In a recent interview with the YouTube channel ‘Wolf of all Streets’, Charles Hoskinson, the man behind the development of Cardano (ADA), shared his thoughts on memecoins, comparing them to the short-lived fame of celebrities. He argues that much like those celebrities, memecoins must evolve quickly, developing use cases and securing a user base to avoid what he terms the ‘dumpening’ – the practice where tokens are created and launched with the sole objective of enriching insiders.
According to Hoskinson, “A memecoin is like a celebrity enjoying 15 minutes of fame. That doesn’t necessarily mean they’ll disappear forever, but their popularity is temporary. They must find a way to become sustainable quickly or risk losing attention and fading away. This is why 99% of memecoins will fail. The ones that succeed pivot into building ecosystems.”
Hoskinson posits that survival in this ecosystem requires building a community and engaging that community in meaningful ways. There must be a compelling reason for people to invest and continue to do so. This, he acknowledges, is a difficult task as often the memecoin’s distribution is structured to benefit insiders. The individuals or group who issue the memecoin are typically motivated by a desire to inflate the price before dumping it. Memecoins, therefore, must weather this ‘dumpening’.
More broadly, Hoskinson believes that memecoins are negatively impacting the broader cryptocurrency industry. He argues that they tend to divert capital away from market participants, hindering the growth and adoption of digital assets rather than promoting it.
Hoskinson explains, “What’s happening is akin to moving water from one side of the bathtub to the other while the drain is open and the water ends up in the founder’s pocket. Essentially, you’re not adding water to the tub, you’re losing it over time. The net effect is neutral or negative.”
Hoskinson’s perspective on memecoins is a sobering one, suggesting a potential bubble that could have wider implications for the crypto market. It’s a stark reminder to investors of the volatility and high-risk nature of these digital assets, urging them to consider their investments carefully.
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