Heaven or Hell: The Meme Coin Frenzy

In crypto, a single day feels like a year. This time, the battleground is the meme coin launchpads across multiple chains. Solana’s Pump.fun has battled through countless hurdles since the start of the year to establish itself as the industry leader. Not far behind is Tron’s SunPump, a parody of Justin Sun’s branding and marketing. Meanwhile, opportunists have launched DumpyFun, a platform specializing in shorting meme coins.

If you’re familiar with the NFT craze, you’ll remember how Blur revolutionized the way to bulk-buy NFTs, turning them into pure speculative assets. Soon after, however, the NFT market spiraled into a death dive, and platforms like OpenSea and Blur quickly lost their shine. Now, we could be witnessing the same story unfold with meme coins.

One-Click Token Launch: A Punch in the Face for VC Coins

The meme coin craze can be traced back to frustration with VC-backed tokens. Meme coins, which pride themselves on fairness — no insiders, no VCs, and sometimes even no centralized exchanges — have gained massive popularity among on-chain users. Traditional tokens like Dogecoin and SHIB, now seen as overvalued, have fallen out of favor. The spotlight has shifted to meme coin launchpads where anyone can easily create their own token.

For instance, Pump.fun simplifies the token creation process and lowers technical barriers, allowing anyone to launch their own meme coin. Users don’t need advanced coding skills to create a new meme token, and the initial liquidity requirement is as low as $2. Additionally, Pump.fun has a rug-pull protection mechanism, ensuring that every token launched on the platform follows a fair distribution process.

In August, Pump.fun saw its daily transaction fees peak at $1 million, and by August 13, 2024, the platform’s protocol revenue had exceeded $100 million.

Originally built on Solana, Pump.fun quickly expanded to support Ethereum Layer 2, Blast. Tempted by its incredible potential for profits, users have abandoned overpriced VC-backed coins to embrace the PvP game that meme coins offer, with some making massive gains while others contribute liquidity to the market.

At the heart of Pump.fun’s model is the bonding curve mechanism. In simple terms, this curve allows users to add initial liquidity at a low cost, with prices rising as buying volume increases and falling as selling volume picks up. This benefits early adopters, as later participants drive up prices, generating profits for those who got in early.

This setup encourages early buyers to “shill” their meme coins. As long as new users keep buying in, early adopters enjoy passive income, sparking a grassroots promotional wave on social media platforms.

What Makes Pump.fun Stand Out?

To solidify its place as the top meme coin launchpad, Pump.fun has implemented several growth mechanisms, which can be summed up as follows:

1. Low-Cost Token Creation: The starting cost to create a token on Pump.fun is just 0.02 SOL (around $80), lowering the barrier to entry.
2. No Initial Liquidity Required: Users can create and trade meme coins without initial liquidity, making it easy to start a new project without having to prepare liquidity in advance.
3. One-Click Token Creation: The platform’s one-click token creation process allows anyone to easily launch their own meme coin, which has made it a hit among influencers and everyday users alike.

Given these factors, Pump.fun has become an outperformer in the on-chain market, attracting numerous imitators like SunPump on Tron and competitors like Dump.fun, which focuses on shorting meme coins.

The Liquidity Crunch on Chain

While VC-backed tokens have their flaws, they often position themselves as tech-driven projects. Meme coins, on the other hand, are purely speculative assets with short life cycles. To sustain market enthusiasm, meme coin launchpads need to constantly roll out new tokens.

From a market perspective, meme coins have indeed seen significant growth in both popularity and market capitalization. Platforms like Pump.fun and SunPump have attracted a flood of retail investors, lowering the technical barriers and automating processes to make meme coins more accessible.

In terms of revenue, meme coin-specific platforms have performed exceptionally well within the DeFi space. In June, Pump.fun ranked fifth among the top 15 revenue-generating DeFi sector, and on certain days, it even outperformed Ethereum mainnet. Even the long-dormant BNB Chain has jumped on the bandwagon, launching the “Meme Heroes” program to support the meme coin ecosystem.

Despite these successes, the broader DeFi ecosystem is still facing challenges. For example, Ethereum has experienced deleveraging, and the DeFi market is slowly entering a downtrend. While DeFi products were built to withstand extreme conditions, meme coins’ speculative nature means they can’t compete with traditional DeFi products in terms of stability.

A Shrinking Pool of Liquidity

From a macro perspective, the Ethereum ETF hasn’t had the same impact as the Bitcoin ETF, and ETH prices have entered a prolonged downtrend. The high volatility and speculative nature of meme coins may attract many investors, but this could also increase leverage and risk in the market.

Currently, nearly 2 million meme coins have been created on Pump.fun, but only about 2.5% have made it to major DEX platforms like Raydium on Solana. Even fewer have made it to centralized exchanges (CEXs). This lack of on-chain liquidity is leading to fierce competition.

Moreover, the phenomenon of influencers banding together to launch meme coins has turned the space into a brutal battleground, with intense PvP trading. As a result, meme coins are rarely held long-term, and their high turnover rates only further destabilize prices.

Conclusion

People may reject VC-backed coins, but meme coins are not the promised land — they’re a battlefield where everyone is fighting for dominance. Yet, in today’s market, meme coins remain the last standing symbol of crypto’s subculture. Their influence on social media and internet culture is undeniable. By bringing an element of entertainment to investing, meme culture allows more users to enter the market at a low cost, creating the long-term potential for Web3’s mass adoption.