The Memecoin Trojan Horse

Memecoins spark strong opinions.

Some view them as degenerate distractions—unproductive, zero-sum games played at the expense of others. Others see them as a grassroots reaction against top-down elites and venture capital influence.

We all know this debate–the industry has already had this conversation countless times. However, like many aspects of crypto, the arc of memecoins is dynamic and adaptive rather than inert.

There are reasons to be optimistic about the future of memecoins. 

Memecoins as a term has become overused and overly broad. Not every token labeled a memecoin fits the stereotype of a hollow, inert gimmick. Some tokens begin as memecoins but evolve into something more, yet people still ultimately label these as memecoins due to inertia. 

Platforms like Pump.fun have democratized token creation, fueling an explosion in the number of coins. With low barriers to entry, sure, most of these tokens are low-effort creations—a funny name, a quirky picture—designed to entertain and little else. However, amid the noise, a few transcend their origins, gaining substance and driving value in unexpected ways.

Pump.fun, Clanker, and token launchpads make it trivially easy to create a liquid token. Permissionlessness and accessibility are core value propositions of our industry.

There's a lot here.

More Accessible

The arc of the crypto industry has been towards increasing the accessibility of the average individual to be able to make a token. F*** the regulators! They should not gatekeep who can and who cannot produce a financial asset. That is a right of the individual! Average Joe gets to make a token!

Crypto’s history is one of increasing accessibility to token creation. Each bull market brings a new mechanism:

• 2013: people learned that it wasn’t hard to fork Bitcoin’s codebase and create a new blockchain.  
• 2017: Ethereum introduced ERC-20 tokens, eliminating the need to launch a full blockchain.
• 2021: NFTs and the mint mechanism unlock another token standard and distribution mechanism, turning quirky images into speculative assets.
• 2024: Pump.fun combined token token minting and AMM liquidity, all packaged into a simple interface.

This pattern extends beyond tokens. Why are there so many L2s? Because Optimism’s OP stack reduced the cost of creating a rollup. Conduit is taking this even further by creating a front-end for L2 creation. 

The most recent innovation in token creation has been Clanker, an LLM Warpcast account where Warpcast users can simply tag Clanker with a ticker and an image, and Clanker will automatically mint a token and spin up a Uniswap V3 pool, skipping a front-end altogether. 

Beyond Memecoins

Critics often conflate token launchpads like Pump.fun or Clanker with the tokens they produce. While many tokens emerging from these platforms are classic memecoins, the launchpads themselves are neutral tools. 

For instance:

• GOAT, the token that has become associated with the first-ever AI agent, came out of Pump.fun. GOAT is now a valid investment for people who want exposure to the IP of Truth Terminal. Are there cashflows? No. Is there a direct codified relationship between GOAT and Truth Terminal? Also, no, the relationship is squishy and indirect. But will the token go up in price as a function of the magnitude of the brand of Truth Terminal? Idk, not investment advice, but probably, and it’s why people are buying GOAT. 
• ANON, launched on Clanker, facilitates access to a ZK-anonymized Farcaster account. If you have sufficient ANON tokens, you are given access to the ability to anonymously tweet from the Anon Farcaster and Twitter accounts. That’s ✨utility✨.

We should learn to differentiate the token from the launchpad. Pump.fun is not a memecoin launchpad. It is a token launchpad. Good launchpads just makes making memecoins easier.

New Creation Mechanisms

Let’s discuss the benefits of a token launchpad as a mechanism in a vacuum. We can moralize about the products they tend to produce later.

In 2023 and 2024, crypto was plagued with the high-FDV, low-float token distribution meta. Points was the industry’s ‘wink wink’ for signaling their intent to distribute tokens, without explicitly stating their intent to do so.

The points + high FDV low float meta emerged from an unfortunate confluence of factors, mainly an overabundance of VC capital and the harshest regulatory environment crypto has ever seen. 

As a result of this confluence, the points and airdrop farming meta emerged and was co-opted by sophisticated and extractive airdrop sybil farmers, which created toxic and perverse incentives, faked metrics, and little actual value distributed to the intended stakeholders. 

Memecoins are the diametrically opposed distribution mechanism for tokens. 

Rather than buying some VC's $35B valuation bags, with 5% of the tokens liquid, you can instead be the 7th person ever to buy a sub-$1m market cap, with a token supply that is 100% liquid. There are only 6 people who can dump on you, and the entire world is left to buy your bags. 

There are merits to this token generation mechanism! 

On day 1, the entire supply of the token is on the market. That is good. This eliminates the different classes of investors found in tokens with lockups. Everyone has access to the same valuations. Everyone is the same tier of investor. 

Nonetheless, there are insiders and cabals that can corrupt tokens when created via a launchpad. Additionally, the principle-agent problem between token creators and token buyers is unresolved. Fully liquid token launches do not fix what is ultimately a fundamentally human issue. Humans are imperfect and easily corruptible. 

Regardless, the ability for a token to be launched with 100% of the supply on the market and with instant AMM liquidity is a novel and valuable mechanism that has strong merits, and we should not cast this mechanism aside, even though it is highly abusable. 

We should add it to our tool belt of token creation mechanisms, alongside the ICO and the NFT mint, as valid ways to launch and distribute tokens. 

All Tokens Start as Memes

I encourage people to consider the potential of using platforms like Pump.fun or Clanker to create a token for your project. 

Imagine a founder with a promising idea for a product or service. They believe it holds value and plan to work long-term to realize its potential. To support their project, they decide to launch a token, either to decentralize governance, manage system risks, capture fees, or for any other possible reason. 

This founder could: 

1. Raise money from VCs
2. Do an ICO
3. Spin up a token on a token launchpad 

All of these are valid options, and each founder should consider the merits of each one. 

Let’s consider that last one specifically. Let’s also say that said founder also launches a token extremely early in the project's lifecycle. Maybe because they can, they do the token first before building any of the other parts of the project. If that’s the setup, then that token is a meme. The founder has an idea, maybe a document, of what the plans are. They are sharing it with others to try and incept the meme into other people’s brains, but nonetheless, it is a meme. 

Take, for example, this recent Clanker token, $NATIVE. This Derek guy requested a token for his Farcaster project, which is apparently to build a new kind of Farcaster client.

Maybe the story ends here! Maybe Derek has no intentions of building Native, and he just requested a Clanker token with a 1-tweet-long story about potentially building Native. Maybe Derek has already been working on Native for over a year now. Who knows! I certainly don’t. It’s up to Derek to prove it to the market. But, nonetheless, the token is fully liquid and potential buyers can make their own decision based on the information they have. 

There is certainly a large principle-agent problem here. The founder could talk a big game about their project as a means to convince people to buy the token they created, and then they could dump the token, which might have been the plan all along. 

After writing the above, Derek tweets that he’s locked his supply of tokens for a year! The guy minted his own token, purchased his own supply (cheaply), and then chose to tie himself to the mast. Legitimate projects with legitimate effort can come out of token launchpads, even if they also primarily launch worthless memecoins! 

This is what we saw with many of the ICOs of 2017, and additionally, the entire industry has wised up to the idea of the VC psyop about spinning narratives around meritless projects. The principle-agent problem exists regardless of the token creation mechanism. It’s just different parties of people doing the psyoping.

Nonetheless, there are Pump.fun and Clanker tokens that started off as memes, and now represent a valid effort to build something truly revolutionary. Again, refer to ANON and GOAT. People have been calling these memecoins, simply by the mechanism of their creation, but they are not memecoins! 

Mechanisms to Improve Memecoins

There are ways to improve the principle-agent gap between token devs and token buyers when using a token launchpad. 

What if, rather than the developer owning a share of the tokens as the upside-exposure mechanism, the dev owned rights to trading fee revenue instead?

This is a mechanism that Flayer is building with their incoming token launchpad, Flaunch. They’re building a Uniswap V4 hook that adds some additional features and mechanisms to their token launchpad.

1️⃣ Trading fee management

Tokens launched on Flaunch have a revenue split between Dev and Community. Like Pump.fun, Flaunch charges a percentage of all trading fees that go through its platform. Unlike Pump.fun, Flaunch directs those trading fees back to the token Dev and the token holders (the community). 

The dev of the token is in control of the revenue split between Dev & Community. This is a parameter that is set at token launch, from anywhere between 100% community, 0% dev, and 20% community, 80% dev. The community must receive at least 20%. 

The fees collected by a token community go back to buying the token and adding it to the LP, increasing the price and the liquidity of the token as trading volume increases. They call it a “progressive buy wall”, which is a great narrative. The fees collected by the dev can go to funding their Lambo, or can be reinvested into the project to fund development and growth. 

This is a much more aligned mechanism that helps close the principle-agent gap. With this mechanism, devs monetize trading fee revenue. They no longer have to sell a supply of their tokens in order to fund development or their Lambo. This is highly NumberGoUp-aligned since trading fee revenue increases commensurately with the price of the token. 

2️⃣ NFT ownership

Who the ‘dev’ is of a Flaunch token is determined by the owner of an NFT. Every token launch on Flaunch comes with a 1/1, which is where the Dev trading fee revenue goes. 

This NFT becomes a composable object to build a further structure around (Money legos!). You can put that NFT into a multi-sig and have that be managed by the team. Or, the NFT could be governed by DAO token vote, either by the token previously launched or a new governance token. 

The possibilities only expand from here. 

Using additional mechanisms like these, we can encourage taking the meme out of memecoins and create more total economic value, productivity, and GDP from the token launchpad mechanism.

So, Have I Changed My Stance on Memecoins?

I’ve recently caught some flack on Twitter for my apparent pivot on memecoins. It's true, I’ve never voiced support of memecoins, other than the occasional appreciation of the Dogecoin, and numerous times on Bankless, I have stated my preference for productive assets, in contrast to the inert nature of memecoins. 

I do think Dogecoin probably represents the best-case scenario for a memecoin. Dogecoin is a wholesome story about a community coming together under the banner of a funny dog picture and collectively growing the dogecoin market cap in the name of good vibes. Additionally, the Dogecoin effort has donated substantial capital to various charities, including clean water projects in Africa, bee conservation efforts, the American Cancer Society, education, animal welfare, homeless support, and, of course, my favorite, sending the Jamaican Bobsled Team to the Olympics in 2014.

Nonetheless, there will still be the normal, vanilla, inert memecoins. And these coins will continue to draw ire from many as they struggle to convince anyone that they are anything but a speculative PvP insiders game with untenable principle agent problems. 

My preference for productive assets with development arcs remains unchanged, but I have broadened my appreciation for the wider potential of memecoins.  

First, I’ve started to envision a world where memecoins play a far larger role in the internet economy than most currently imagine.

What if the memecoin economy grows to rival the traditional stock market in scale? Crypto protocols and markets are designed as supersets of existing financial systems, offering unprecedented flexibility and reach. Memecoins could capitalize on this foundation, becoming vast economic ecosystems in their own right. Listening to the vernacular of Zoomers and Generation AI makes it clear: memes are central to internet culture, and memecoins are naturally positioned to play a large role in internet finance.

While memecoins are currently riding a speculative hype cycle akin to ICOs or NFTs—and will likely face a market reckoning—they will remain a permanent fixture in the crypto space. The demand for being early to something new and exciting will never disappear. In this sense, I’ve come to embrace the long-term potential of memecoins and have changed my mind on this. 

Second, as illustrated by this entire article, I see a growing opportunity for memecoins to evolve into something much greater than the memes they were born from. With additional mechanisms, these tokens can transform into foundational "money legos" that support more substantial systems. With the possibility of memecoins growing into something more sustainable and productive, their palatability to me has improved. 

Let’s Evolve Memecoins

We are humans with agency. I choose to believe that we can harness the power of memecoins that people clearly enjoy and build mechanisms and scaffolding that bend memecoins towards the light rather than to the unsavory. 

When Pump.fun added its live-streaming feature, it started optimizing for attention and virality, and we all know the costs of optimizing for this outcome. When Pump.fun removed its livestream feature, the platform made a significant step away from degeneracy, and towards wholesomeness. With that one simple trick, it nerfed the incentive towards deplorable behavior, and created room for more productive outcomes. 

I think there are more tricks and mechanisms out there that can continue to improve the nature of memecoins. The memecoin industry is large, and it is here to stay. There is a ton of juice left to squeeze to create sustainable value in the memecoin sector. 

So, this is a call for startups! Build memecoin infra that helps memecoins become savory. Help solve the principle-agent problem that exists in all token creation events. 

Both Clanker and Pump.fun produce memecoins that are unruggable. There is no backdoor to these tokens - no one can mint more, and no one can create a honeypot trap. These are examples of token infra helping keep users safe. 

There are more mechanisms like this out there. Let’s find them!