What Are Meme Coins and How Do They Work?

From Dogecoin and Shiba Inu to lesser-known variants, learn all about meme coins, what they are, and how to trade them.

Mar 11, 2022
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What Are Memecoins Otp

As their name implies, meme coins are a category of cryptocurrency inspired by memes or which possess a comedic trait. Dogecoin and Shiba Inu are two well-known examples.

Key Takeaways:

  • Meme coins are generally highly volatile, as they often have an abundant supply and their popularity is largely driven by pop culture.
  • Dogecoin and Shiba Inu are the leading meme coins, though there are hundreds of others available.
  • Having a thorough understanding of a meme coin requires verifying that liquidity pools are tied to burn addresses, ensuring third-party audits have been completed on the project, and confirming no one entity owns more than 5% of the total supply.
  • Meme coins’ reputation of offering no clear use case or benefits is changing with the emergence of utility meme coins.

What Are Meme Coins?

What Are Meme Coins Infographics Mar23

Meme coins are cryptocurrencies, like Bitcoin or Ethereum, that pay homage to a meme, which is an interesting or funny idea captured in an image, video, or another form of media. Like the memes they’re based on, meme coins are designed to go viral and be shared. 

Dogecoin (DOGE), the original meme coin and category leader by market capitalisation, was created in 2013 as a joke to satirise the hype around Bitcoin and other mainstream cryptocurrencies. Its developers, software engineers Billy Markus and Jackson Palmer, intended for Dogecoin to be a fun and accessible altcoin, which is why it doesn’t have a capped supply. Dogecoin was an instant success upon launch and surged in popularity on platforms like Reddit. 

Despite its ups and downs over the years, Dogecoin has consistently maintained a passionate community and, at one point, surpassed Bitcoin in daily transaction volume.

Read our University article about Dogecoin to learn more about the meme coin that started it all.

Volatility and Value

Since meme coins are community-driven, their value is considered to be speculative and incredibly volatile. When Elon Musk and Mark Cuban promoted Dogecoin, its value skyrocketed. But once the hype died down, its price fell just as quickly. Another reason meme coins undergo such extreme changes in value is because of the way they’re designed. Unlike fiat currencies and most cryptocurrencies, meme coins often have an uncapped supply, making them inflationary in nature. An exception is Shiba Inu (SHIB), which has a total supply of 1 quadrillion tokens. 

While the financial risk of investing in meme coins is high, they’re still an important part of the cryptocurrency market. In fact, the market capitalisation of the top two meme coins, Dogecoin and Shiba Inu, is in the billions. Keeping abreast of cryptocurrency trends requires an understanding of how meme coins work and how they’re changing. 

Most Popular Memecoins Infographics Mar23 1

To summarise, here are the characteristics of meme coins that differentiate them from traditional cryptocurrencies:

  • Meme coins are highly volatile and subject to extreme changes in value over very short periods of time.
  • They generally have a massive or uncapped supply.
  • Meme coins’ values are driven by the current buzz surrounding the token.
  • They can have a very low value per token.

How Do Meme Coins Work?

Meme coins work like any other cryptocurrency, taking full advantage of the blockchain and related technology. They’re often built on blockchains that use smart contracts, like Ethereum and Solana. Today, there are over 300 meme coins in existence.

In the Crypto.com App, users can conveniently buy meme coins and 250-plus other coins using Apple Pay, Google Pay, a credit/debit card, or 20-plus fiat currencies transferred from their bank account. To do so, users can tap ‘Buy’ from the home screen and select the token to purchase plus the payment method. 

Visit the Help Centre for more information, and download the Crypto.com App here

Benefits of Meme Coins Once Purchased 

In its early days, Dogecoin was mainly used for ‘tipping’, which is the practise of rewarding people on the Internet for doing a good deed. Some meme coins offer utility or are now part of wider decentralised finance (DeFi) ecosystems. For example, Bone ShibaSwap (BONE) is the governance token of ShibaSwap, a decentralised exchange (DEX). 

Canine Coins Infographics Mar23

The excitement around meme coins is a relatively recent phenomenon. They became a part of the zeitgeist in early 2021 when celebrities like Elon Musk, Mark Cuban, and Snoop Dogg backed Dogecoin, sending it soaring more than 800% in 24 hours.

Since then, Dogecoin has had instances where it leapt in value when Elon Musk tweeted about it. Hundreds of other meme coins have also entered the scene, including dozens based on the doge meme. 

Besides Dogecoin and Shiba Inu, five of the top ten meme coins with the highest market cap include:

Token NameWhat Is It?
Floki Inu (FLOKI)FLOKI’s ecosystem offers a 3D NFT metaverse, DeFi utilities, a crypto education platform, NFTs, a merchandise store, and more. The community has pledged to build schools as part of its charitable initiatives.
Bone ShibaSwap (BONE)BONE is a governance token of the ShibaSwap ecosystem that allows the #ShibArmy to vote on upcoming proposals. The more BONE the user holds, the more weight their vote carries.
Baby Doge Coin (BabyDoge)BabyDoge is a deflationary token designed to become more scarce over time. All holders of BabyDoge will earn more BabyDoge sent directly to their wallet. 
Dogelon Mars (ELON)ELON follows the path of other popular canine meme coins, such as Dogecoin, Shiba Inu, and Floki Inu. Its name is a combination of Dogecoin and billionaire entrepreneur Elon Musk.
Doge Killer (LEASH)LEASH is a token in the Shiba Inu ecosystem. Shiba Inu is commonly referred to as the ‘Dogecoin (DOGE) killer’ because of its enormous popularity.
Token NameFloki Inu (FLOKI)
What Is It?FLOKI’s ecosystem offers a 3D NFT metaverse, DeFi utilities, a crypto education platform, NFTs, a merchandise store, and more. The community has pledged to build schools as part of its charitable initiatives.
Token NameBone ShibaSwap (BONE)
What Is It?BONE is a governance token of the ShibaSwap ecosystem that allows the #ShibArmy to vote on upcoming proposals. The more BONE the user holds, the more weight their vote carries.
Token NameBaby Doge Coin (BabyDoge)
What Is It?BabyDoge is a deflationary token designed to become more scarce over time. All holders of BabyDoge will earn more BabyDoge sent directly to their wallet. 
Token NameDogelon Mars (ELON)
What Is It?ELON follows the path of other popular canine meme coins, such as Dogecoin, Shiba Inu, and Floki Inu. Its name is a combination of Dogecoin and billionaire entrepreneur Elon Musk.
Token NameDoge Killer (LEASH)
What Is It?LEASH is a token in the Shiba Inu ecosystem. Shiba Inu is commonly referred to as the ‘Dogecoin (DOGE) killer’ because of its enormous popularity.

Are Meme Coins Safe?

Meme coins’ high supply and volatility make them more speculative than other cryptocurrencies. While Elon Musk (or some other celebrity) could tweet about Doge and send its value soaring tomorrow, it could just as easily fade away into obscurity. Remember, meme coins are based on Internet memes. As such, they share many traits with them, including the potential for going viral and for becoming quickly outdated.

What to Keep in Mind When Buying Meme Coins:

  • Verify that liquidity pools are held by burn addresses to avoid buying a cryptocurrency that can face malicious activity, such as a rug pull.
  • Always ensure that a reputable third-party firm has audited the meme coin project.
  • Be wary of any coin where developers hold most of the tokens. Ideally, no single person or organisation should control more than 5% of the token’s total supply.

Keeping these things in mind and performing research (DYOR) on any coin of interest will help to minimise unnecessary risks.

At the moment, meme coins do not have the same widespread adoption as the leading cryptocurrencies. However, that doesn’t mean they’re on the way out. The main barrier for meme coins is the same as other cryptocurrencies: Many people are still unfamiliar with them. 

More Businesses Are Accepting Meme Coins as Currency

Several mainstream businesses have expressed an openness to meme coins. Knowing Elon Musk’s appreciation for meme coins, it’s not surprising that the Tesla store has begun accepting Dogecoin for certain items.

But Musk isn’t the only business person who’s been open to meme coins. AMC, GameStop, Newegg, and Twitch have already begun accepting meme coins like Dogecoin and Shiba Inu. 

A New Wave: Utility Meme Coins

We’re beginning to see meme coins move towards a more utility-focused model. One of the best examples of this is Shiba Inu, which plans to create the Shibaverse, a Metaverse for Shiba Inu community members. The ecosystem already includes ShibaSwap, a DEX where users can swap tokens.

Floki Inu’s developers, who have ambitions to dethrone Dogecoin as the most popular meme coin, emphasise the token’s utility as a way to differentiate it from the pack. The FLOKI ecosystem includes plans for an NFT gaming Metaverse called ‘Valhalla’, a merchandise marketplace, and a crypto education platform. 

While, historically, most meme coins were created for the sole purpose of trading, it’s evident that new projects are using the comedic element of their token as the means to build a community. Crypto.com offers the ideal starting place for those interested in meme coins. Check current coin prices on the Crypto.com Price page or download the Crypto.com App

Due Diligence and Do Your Own Research

All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.

Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.

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