Written by: Ling Yun, Miss Cat

Reviewer: Ashley

Cover source: Midjourney

Value investing is in vain, and memes are all over the place overnight. Today AU Research will explain to you the economic principles of Meme’s popularity and how to select reliable targets.

01 What is a Meme

The term Meme was first proposed by British scholar Dawkins in his book "The Selfish Gene". He believed that just like genes in biology, culture also has a basic unit that carries the information of cultural communication.

Meme is also translated as meme, riddle mother, etc. It originally comes from the Greek mimema, which means "something imitated". Biologist Richard Dawkins first mentioned it in his 1976 book "The Selfish Gene" and simplified it into the word "meme" which is similar to the rhythm of gene. He also applied "evolution theory" to the research perspective of "cultural change" and formally defined meme as: a small cultural unit similar to genes that is constantly copied and imitated between people and spread. Chinese scholars He Ziran and He Xuelin translated memes into "memes" in 2003.

Richard Dawkins compared the process of cultural inheritance to the evolutionary rules in biology. Memes are very broad, including religion, rumors, news, knowledge, concepts, habits, customs and even slogans, proverbs, expressions, words and jokes.

The replication of memes is not as accurate as the replication of genes in nature. It is not only a process of imitation, but also a process of autonomous re-creation, which also follows the principle of survival of the fittest.

Just as genes jump from one person to another in the gene pool, memes reproduce themselves by imitating and jumping from one person's mind to another in the meme pool. When a meme takes over a person's mind, it is like a virus infecting a cell, turning the mind into a vehicle for carrying the meme. Just as not all genes can reproduce successfully, some memes have a wide impact, while others quickly disappear.

02 How Memes Spread

Dawkins summarizes three key factors that affect the viability of a meme: persistence, fecundity, and fidelity of replication.

Compared with the other two factors, persistence is less important, because the persistence of a meme depends largely on the persistence of its carrier. When the brain that carries the meme dies, or the "CD" that carries the information is destroyed, the meme disappears.

Reproductivity is relatively more important. If the meme is a scientific discovery, its chances of survival are largely determined by how many people know about it, which can be roughly estimated by counting the number of citations in well-known academic journals and the sales of the journals. The stronger the reproductive capacity of a meme, the more widely it can be spread and the greater its chances of survival.

The fidelity of replication refers to whether a meme can remain completely intact when it is copied and spread. The copied and accepted memes may differ due to differences in educational background, hobbies, age, gender, etc. between the copiers and recipients. In some cases, the copiers consciously make changes when spreading the meme. A typical example is that in an academic paper, in order to match the point the author wants to make, only one aspect of a meme is selected to be explained or analyzed from a new perspective, or it is combined with other memes to form a new meme. Memes with high replication fidelity can be completely preserved.

03 What makes a meme so popular?

Simply put, it depends on "conforming to the laws of communication" to spread quickly. Therefore, to study memes, we must first study the laws of communication, study market sentiment, and understand "how to mobilize people's emotions." This is where the SIR communication model comes in.

This is a model of epidemic spread, but it is also applicable to information spread. The red line represents people who are susceptible to infection, the green line represents people who are infected, the blue line represents people who have recovered, and the horizontal axis represents time.

The core of information dissemination is to make the infection rate faster than the recovery rate, so that the number of infected people will continue to expand. Combining information dissemination and psychology, it means that if more new people are exposed to this information, there will be a chance to infect more people.

Next, we will combine psychology and communication to find the rules of meme release. We will analyze it from four core elements: MEME content, environmental atmosphere, KOL promotion, and wealth-creating effect.

Main content: The essence of meme is to tell stories and convey emotions with pictures. For example, $Doge is friendly to dog lovers, and has a strong long-tail effect, that is, many people will be attracted by cute and interesting little dogs, and the more they see them, the more they like them. $PEPE, the sad little frog, was a popular emoticon package before it became a meme. The sloth is also very popular in Zootopia.

In terms of emotional transmission, the more straightforward and simple to understand, the better. There is a saying about "The Three-Body Problem" that every time a formula is added, there will be 10,000 fewer viewers. That's it. The more down-to-earth, the easier it is to spread. Over-professionalism can only attract peers.

To sum it up simply, things that are cute, popular in the traditional world, and simple and straightforward are likely to become popular.

Environmental factors: This environment includes the macro environment and economic cycle. This round of bull market has brought a large number of outsiders into the industry. They cannot understand the complex technologies such as oracles, re-staking to provide security measures, and smart contracts. But memes are understandable to them and are priced very cheaply. 10U can buy thousands of them. If you remove a zero, it will be a ten-fold coin. How many local dogs can add more zeros in an hour, which is easy to get started.

The meme boom in this bull market is also affected by the downturn in the traditional economic cycle. Simply put, it is a downgrade in cryptocurrency consumption. Except for the United States, most countries have experienced economic weakness in the past two years. In this case, the public's desire to explore new technologies will decrease, just like animals hibernating, living in a low-energy and easy-to-absorb behavior. In this case, the meme market will become even more popular.

KOL promotion: The creation of a meme, distribution, pool building, KOL promotion, and community promotion are essential links. Regardless of the level of KOLs, you will find that what they write and say is very inflammatory, making people feel willing to believe. Many prices in the cryptocurrency circle come from bubbles, and bubbles come from consensus, so meme marketing will inevitably involve means such as KOL promotion and community communication.

At this point, here are some risk warnings: You may see several community owners shouting to buy XX coins at the same time. At this time, you will also be brainwashed by the overwhelming public accounts and think that a certain meme is particularly valuable. After rushing in, you will find that you are either harvested by the sellers of trading robots, or the top of the mountain takes over, or your price returns to zero in ten minutes.

Paying attention to KOLs in the English-speaking area and in different countries will help you better judge the cultural value behind the meme. Cross-cultural consensus is the real consensus.

Wealth-creating effect: The reason why Meme has developed into a mainstream track now is that it easily creates wealth and the FOMO (fear of missing out) panic of missing opportunities. On the one hand, it pulls up the market to convince people, and on the other hand, it promotes the myth of wealth creation, such as so-and-so earning 30 million US dollars in two hours, and on the other hand, it spreads the fear of FOMO in the community. This is also a common marketing method of meme, and it is also in line with the laws of communication.

04 What is Meme Coin

The mapping of meme culture in the crypto field is undoubtedly various memecoins and various meme NFTs. Memecoins, as a subcategory of cryptocurrency, focus on popular Internet memes, pop culture references, and viral Internet trends. Famous examples of such memes include different versions of the Japanese Shiba Inu Kabosu and Pepe the Frog cartoon, and even extend to celebrities like Elon Musk.

According to a recent report from CoinGecko, the memecoin industry has become the most profitable sector so far this year.

The report shows that among the tokens with the highest market capitalization, memecoin has the highest average return rate of 1,312.6%. By the end of this quarter, Memecoin, which was launched in March, has entered the top 10 memecoin list by market capitalization, including Book of Meme (BOME), Brett, and Cat in a Dogs World (MEW). It far exceeds the RWA and AI tracks.

Memecoin creators use various themes to attract the attention and trading volume of crypto market speculators. In many cases, well-known KOLs and forums such as Reddit have also joined the Memecoin craze. Unlike other cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH), which are mainly digital currencies, developers often create memecoin only as a lighthearted social experiment, and the technical value it brings is limited.

Many people see memecoin as a refreshing departure from the seriousness of traditional cryptocurrencies. Memecoins invite a new generation of users to engage with blockchain technology in an approachable, non-traditional way. However, others see memecoins as extremely risky assets that undermine the legitimacy of ambitious blockchain projects. Whether you dare to rush into meme or not, it is still important to understand how memecoins work, where they are most often used, and some of the risks you should be aware of before entering the field. Today we will discuss the relevant analysis of meme and cryptocurrency.

05 History of memecoins

The concept of memecoins can be traced back to the early stages of cryptocurrency. At first, it did not attract much attention in the market. It was not until the emergence of the original memecoin, Dogecoin (DOGE), in 2013 that meme entered the public eye. Dogecoin was created as a joke by software engineers Billy Markus and Jackson Palmer. Its logo was the popular Shiba Inu "Doge". Although it originated from a humorous attempt, the low unit price and fast block generation speed of Dogecoin made it quickly popular in the currency circle.

Bitcoin is essentially the biggest Memecoin. The value of Bitcoin comes from people's consensus, which is based on the belief in decentralization and relies on cryptography technology. At present, we usually call those cryptocurrencies that are based on simple consensus, jokes, and have a rapid spread effect but lack technological innovation as meme coins.

From online donations on sites like Reddit.com to charitable donations to international non-profit organizations, Dogecoin has become a common medium of exchange, not just a joke. With the success of Dogecoin, a series of memecoins inspired by online trends and jokes have emerged: tokens like Pepe (PEPE) (inspired by the sad frog) and Shiba Inu (SHIB) have gained attention in their own right and have become popular in the cryptocurrency community.

In subsequent developments, the rise of DeFi (decentralized finance) and the NFT (non-fungible token) craze provided fertile soil for more Memecoin experiments.

06 memecoin and NFT

Memecoin also took advantage of the NFT craze by turning viral internet characters into one-of-a-kind digital assets that users can own and trade. For example, a Memecoin project might create limited edition NFTs that contain popular elements related to their token. Users can buy, sell, or trade these NFTs on various NFT marketplaces. This allows meme enthusiasts to not only keep a piece of internet history, but also support their favorite meme projects. Rare Pepes and the subsequent Fake Rares series are examples of some of the earliest NFT projects developed from viral internet memes.

Shiba Inu Coin (SHIB), one of the most popular meme projects in the cryptocurrency space today, has also launched its own "Shiboshis" NFT. This series includes 10,000 Shiba Inu-inspired cartoon characters that holders can use to fight in Shiba Eternity - a popular gold farming game (earning coins by playing games) for the SHIB project.

Like many other popular NFTs, Meme NFT holders have established private communities for their collections, some of which allow holders to attend exclusive offline events and have the opportunity to obtain related merchandise.

07 memecoin and Defi

DeFi refers to a range of blockchain-based financial applications that rebuild traditional financial services in a decentralized manner.

Memecoins uses the DeFi protocol to create innovative ways for users to participate in the use of its tokens, not just limited to simple speculation, but also to participate in staking, mining and providing liquidity.

Staking: Memecoin holders can stake their tokens on DeFi platforms to earn rewards. These rewards can be in the form of additional Memecoin or other tokens, providing users with an incentive to hold and actively participate in the Memecoin ecosystem.

The Shiba Inu Coin project is a prime example of how a Meme project can thrive by incorporating DeFi elements into its protocol. SHIB token holders can use its ShibaSwap platform to exchange ERC-20 tokens and perform various tasks to earn SHIB and two other native tokens, BONE and LEASH. DoggyDAO, as a decentralized autonomous organization (DAO), provides additional benefits to token holders by granting them voting rights on key protocol decisions.

Mining: Mining is mainly about lending your Meme coins to others in exchange for interest through smart contracts. Memecoin's DeFi platform uses these loans to facilitate various activities, including trading or providing liquidity, and users mine Meme coins to receive income compensation for making the above contributions.

Providing liquidity: Memecoin can also create liquidity pools, where users can use their own Meme tokens to provide others with trading on decentralized exchanges. This operation process enables users to earn a portion of transaction fees and contribute to the liquidity and efficiency of the Meme coin market, and also receive corresponding compensation income.

08 Risks of memecoin investment

Due to the viral nature of Memecoins, many projects have seen huge increases before, but some have also suffered sudden crashes.

1. Extreme volatility: The value of a Meme coin can soar in one moment and plummet in the next, leaving investors vulnerable to significant financial losses. It is highly speculative in nature, so it is particularly susceptible to sudden market changes influenced by a core figure (such as Musk), news, or network trends.

2. Over-reliance on emotions: Many new meme coins often lack underlying technology or tangible use cases, which can cause their value to be completely dependent on market sentiment. While some meme coins have found creative ways to integrate NFTs, decentralized finance (DeFi), or community-driven initiatives, many projects focus primarily on emotional value such as humor and satire. This lack of fundamental technical value still makes it easy for memes to become castles in the air.

3. Market manipulation: The concept-driven nature of Meme coins may attract bad actors who want to take advantage of the hype to profit. Sometimes false market news and community divisions are deliberately created to drive up the price of the coin and sell its holdings at the high point of the price, which often leads to significant losses for unsuspecting investors. These schemes take advantage of the speculative and emotional nature of Meme coin trading, so investors need to conduct careful research when holding a large position in Meme coins.

4. There are many scams: Many meme projects are launched by anonymous or pseudonymous developers, which makes it difficult to assess the credibility and intentions behind the tokens. There are also many pre-sale memes that have been launched, and after a certain amount of money has been transferred, the development team has run away. There are also those who use official accounts to modify the pre-sale payment address, which will bring great risks.

09 Conclusion

Overall, Memecoins represent an interesting fusion of digital currency, internet culture, and humor. As Memecoins continue to attract attention and continue to grow, how will they shape the broader cryptocurrency landscape, and how will they find amazing applications beyond their funny origins? How to discover early value? When is the right time to enter the market to better balance risks and benefits? The AU Research team will continue to bring you more tools and technical line details.