The following is a guest post from Shane Neagle, Editor In Chief from The Tokenist.
Value is driven by many narratives, which compete for supremacy. For instance, one may see a house listed in outstanding condition, which is a fine narrative to have. The value of the house should reflect that, but not if the house is in a crime-ridden neighborhood.
Likewise, in the crypto space, the value of cryptocurrencies is a dynamic interplay between narratives. Case in point, memecoins, and AI tokens have gained much traction over the last year, with the latter reflecting the overarching AI demand narrative in the world of stocks.
But it was the Solana (SOL) that benefited sustainably from all the traffic as the launching platform. In turn, the utility purpose of SOL was maximized because SOL is required to trade with memetic assets like Fartcoin (FART) or Bonk (BONK).
Beyond speculative memecoins, Solana is also poised to gain traffic as the popular AI agent platform Virtuals Protocol (VIRTUAL) expands from Ethereum’s Base to Solana. Valuation-wise, SOL is more stable but still has returned a solid 24% return over the last three months. Yet, this pales in comparison to VIRTUAL (up 271%) and FART (up 1,309%) in the same period.
The question is, should crypto investors also view some memecoins as utility tokens that would imbue them with greater staying power beyond the short-term speculation drives?
What Is Utility?
If one were to stretch the meaning of words, one could say that the utility of the recent Official Trump (TRUMP) memecoin, also having launched on Solana, is to gauge the popularity of his presidency.
In a way, the utility of TRUMP is to monetize the following of President Donald Trump, just as was the case with the controversial Hawk Tuah (HAWK) token. In both cases, a large following provides a liquidity pool as the baseline. And if the liquidity pool is large enough, there are more opportunities to buy the dips in-between FOMO cycles.
Of course, under the condition that one excludes malicious intent via rug pulls.
Therefore, the monetized following itself, as a liquidity source, is the primary utility of most memecoins. However, although social contagion and tribalism are powerful forces to utilize, they still rely on speculation. For this reason, the utility of a token, especially of a memecoin, is best understood as a secondary purpose, one that can independently drive value as a byproduct of community’s engagement.
In other words, the utility of SOL is tied to its core functionality, while the core functionality of memecoins is social-media-driven hype, which then reflects in their liquidity dynamics. But if the memecoin also has utility in a narrow meaning, this itself can boost its value.
In the case of TRUMP coin, that secondary purpose would be to use the memecoin as a currency to buy merchandise from GetTrumpFragrances.com, GetTrumpSneakers.com, and GetTrumpWatches.com. Potentially, this could serve as a launching pad into other venues.
We have already seen this with Tesla accepting Dogecoin (DOGE) for some products.
With the understanding that the meme narrative of a coin is tied to its utility in a feedback loop, which memecoin exemplifies the standard of robust utility?
Shiba Inu (SHIB)
There is a reason why SHIB has remained one of the top memecoins by market cap, just behind Dogecoin. Unlike Dogecoin, however, as the king of memecoins often pushed by Elon Musk, SHIB has a finite supply, of which 59% is in circulation out of 1 quadrillion SHIB.
With such an ample supply, SHIP token-holders often engage in burn drives – sending SHIB to burn addresses to increase scarcity. Moreover, SHIB is used in ShibaSwap decentralized exchange (DEX) against other tokens and as a utility fee token.
In fact, a portion of some fees from ShibaSwap trades go to token burns. Additionally, Shibarium, as a layer-2 scalability solution like Base, has a token-burning mechanism, with the burn rate depending on Shiba Inu’s market activity.
SHIB’s market activity is further boosted with futures trading strategies, typically via perpetual contracts on exchanges as people bet on the memcoin’s price fluctuations. On top of its scarcity drive that mimics Bitcoin but without the proof-of-work capex, Shiba Inu has sub tokens that are more scarce. BONE is limited to 250 million tokens, serving as a governance token to vote on proposals, and LEASH is limited to 107,646 tokens, serving as a reward token.
Lastly, there are 8 online platforms that accept SHIB payments, from domain hosting to betting and cannabis products. In short, SHIB has many layers beyond dog memetics that all come together to bolster SHIB’s staying power.
Perhaps most importantly, SHIB is devoid of celebrity-focus. Therefore, its valuation is not tied to the shifting waters of celebrity status. One wonders what will happen to TRUMP once the President is out of office.
Which Other Memecoins Fit the Utility Bill?
From SHIB, we can see what it takes to have a robust memecoin that is less likely to end up in a worthless token bag. First, the memecoin market cap has to be fairly large. Otherwise, there is greater risk of lower liquidity.
And if there is low liquidity, the memecoin may lose traction for future valuation drives.
This is a sure way to end up holding a stash of memecoins worth pennies. Many traders ignore this because they want to participate in the initial token drive just before its valuation skyrockets.
This speculative mindset mirrors insurance premium auditing, where insurers assess risk to ensure accurate premiums. Likewise, traders who overlook liquidity can become overexposed, making memecoin evaluation crucial to avoid losses.
However, this is a fertile ground for scammers, and they count on FOMO’s potential to attract the initial investment wave. At the same time, one should also beware of large-cap memecoins like Dogecoin (DOGE) that have infinite token inflation.
Beyond this fundamental, it would be best if the memecoin is divested from specific individuals. After all, the reputational risk of those individuals is then tied to the memecoin, which is typically unsustainable in the long run.
Lastly, a robust memecoin has to have a deeper utility ecosystem, as shown by Shiba Inu’s burning mechanism, merchant use, DEX, staking, and supportive BONE and LEASH tokens.
Besides Shiba Inu, memecoins that fit all these main parameters are Pepe (PEPE), Bonk (BONK), and Floki (FLOKI). All of them are extremely cheap, which makes for a low barrier to entry in future cycles. They also have projects that elevate tokenholder participation. In turn, there are more capital tentacles to grab onto inflows.
With that said, these are still memecoins and should be treated as such – highly speculative assets. Nonetheless, if one were to take memecoin exposure that is safer by comparison, investors should keep them in mind.
