Whether it’s ARB or WLD, they are essentially meme coins attached to protocols.
VCs dislike meme coins, but I will explain why there is no difference between meme coins and governance tokens. Governance tokens are just meme coins in suits.
All governance tokens are essentially meme coins, with protocol memes as their valuation source. Why?
No revenue sharing (securities law).
Governance tokens are ineffective in community decision-making frameworks.
Governance token distribution tends to be centralized, with token holders not actively participating in governance, or DAOs often malfunctioning – making them similar to meme coins. Whether it’s ARB or WLD, they are essentially meme coins attached to these protocols.
Many times, governance tokens cause as much harm as meme coins:
Community: Most governance tokens are VC-backed tokens launched with high valuations and gradually sold to retail investors.
Builders: Many well-known VC-backed governance tokens are launched (e.g., Zeus launched with a $1 billion FDV). Not to say that Zeus won’t succeed, but just pointing out that it is common practice to launch tokens before the product.
Even 2017 ICOs were more preferable than current VC-backed low circulating supply tokens because they were fairer, with most of the supply unlocked at launch.
Using EigenLayer as an example – a typical low circulating supply, high FDV game supported by VCs. Insiders (VCs and the team) hold a significant stake, reaching 55%. In the previous cycle, we blamed FTX/Alameda, but this cycle we haven’t fared any better.
If a group of insiders takes more than 50% of the stake, it severely hinders the redistribution effect of cryptocurrencies and makes insiders insanely rich through high FDV launches. If insiders truly consider the high issuance of FDV tokens, they should allocate fewer tokens.
Will the real conspiracy group stand up? Given the absurdity of the capital formation process, we end up with:
VCs blaming meme coins
Memeers blaming VCs
Leading this field of serious builders through regulatory chaos and reputation risks.
But why are VCs harmful to tokens? There are structural reasons why VCs exaggerate FDV. Let’s assume a large venture capital fund invests $4 million, accounting for 20% of a $20 million project. Logically, they must increase the FDV of the TGE to at least $400 million to make it profitable for LPs.
The larger the fund, the more likely they are to offer projects: Absurdly high private valuations → building strong narratives → raising funds at higher valuations (packages for pre-seed/seed round investors) → launching at higher public valuations → selling to retail investors.
Launching with a high FDV only leads to a downward spiral and 0 market share, look at Starkware for research. Launching with a lower FDV can allow retail investors to profit from repricing and help form communities and market share, look at Celestic for research.
Retail investors are more sensitive to unlocks than ever before. In May alone, $1.25 billion of Pyth was unlocked, along with hundreds of millions from Avalanche, Aptos, Arbitrum, etc.
Meme coins are the result of the financial system collapsing (e.g., Bitcoin after the financial crisis). Negative/zero real interest rates force every depositor to speculate on new shiny asset classes (e.g., meme coins). The zero-rate environment creates a market filled with zombie companies.
Even top indexes like the S&P 500 have around 5% zombie companies, and they are about to get worse as rates rise, making them no better than meme coins.
What’s worse? They are already marketed by fund managers, and retail investors buy them every month.
Learn from GME.
Speculation never dies for a reason. In this cycle, they are meme coins. Research financial nihilism.
I disagree with @eddylazzarin’s stance. Meme coins have a net positive impact on the network. Without meme coins, chains like Solana wouldn’t face network congestion, and all the network/economic vulnerabilities wouldn’t come to light.
Meme coins on Solana have benefits:
All DEXs not only handle record volumes but surpass their Ethereum counterparts.
Lending markets integrate meme coins to increase TVL.
Validators earn hefty fees due to priority packing fees and MEV.
Consumer applications integrate meme coins for attention or marketing purposes.
With increased liquidity and activity, there are wider network effects in DeFi.
For RWAs traded on-chain, we need stress-tested infrastructure (DEXes/wider DeFi) and liquidity (look at top meme coins, they have the deepest liquidity outside of L1 tokens/stablecoins).
Meme coins don’t distract, they are just another asset class on a shared ledger.
As a fundraising mechanism, meme coins like @pumpdotfun research Solana. Launching 1,000 meme coins daily and generating millions in fees.
In human history, anyone can create and participate in financial assets within 2 minutes and at a cost of less than $2.
Memecoins can be an excellent fundraising and GTM strategy. Traditionally: Projects raise funds by allocating 15-20% to venture capital firms → develop the product → launch the token → build the community through memes/marketing. However, the community ends up being abandoned by venture capital firms.
In the era of meme coins: Launch meme coins (no roadmap, just for fun) → raise funds → early formation of tribal communities → build applications/infrastructure → continuously add utility to meme coins without making false promises or providing roadmaps.
This approach leverages the tribalism of meme coin communities (token holder bias), ensuring high engagement from community members who become your BD/marketing people. Ensure fairer token distribution, counteracting the low circulating high FDV dumping strategy adopted by venture capital firms.
This trend will eventually lead to the fusion of meme coins and governance tokens:
@bonkbot_io, a Telegram bot generated from the BONK meme coin (peaking at $250 million in daily trading volume), burns 10% of transaction fees.
@degentokenbase, Farcaster meme coin (now creating L3).
In the end, what does the future hold? Everyone wants to get in early. Meme coins provide leverage for retail investors, as access to venture capital private deals is limited. While memecoins empower communities, it does make cryptocurrency look like a casino.
So, what’s the solution? For VCs – put your deals on platforms like @echodotxyz, for example, involve the community in syndicate deals and witness the meme coin-like magic of the community rallying around projects from an early stage.
Just to clarify, I’m not against venture capital/private financing, and VCs should be rewarded for their early risky behavior. I’m advocating for fairer distribution, creating a level playing field, and giving everyone a chance at financial sovereignty.
Cryptocurrency is not just about open and permissionless technology, it’s also about making early-stage financing more open, which is currently just as opaque as traditional startup companies.
In summary: Everything is a meme coin. Research meme coins as fundraising and community-building mechanisms. Projects should lean towards fairer releases.
Tags:
2023 market trend
DeFi
PEPE
Solana
VC
WLD
meme coins
Source link:
https://foresightnews.pro/article/detail/60104
Note: The views expressed in this article are solely those of the author and do not constitute investment advice.
Original article link:
https://www.bitpush.news/articles/6733661
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