Memecoins vs Scamcoins: The difference & My Opinion on How to Regulate Them
1. Memecoins = Scamcoins?
Memecoins, the one crypto category that is either loved or hated by crypto communities. While some memecoins do offer some real-world utility (such as charity donations using DOGE), many of them provided literally zero utility with insanely bad tokenomics (such as excessive token supply & unequal distribution). With it’s downsides, many have labelled memecoins as scams due to:
Lack of substance: Memecoins are often criticized for lacking real-world utility or solid underlying technology, which can make them speculative investments.
Volatility and risks: Memecoins are highly volatile, with their value heavily influenced by market sentiments. Besides, the majority of most memecoins are owned by whales who bought them in thousands of dollars as a gamble for pumps & dumps, which poses significant risks especially to retail investors.
Potential for scams & rugpulls: The popularity of memecoins has attracted scammers and fraudulent projects looking to exploit retail investors' enthusiasm and make quick profits.
Despite all the negative sentiment about memecoins especially on the pump & dump part, they do serve some purposes that caught the eye of many investors who purchased them. Memecoins are mainly used for these utility:
Community engagement: Memecoins often have dedicated communities that participate actively in their development and promotion.
Accessibility: Memecoins can provide an entry point into the world of cryptocurrencies for individuals who are attracted to the meme culture and internet trends.
Entertainment value: Memecoins can be seen as a fun and light-hearted aspect of the crypto space, appealing to those who enjoy memes and humor. In fact, I actually do think memecoins would be great for light gambling during the festive seasons such as the Chinese New Year. Imagine betting in a Blackjack game using $SHIB where everyone can bet in millions of SHIB to look like a millionaire, but in truth you’re only betting $10 of dollars into the game.
Use as money: Memecoins are cryptocurrencies after all, and you can trade them for goods & services if you wish, even though the value is highly volatile.
While memecoins are great drivers of marketing especially for newcomers who just want to have a feel of the crypto space and have fun, many people tend to put large sums of money into these memecoins without knowing the fundamentals behind the utility and tokenomics of those tokens. This is where the boundary of the memecoins need to be set.
2. My opinion on memecoin regulation
In my opinion, there’s only a certain level of fun that memecoins can have until people start putting millions of dollars into those memecoins, with the intention of believing they can make 10x, 100x or 1000x gains out of them. After that, the people who controlled the majority of the tokens manipulate the value by pumping the token price and exit their position fully when they hit their price targets, thus causing huge losses for most retail investors and generally label memecoins as scams.
To mitigate this, I do have an idea on how to maintain the fun element of memecoins while eliminating the idea of using memecoins as speculative investments:
Create a new token standard that sets a limit of the USD value market cap regardless of the token circulation.
For example, let’s say you programmed a total supply of 100 billion $PIZZA, then the token standards limits the market cap of every single meme token to just USD$10,000. This will ensure a fixed value of $PIZZA token to $1 = 10 million worth of PIZZA. To avoid people buying all $10,000 worth of tokens, the token standard must program a maximum value a user can buy, say each user can only buy a maximum of $1 worth of PIZZA tokens (10 million tokens for this example). You can set to whatever amounts of token supply but the hard cap of the market cap value in USD must be obliged.
With this method, everyone will be able to buy those memecoins in a permissionless manner while strongly instilling the thought of buying memecoins for the sake of fun instead of forking out their life savings with the expectation that they might get rich doing it.
For newcomers testing the waters into the space, they are able to learn the technical details of how blockchain & the cryptocurrency space works (such as creating wallets, signing smart contracts, etc) with very minimal tokens bought.
Of course, you can argue that you can also do this with normal cryptos, but programming a hard cap on the marketcap value of the tokens will implant a “you can’t be super rich investing in memecoins” mentality.
What about testnets, you may ask? Aren’t they achieving the same thing without the need to fork out any money to learn this ins & outs of blockchain tech? Yes, I agree but for a newcomer, it’s much more convenient for them to buy the token instead of taking the time to understand how to setup a testnet environment to do so. Once they are used to the crypto environment, they can start picking these learnings up if they wish.
Better yet, these memecoins can be used as governance tokens, where the platform can create DAOs for people to vote on proposals such as “Which memes are the funniest?” or “dynamically change the token supply to infinite & beyond!”. Users can use their memecoins as voting power to vote on proposals while only spending pennies to do so.
On a government regulatory standpoint, since the market cap of those memecoins is so small, you can bet they wouldn’t want to regulate these memecoins as it doesn’t involve a lot of money and will not be detrimental to the economy & financial well-being.
Summary
Whether my opinion is feasible remains to be seen, as I’m not a developer myself, or I might be just bullshitting and it’ll never work, but the key message to this article is this:
Memecoins can be scams, but not all memecoins are scams.
Whether memecoins are considered good or bad depends on an individual's perspective and goals. Some may see them as a fun and engaging aspect of the crypto space, while others may view them as speculative and risky investments. It's important for individuals to conduct thorough research, exercise caution, and consider their own risk tolerance before engaging with memecoins.
The goal is to remove the thought of using memecoins as an investment vehicle and only be used exactly as what it was meant to do: Creating vibrant communities and have fun!
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