Source: Four Pillars; Translated by: Bai Shui, Golden Finance

1. Composition of Token Value

Source: DeFiLlama (Pump.fun)

Since the beginning of this year, the crypto industry has witnessed a frenzy around memecoins, marking what many are calling the "memecoin supercycle." The scale of this movement is evident in the success of Pump.fun, a memecoin launch platform that generates over $1 million in revenue daily and facilitates the issuance of 20,000 tokens. Solana has become the epicenter of this memecoin revolution, with its DEX trading volume now surpassing that of Ethereum and other major chains. This surge in activity is further reflected in the significant success of the Phantom wallet, which peaked at 700 million MAU.

The impact of memecoins extends far beyond merely capturing the imagination of crypto enthusiasts — they have become the most powerful gateway for introducing newcomers to crypto. However, this success is also accompanied by skepticism. Critics argue that memecoins are merely speculative, pointing to their high volatility and apparent lack of intrinsic value. This raises an important question within the crypto community: how should we truly understand and assess the value of memecoins in today's market?

In the crypto ecosystem, the value of tokens is composed of three main components:

• Store of value: Similar to gold or Bitcoin, tokens can serve as a hedge against inflation, maintaining purchasing power over time. This is the most fundamental yet challenging form of value, as it requires broad trust and consensus among users.
• Cash flow and trading demand: This value stems from utility — whether through transaction fees (as seen with ETH and SOL), revenue from fees (like DeFi tokens), or value accumulation mechanisms such as token burns. Much like traditional stocks, these tokens can be evaluated based on their business models and ability to generate sustainable cash flow.
• Meme, narrative, and attention value: This component is driven by community interest and engagement. In the crypto market, a project's ability to attract attention and build a strong community often becomes a key value driver. Narratives range from technological innovation to financial infrastructure, as well as an increasing number of cultural and social elements, as exemplified by meme coins.

It is worth noting that these elements are not mutually exclusive. Tokens often embody a unique combination of these three elements, and this balance may shift as projects mature and evolve. Here are some notable examples illustrating how these value components manifest in practice:

• Bitcoin: Embodies all three value components but is primarily recognized for its store of value attributes. In addition, it has practical uses for payments and cross-border transfers, along with a loyal community of Bitcoin maximalists who reinforce its cultural significance.
• Ethereum/Solana: The value of both primarily comes from their role as the fundamental currencies for network transactions and operations, with increased network activity directly driving token demand. Their established economic presence and network effects also help them develop into reliable stores of value.
• Dogecoin: Although it originated as a meme-driven token, its development has transcended its initial appeal. Through its focused community and sustained relevance, it has achieved a degree of stability, allowing it to serve as a store of value for its loyal holder base.
• Bonk: Initially a meme token within the Solana ecosystem, it later expanded its utility through various applications like BonkBot and Moonwalk. This evolution helped it develop sustainable value through genuine trading demand and value accumulation.

Among the thousands of existing tokens, fewer than 20 protocols may have truly gained recognition as stable stores of value or achieved the market fit necessary to generate sustained demand. The market value of the vast majority of circulating tokens primarily derives from the third element — meme status, narrative strength, and the ability to attract market attention.

2. What is the Value of Memecoin

As discussed above, the fundamental factors determining the value of memecoins share fundamental similarities with other crypto tokens. Beyond practical utility, including the use of stablecoins for payments and transfers, the true potential of crypto lies in the concept of tokenization itself. Essentially, crypto excels at transforming community participation and cultural value into tangible economic value, creating new markets and establishing incentive-driven networks and communities.

This is why other crypto infrastructures or platforms initially exist — from DeFi protocols like Uniswap and Jupiter to middleware solutions like oracles and restaking, and even fundamental infrastructures like rollups and DA layers. They all contribute to facilitating token-based economic activities and the interactions surrounding them.

Source: Understanding the Rise of Memecoin

Most infrastructures and DeFi projects emphasize technological and financial innovation through their tokens, but their value primarily stems from narrative and attention economics, rather than serving as stores of value or cash flow generators. What sets meme coins apart is their deliberate departure from these traditional cryptocurrency narrative games, embracing the fundamental values of community and entertainment. In doing so, they provide a satirical commentary on the limitations of venture capital and insider-driven markets, along with their often superficial utility claims.

"In the short run, the market is a voting machine, but in the long run, it is a weighing machine." — Benjamin Graham

Market events and investor sentiment drive short-term price fluctuations, but over time, assets typically revert to their true fundamental value. This principle is not unique to stocks — it applies to all assets, including physical assets, tokens, and meme coins.

Source: memecoinrace.xyz

Yes, memecoins are more volatile compared to other assets and react more strongly to market events. However, their success or failure cannot be solely explained by short-term trading and speculation. Among the thousands of memecoins, only a few have successfully built lasting communities and maintained their value. The rest typically fade away shortly after the initial hype subsides.

What causes this difference? The key is to understand that memecoins are not merely speculative tools — they are tokenized expressions of community and cultural value. To better understand this, let’s look at three key factors that influence the value of memecoins, or more broadly, the meme value of tokens:

1. Context and Narrative

A strong origin story and engaging narrative are key elements driving the initial success of memecoins. Similar to genes, memes spread through replication and evolution — but among the countless memes that emerge, only those with truly powerful narratives can gain influence and resonance.

The most successful memecoins possess an extraordinary ability to read the market and mine for what captures people's attention. PEPE launched during a dark period in the cryptocurrency market in early 2023, bringing much-needed humor and lightness, helping to shift market sentiment and spark a broader memecoin revival. After the FTX collapse, BONK became a beacon of hope within the Solana ecosystem, embodying resistance to centralized power and community resilience. Recently, GOAT carved out its unique position by building a narrative around an AI-driven memecoin supported by Marc Andreessen.

What sets these successful memecoins apart is not only their entertainment value but also their ability to craft stories that resonate with market sentiment and capture the public imagination through compelling storytelling.

Influential figures often play a crucial role in shaping the stories and successes of memecoins. Take DOGE with Elon Musk, WIF with Ansem, or SPX with Murad as examples. These key figures are not just advocates; they become pillars of the community, supporting the growth of the token while shaping its fundamental vision and values.

However, even the most compelling stories and strongest leadership cannot guarantee lasting success. Consider the memecoin supercycle of early 2024 — despite initial excitement, the vast majority of issuances quickly became irrelevant. While initial hype and FOMO may temporarily drive up prices, what often follows is predictable: once momentum stalls, it turns into a desperate race to exit, with holders scrambling to sell before others, often resulting in the token's value plummeting to zero. This rise and fall cycle has become a very common pattern in the memecoin space.

2. Community and Brand

In "Sapiens: A Brief History of Humankind," Yuval Noah Harari points out a decisive characteristic of humanity: our ability to believe in fictional things. As more people believe in these fictions, they become stronger and more real. Memes and communities operate in a similar way. They spread through the most viral forms of thought (fun and culture), and as more people participate, they form powerful network effects and genuine cultural value.

Source: Milady Maker

To transform the initial hype and capital of memecoins into genuine success — sustainable value — they must establish a strong community and brand foundation. Tokens like Bonk and WIF, as well as NFTs like Pudgy Penguins, CryptoPunk, and Milady, have evolved from simple memes into cultural symbols and well-known brands. Just as luxury and fashion brands represent certain lifestyles and values, these digital assets provide holders with a unique identity and sense of belonging. When people hold these tokens and engage with their communities, they are not merely speculating — they are participating in a new form of cultural consumption.

What sets crypto communities apart from traditional brands or cultural groups is how they combine cultural value with economic incentives. Take Degen as an example — it directly rewards content creation and social participation within the early Farcaster community. Participants are not just consumers; they are active value creators. This creates a positive feedback loop where earlier and more active participation yields greater rewards, encouraging early adoption and long-term community loyalty.

3. Organic Growth and Fairness

Source: Guided by Trustworthy Neutrality

Decentralization is not only crucial for blockchain networks but also a fundamental requirement for memecoins to build organic communities. This aligns with what Vitalik Buterin refers to as "trustworthy neutrality." People are highly sensitive to discriminatory conditions or benefits that favor specific groups or individuals. For instance, when social media platforms censor certain political ideologies or content, people feel outraged, but they do not complain when food delivery apps filter out poorly rated restaurants.

As mentioned earlier, the true value of memecoins depends on how many people resonate with their meme culture and community and wish to participate. Therefore, organic growth and fairness are not just moral imperatives but practical necessities. How tokens are issued and distributed fairly and transparently becomes a key criterion for earning people's trust and incentivizing their participation.

This is especially important for memecoins that rely on community engagement. The success of token issuance platforms like Pump.fun lies not only in lowering the barriers to token issuance but also in responding to the market's demand for fairness and transparency in early token investments.

Source: X(@MustStopMurad)

The demand for fairness and organic growth can be measured through quantifiable indicators of the health of the token community. Murad emphasizes the community aspect of memecoins, highlighting metrics like median holder rank and HHI (Herfindahl-Hirschman Index) to assess the fair distribution of tokens and the loyalty of holders. HHI was originally designed to measure market concentration and is used to determine the concentration among token holders.

Conclusion

Those who remain skeptical about Web3 and cryptocurrencies may view blockchain and tokens as vehicles for gambling and speculation. However, beneath this surface lies an ideology aimed at building a decentralized, better financial system and a new internet structure. Regardless of the goodwill behind it, speculative demand has undoubtedly become a powerful catalyst for the birth and development of the industry. After countless iterations, we have reached a stage where prediction markets can replace traditional media, stablecoins are gaining attention as the next-generation payment networks, and blockchain applications are becoming accessible to everyone.

Memecoins also carry deeper meanings beneath their seemingly worthless and unsound gambling and speculative facade — they represent the fusion of tokens, community, and culture. Memecoins embody the purest form of the ideals of decentralization and fairness within the crypto ecosystem. They demonstrate that sustainable value can be created solely through community participation and transparent operations, without the need for complex technologies or financial products. This indicates that beyond mere speculative frenzy, there are more possibilities for blockchain technology to enable new forms of social networks and services.

More memecoins will continue to emerge and fade away. Through these cycles of innovation and failure, we gradually uncover the reasons behind the thriving of digital communities and how token economies can better align with human behavior and social dynamics. Although this ongoing evolution is volatile, it is steadily guiding us toward a more complex and sustainable community-driven value creation model in the digital age.

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