Memecoins and Crypto's Moral Compass
Also: Jacob Collier's Guitar, Sora's AI Films, and Harberger Tax Toolkits
Memecoins in crypto have recently grown in prominence and its rise have surfaced several opinions. It’s something I predicted since I first discovered Dogecoin in 2013.
With Dogecoin however… there’s no lofty theme, or concept, other than doge: the meme. It’s currently very big on the net. Doge harnesses a strong existing network effect. Its usefulness as a currency is exactly that. It seems as if 'money’ (or value) is a correlation to a network effect.
(sidenote: I don’t like linking to that writing since I’ve moved on personally on some of the ideas)
It led to a few years of work establishing new infrastructure, standards, inventing token bonding curves, and seeding the ideas.
Using Ethereum as a programmable, distributed, shared ledger, these groups can mint a token of value according to agreed upon rules without a centralized 3rd party being involved. In other words, a specific entity is not involved in the creation process of the tokens of value.
It is a new type of organisational model & way for people to coordinate, unfettered, around shared goals.
In essence, we allow the creation of global, joint-stock “memes”. Another phrase to describe this model is “meme markets”.
We will be able to mint tokens for things like sub-reddits, hashtags, people, memes and new organisations.
So, I’ve been following it since their inceptions. To me, all of crypto was some variation of a memecoin. It’s technical features serves their propagations.
The reason why is quite simple: blockchain tokenization decreases the cost to coordinate by orders of magnitude. Coordination systems are utilised when the cost to run them are less than the benefits they provide. New coordination systems will come to exist because we’ve substantially lowered the costs to implement them.
The underlying coordination benefit here is focused on a community that partakes in this as a game. And like many games, the goal is to win and the secondary outcome is the play.
1kx has a great article on the history of memecoins (thanks Misha for the link).
At the end they note the risk and gambling nature of it:
Despite the opportunity, memecoins are not without risks. Many memecoins tend to attract users trying to acquire instant wealth with little effort, treating it as a lottery ticket or form of gambling.
Another common trend are ‘rug pulls’ and ‘pump-and-dump’ schemes, which occur almost daily on decentralized networks through memecoins. According to a recent report by CipherTrace, a blockchain analytics firm, rug pulls accounted for 99% of all crypto frauds in 2023, totaling $2.1 billion in losses.
Li Jin (
) sees memecoins as a go-to market strategy.While many dismiss memecoin trading as gambling or a strange form of financial entertainment, their growing popularity and intense communities may mean that they become a viable part of GTM strategies. For users, the new development is that, as assets, memecoins allow anyone to invest in and own a piece of a GTM strategy, grassroots community, internet culture, and community currency.
Jarrod Dicker sees memecoins as a media/entertainment business.
media folks definitely hate this. they also hate that I would dare to call memecoin’s a media business. but that’s exactly what it is. with memecoins, you have a bunch of people coordinating around timely pop culture topics (existing or newly created), building real markets around them, and then socializing the fuck out of them. but unlike traditional media where you create content to drive attention and then try to monetize it, memeland does the opposite-- the signal of a topic worth discussing is dictated through “dollars” and once big enough, holders of these coins create media around them to drive more awareness. this, in return, (hopefully) drives the value of their holdings up. rinse and repeat.
Vitalik Buterin wonders how memecoins could have a more pro-social outcome besides a zero-sum attention game:
I think of the "degen" parts of the crypto space in the same way. I have zero enthusiasm for coins named after totalitarian political movements, scams, rugpulls or anything that feels exciting in month N but leaves everyone upset in month N+1. At the same time, I value people's desire to have fun, and I would rather the crypto space somehow swim with this current rather than against it. And so I want to see higher quality fun projects that contribute positively to the ecosystem and the world around them (and not just by "bringing in users") get more mindshare. At the least, more good memecoins than bad ones, ideally those that support public goods instead of just enriching insiders and creators. But also ideally, making games rather than coins, and making projects that people enjoy participating in.
The DeFi ponzis, the memecoins, the ugly JPEGs of 2021. It’s the same story every time - there’s some grandiose narrative for what’s nothing more than pure casino. Can’t get much worse, right?
Sadly, nope, things have hit an all-new bottom with 2024: racist, sexist, and other shitheaded memecoins which are merely a vehicle to transfer wealth from the many to the most obnoxious people on the planet.
So why has there been such a sharp decline? I think it’s pretty simple - the crypto community lacks any moral compass.
They argue that all the copes and defensiveness about this market is just perpetuating a rotten and toxic culture.
At this point, this evil in crypto is banal and normalized. This has become the identity of crypto - sure, some useful stuff, but mostly just infested with scams and absolute degeneracy.
What to do about it?
There’s a part of each argument that resonates with me. I detest rabid “degens” that ultimately use memecoins to pull people into a scheme that rids them of their money. Memecoins a part of crypto, but not the entirety of it. It grabs a lot of the attention due to its absurdness. I also think they are interesting entertainment phenomena that’s ultimately just a game. Like games, there are second order benefits to both the players (socializing) and beyond (in the way that sport supports economies). As Li Jin pointed out, some of these memecoins have resulted in legitimate non-crypto economic benefit. Who could forget the original memecoin, Dogecoin, sponsoring a Nascar driver?
Or $dogwifhat sponsoring an ad on the Las Vegas Sphere.
In terms of the gambling aspect of this game. In the US, for example, most adults have gambled, but estimates put those with addiction at 1-5%. In ergodicity economics we know that most people are actually *rationally* risk-averse.
Ergodicity economics shows people (rationally) maximize the long-term growth of their wealth and that much of what we call “risk aversion” is rational avoidance of non-ergodic games like Russian Roulette.
In other words, a few people are likely doing most of the playing of this game, and that a small percentage get unreasonably hooked to gambling. Compared to other vices, like Alcohol Use Disorder (~10.5% of Americans) and cigarette smoking (~11.5% of Americans), it’s not as serious. Depending on perspectives, it might be that it should be zero, which is why in general that gambling is “allowed”, regulated, and used to funnel the speculation into further pro-social causes (eg, national lotteries).
Thus, a more reasonable question is whether the potential pro-social outcomes are worth the costs. And ultimately that depends on your own moral compass. Are most people involved in memecoin trading, addicts? Or are they just having fun? How many are losing life-savings to grifts and scams? How many scams and rugpulls are there? Should people be able to take these individual bets themselves and not have society impose on that freedom? How do you measure the social benefits of memecoin trading? People form legitimate communities and socialise in social media and group chats around this. It’s just not what many would be used to.
And so, based on your own opinion and perspective on the speculative nature of memecoins, you can decide whether these games are net positive or not.
That being said…
Finite, Infinite, and Meta Games
If you’re familiar with the framework of finite and infinite games, you might see that memecoinery is primarily finite: there’s winners and losers. You see little sustained productive benefit.
A benefit of finite games as entertainment (like sport), is that they allow an outlet for competition and status games that *also* have second order infinite game benefits. After the game is over, you’ve stimulated an economy. The winners rejoice and losers sulk and lick their wounds. But, on net, everyone is better off and ready for the next game. This latter principle is the meta game where both finite and infinite games aren’t opposite sides of each other.
Capitalism itself straddles this line. Companies win and companies lose. People win and people lose. Creative construction and creative destruction. But, if channelled in the right way and the meta game is contained to ensure that positive outcomes result from the finite games, we all win. It’s progressive tax regimes. It’s ensuring that more people own more of the means of production. It’s dynamism (allowing people to get back up when they lose). It’s taking care of basic needs. It’s universal basic equity. It’s ensuring the resource allocation doesn’t get monopolised. It’s reasonable anti-trust. It’s protecting competition and ensuring free and fair markets. It’s optionality. It’s a rising tide that lifts all boats.
If you pay your taxes, memecoins do have this second-order benefit. Let the degens, degen as long as they pay their share. But, the benefit of this system, besides the socialization benefits, should not just become a broader pro-social benefit through taxation. Rather, internal structures that funnel proceeds from these games to systems of regeneration would make the entire thing more palatable. Like the sports bar that benefits from a local soccer game, if memecoin fees were funnelled into various longer term pro-social institutions, we’ll all be better for it. I hope that more memecoins incorporate fees that go not just back into the same ecosystem, but spills over beyond it.
Then, I’m sure that many would find this orgy of trading memes to be substantially more palatable. If a kid could say that he went to school because some guy traded $dogwifhat, then that’s a story befitting 2024.
You Can’t Ignore It
Some argue that one should merely ignore the memecoin degeneracy. Focus on the more positive aspects of crypto. There’s regen. Common Ownership. Privacy technology, etc.
The argument that it should be ignored is a bit harder to stomach for me, because unlike the internet, the entirety of crypto takes in the same proverbial room by sharing a ledger. It’s both its benefit, but also its crutch. I might be optimistic that memecoinery can change to incorporate a spillover into broader society, but, I’ve always preferred being an optimist. ;)
10 years ago, I posted this picture of a community of fans putting a mask of doge on the Wall Street Bull on my blog.
And I quoted it with:
In the next decade, we’ll look back and realise just how much this picture meant. Now, we don’t quite know just what we are in for.
It’s a grand time to be alive.
A lot has changed in 10 years. Me too. My opinions too. But, I still contend that truly understanding memecoins leads to some really interesting implications. It’s going to remain a part of our future whether you are confused by it, enraged by it, disgusted by it, or merely curious about it.
Let’s see where we are 10 years from now! Let’s nudge it in the right direction.
Bonus Content!
Hey friends! A positive week for me as I continue working on my novel and continue to get back to running with good health and without injury. 🥳
Quite happy on both counts. In both, I had setbacks recently: months where I’m unable to progress. When you get back to where you were, you realise just how much you took it for granted. Penning down a story where it gets back its right place and running where you don’t have post-viral complications or injury anymore is the same feeling. While sometimes it can mean that you’re just back to square one, it’s great just to get back to it all. So, I’m excited for what’s next!
Sora’s First Impressions Films
Sora is OpenAI’s text-to-video app. They shared some of the films they enjoyed.
It’s good.
One thing to take note of. It’s the same for most of the text-to-image applications: it’s vibes media. Vibes, as in: the direction is not particularly specific. Details matter less over tone/feeling. In most of these films, the story can be sufficiently told if the directors don’t require highly specific directing. For example, none of these films that were shared have specific blocking shots with actors and actresses talking to each other. It’s not about the subtle body language of a person.
So, while these films are good, desiring specificity will run up to complexity limit when a tool makes inferences for the creator. At some point, it’s just easier to *not* use AI tools.
To put it differently: AI is going to leave a lot more Chekov guns lying around than what certain stories need. It feels like if a toddler wades through your story, leaving things strewn about.
No doubt it will improve and that directing will get easier, but for now, AI generated media is best when it doesn’t have to be specific.
AI might even explain to you WHY it chose certain decisions, but one can only rely on one’s own ability to witness and see and understand that adjacent possibilities exist at all. We can verify when an AI is bullshitting us when it fails at something like a math test, but to verify when it’s bullshitting us when it is subjective is a much, much harder task. The skill of deliberateness, the why, and the specificity that comes from it, won’t go away.
The Guest Who Wouldn’t Leave
This story about a man who used obscure laws to live in a hotel in New York and eventually convince people to hand over ownership of it is catnip for people interested in the intersection of law, housing, and obscure unintended consequences.
On a June afternoon in 2018, a man named Mickey Barreto checked into the New Yorker Hotel. He was assigned Room 2565, a double-bed accommodation with a view of Midtown Manhattan almost entirely obscured by an exterior wall. For a one-night stay, he paid $200.57.
But he did not check out the next morning. Instead, he made the once-grand hotel his full-time residence for the next five years, without ever paying another cent.
Harberger Toolkit
Ever since I deployed the first smart contract to use Harberger tax in 2019, different teams and people have coded more generic versions of the principle/idea. 0xlpd wrote a new toolkit that also references the other works using this toolset.
I haven’t done my own code review of it, but I enjoy that there’s more options available and flexibility to experiment with it.
Small Press Distribution
Last week, I wrote about the various opinions on the new publishing house, Author’s Equity. Another story this week in the literature space is the winding down on SPD in the US. They handled distribution for some smaller presses.
, owner of a small press, wrote about SPD’s closure and Author’s Equity. I’m enjoying reading more of the publishing industry’s takes on where the industry is going!And that, folks, is what links these two publishing scandals. Distribution is a mess; distribution is also unnecessary. You don’t need it to to get your book to consumers: anyone can list a book on the largest bookstore ever in the history of the world. You don’t need it if your readers are okay reading digitally (which they probably do for every other thing they read). You don’t need it to house printed books because of (Print-On-Demand) POD and digital short-runs.
Jacob Collier’s Playfulness
Really adored this video where Jacob Collier describes his variation of a guitar (a 5-string). While this video is about guitars and guitar-playing, what resonated with me is that it’s actually a great encapsulation of the relationship between music and instrument. If the medium is the message, then the instrument is the melody. Navigating an instrument leads to habitual chords, tones, and expressions that any musician becomes familiar with. Over time, they explore the instrument to produce new ideas and melodies. Your instrument becomes a garden that, the deeper you go with it, the more you need to do to maintain it.
New instruments are often a way to rethink your own desire paths you’ve carved in your own melody map gardens. A 5-string guitar is one such re-imagination. I loved it. I need to seriously get back to making music again.
Omah Lay - Holy Ghost | Lekaa Beats, Martin Solveig Remix
This week’s track is a groove-y afrobeat/house track! Been enjoying playing this on my runs.
See you next week, friends. As always, please share the newsletter if you enjoy and hope you get to enjoy a lovely sunset!
Simon