Source: Four Pillars; Translated by: Baishui, Golden Finance
1. Composition of Token Value
Source: DeFiLlama (Pump.fun)
Since the beginning of the year, the crypto industry has witnessed a memecoin frenzy, marking what many are calling the “memecoin supercycle.” The scale of this movement is evident in the success of Pump.fun, a memecoin launchpad that generates over $1 million in revenue and facilitates the issuance of 20,000 tokens per day. Solana has become the epicenter of this memecoin revolution, with its DEX volume now surpassing that of Ethereum and other major chains. This surge in activity is further reflected in the remarkable success of the Phantom wallet, which reached 700 million MAUs at its peak.
Memecoins' impact goes far beyond simply capturing the imagination of crypto enthusiasts - they have become the most powerful gateway to introduce newcomers to crypto. However, this success has also been accompanied by skepticism. Critics argue that memecoins are only meant for speculation, pointing to their high volatility and apparent lack of intrinsic value. This raises an important question for 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 a token is made up of three main components:
- Store of Value: Similar to gold or Bitcoin, tokens can act as a hedge against inflation, maintaining purchasing power over time. This is the most basic but most challenging form of value because it requires widespread trust and consensus among users.
- Cash Flow and Transaction Demand: This value is derived from utility — whether through transaction fees (as seen in ETH and SOL), fee income (as seen in DeFi tokens), or value accrual mechanisms such as token burns. Much like traditional stocks, these tokens can be valued based on their business model and ability to generate sustainable cash flow.
- Memes, Narratives, and Attention Value: This component is driven by community interest and engagement. In crypto markets, 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, and increasingly cultural and social elements, as seen in memecoins.
It’s important to note that these elements are not mutually exclusive. Tokens often embody a unique combination of all three, and as a project matures and evolves, this balance may change. Here are some notable examples of how these elements of value manifest themselves in practice:
- Bitcoin: embodies all three value components, but it is primarily recognized for its store of value properties. Beyond that, it has practical uses for payments and cross-border transfers, and has a loyal community of Bitcoin maximalists who reinforce its cultural significance.
- Ethereum/Solana: The value of both comes primarily from the fact that they are the base currency for network transactions and operations, and the increase in network activity directly drives the demand for tokens. Their established economic existence and network effects also help them develop into reliable value stores.
- Dogecoin: While it originated as a meme-driven coin, it has evolved beyond its initial appeal. Through its dedicated community and continued relevance, it has achieved a level of stability that allows it to serve as a store of value for its loyal group of holders.
- Bonk: Originally a meme token in the Solana ecosystem, it later expanded its utility through various applications such as BonkBot and Moonwalk. This evolution helped it develop sustainable value through real transaction demand and value accumulation.
Of the thousands of tokens in existence, fewer than 20 protocols have likely gained true acceptance as a stable store of value or achieved the market fit required to generate sustained demand. The vast majority of tokens in circulation derive their market value primarily from the third element — meme status, narrative strength, and the ability to capture market attention.
2. What is the value of Memecoin?
As we discussed above, the underlying factors that determine the value of memecoin are fundamentally similar to other crypto tokens. In addition to practical utility, including the use of stablecoins for payments and transfers, the real potential of crypto lies in the concept of tokenization itself. In essence, crypto excels at converting community participation and cultural value into tangible economic value, creating new markets, and building incentive-driven networks and communities.
This is why other crypto infrastructure or platforms exist in the first place — from DeFi protocols like Uniswap and Jupiter to middleware solutions like oracles and re-collateralization, and even basic infrastructure like rollups and DA layers. They all help facilitate token-based economic activity and interactions around it.
Source: Understanding the Rise of Memecoin
Most infrastructure and DeFi projects emphasize technological and financial innovation through their tokens, but their value is primarily derived from narrative and attention economics rather than as a store of value or cash flow generator. Memecoins are unique in that they deliberately break away from these traditional crypto narrative games and instead embrace the fundamental values of community and entertainment. In doing so, they offer a satirical perspective on the limitations of venture capital and insider-driven markets and their often shallow 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 generally return to their true fundamental value. This principle is not unique to stocks — it applies to all assets, including physical assets, tokens, and memecoins.
Source: memecoinrace.xyz
Yes, memecoins are more volatile and react more strongly to market events than other assets. But their success or failure cannot be explained by short-term trading and speculation alone. Among the thousands of memecoins, only a few have managed to build lasting communities and maintain their value. The rest usually disappear soon after the initial hype fades.
What makes this difference? The key is to understand that memecoins are more than just speculative vehicles — 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 a memecoin, or more broadly, the meme value of a token:
1. Background and Narrative
A strong origin story and a compelling narrative were key elements that drove memecoin’s initial success. Similar to genes, memes spread through replication and evolution — but among the countless memes that emerge, only those with truly powerful narratives gain influence and appeal.
The most successful memecoins have a remarkable ability to read the market and tap into something that captures people’s attention. Launched during a dark period in the cryptocurrency market in early 2023, PEPE brought much-needed humor and levity, helping to shift market sentiment and spark a broader memecoin renaissance. After the FTX debacle, BONK became a beacon of hope in the Solana ecosystem, embodying resistance to centralized power and community resilience. More recently, GOAT has carved out its own unique niche by building a narrative around an AI-powered memecoin backed by Marc Andreessen.
What sets these successful memecoins apart is not only their entertainment value, but also their ability to craft narratives that resonate with market sentiment and capture the public’s imagination through compelling storytelling.
Influential figures often play a key role in shaping a memecoin’s story and success. Take DOGE with Elon Musk, WIF with Ansem or SPX with Murad. These key figures are more than just advocates; they transform into community pillars, both supporting the coin’s growth and shaping its underlying vision and values.
Yet even the most compelling stories and the strongest leadership don’t guarantee lasting success. Just look at 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 prices higher, what happens next is often predictable: once momentum stalls, it turns into a desperate race to the exits, with holders scrambling to sell before everyone else, typically ending with the value of the token plummeting to zero. This boom-and-bust cycle has become an all-too-common pattern in the memecoin space.
2. Community and Brand
In Sapiens: A Brief History of Humankind, Yuval Noah Harari identifies one of the defining characteristics of humans: our ability to believe in fictions. As more people believe in these fictions, they become more powerful and more real. Memes and communities work in much the same way. They spread through the most viral forms of ideas (fun and culture), and as more and more people participate in them, they develop powerful network effects and real cultural value.
Source: Milady Maker
In order to convert the initial hype and capital of memecoin into real success - sustainable value - it must build a strong community and brand foundation. Tokens like Bonk and WIF, and NFTs like Pudgy Penguins, CryptoPunk, and Milady, have evolved from simple memes to cultural symbols and well-known brands. Just as luxury goods and fashion brands represent certain lifestyles and values, these digital assets give holders a unique identity and sense of belonging. When people hold these tokens and participate in their communities, they are not just speculating - they are participating in a new form of cultural consumption.
What makes crypto communities unique compared to traditional brands or cultural groups is how they combine cultural values with economic incentives. Take Degen, for example — it directly rewards early Farcaster communities for content creation and social engagement. Participants are more than just consumers; they are active value creators. This creates a positive feedback loop where earlier, more active engagement leads to greater rewards, encouraging early adoption and long-term community loyalty.
3. Organic growth and fairness
Source: Based on the principle of trustworthiness and neutrality
Decentralization is not only essential for blockchain networks, but also a fundamental requirement for memecoins to build organic communities. This is consistent with what Vitalik Buterin calls "trusted neutrality." People are highly sensitive to discriminatory conditions or benefits that favor specific groups or individuals. Take Vitalik's example: people get angry when social media platforms censor specific political ideologies or content, but they don't complain when food delivery apps filter out restaurants with low ratings.
As mentioned before, the true value of memecoin depends on how many people resonate with its meme culture and community and want to participate in it. Therefore, organic growth and fairness are not just moral requirements, but practical necessities. How the tokens are issued and distributed fairly and transparently becomes a key criterion to win people's trust and motivate them to participate.
This is especially important for memecoins where community participation is crucial. The success of token issuance platforms such as Pump.fun is not only due to its lowering of the threshold for token issuance, but also due to its response to the market's demand for fairness and transparency in early token investment.
Source: X (@MustStopMurad)
The need for fairness and organic growth can be measured through quantitative metrics of the health of a token’s community. Murad emphasized the community aspect of memecoin, and he highlighted metrics such as the median holder ranking and the HHI (Herfindahl-Hirschman Index) to assess the fair distribution of tokens and the loyalty of holders. The HHI was originally designed to measure the degree of market monopoly and is used to determine the degree of concentration among token holders.
Summarize
Those who are still skeptical about Web3 and cryptocurrencies may see blockchains and tokens as vehicles for gambling and speculation. However, beneath this layer of appearance, there is an ideology that aims to build a decentralized, better financial system and a new Internet structure. Regardless of the good intentions, speculative demand has undoubtedly become a powerful catalyst for the birth and development of the industry. After countless trials and errors, we have reached a stage where prediction markets can replace traditional media, stablecoins are gaining attention as the next generation payment network, and blockchain applications have become available to everyone.
Memecoins also have a deeper meaning beneath their seemingly worthless and unsound gambling and speculation veneer - they represent a fusion of tokens, communities and cultures. Memecoins embody the crypto ecosystem's ideals of decentralization and fairness in their purest form. They show that sustainable value can be created through community participation and transparent operations alone, without the need for complex technology or financial products. This shows that there is more to the possibilities beyond pure speculative frenzy, and that blockchain technology can enable new forms of social networks and services.
More memecoins will continue to emerge and die. Through these cycles of innovation and failure, we gradually discover why digital communities thrive and how token economies can better align with human behavior and social dynamics. Although this ongoing evolution is volatile, it is steadily leading us toward more complex and sustainable community-driven value creation models in the digital age.
