On Memes and Mass Adoption.

We’ve seen it a million times. A viral meme, followed by incredible price action in a crypto token. It sounds crazy, but it’s true: trading meme narratives can create generational wealth.

This week, let’s explore the relationship between Web3 and meme culture. After reading this, you’ll gain a better understanding of the following:

• Classification of crypto memes

• The cultural impact of memes in Web3

• How bad actors abuse the power of memes

• Driving brand penetration in traditional markets with memes

We’ve come a long way from laughing at Crazy Frog and Bad Luck Brian (IYKYK 😉). Internet memes have become a centerpiece of modern culture. With blockchain technology, they evolved into commodities for trade.

Let’s start by taking a look at some established categories of memes in NFTs.

Derivative NFTs

The launch of derivative NFTs has become common industry practice. “Derivs” are cheeky attempts to ride on the commercial success of their original cousins. They’re more risky to trade because the odds of success are slim.

• Risk (9/10)

• Popularity (10/10)

“Trending” NFTs

It’s become common to see NFTs that break the fourth wall with popular trends, influencers, and headlines. These memes build on the virality of real-life events.

Donald Trump’s indictment trial spurred a wave of jail-themed Trump NFTs. Soulja Boy also created and promoted a bunch of NFT collections. Only the most degenerate dared touch them.

• Risk (10/10)

• Popularity (5/10)

Internet Meme NFTs

Just like Dogecoin, viral memes have also inspired NFT collections. Hundreds of Pepe-themed projects are forever strewn across the blockchain. The Nyan Cat meme inspired a successful NFT collection that paved the way for its own derivatives. Although they have become industry standards, they are often hit-or-miss.

• Risk (8/10)

• Popularity (6/10)

Social Experiments

A unique approach to meme NFTs can be credited to Punk 6529. The industry figure started a movement to “Seize the Memes of Production.” The idea behind this social experiment is to build a new creative economy via blockchain technology. If the working class of the creative industries controls the memes, they also control the driving force behind blockchain communities.

• Risk (1/10)

• Popularity (8/10)

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Who controls the memes, controls the universe.

Elon Musk (2020)

It’s 2013. The crypto industry is still a 5-year-old baby. A pair of engineers named Billy Markus and Jackson Palmer decide to play a practical joke on-chain. Palmer was a longtime fan of memes and had been researching Bitcoin.

Together, they created a fork of the Litecoin protocol and used a popular Shiba Inu dog meme as its symbol. Thus, Dogecoin was born. From 2014 to 2021, the price ranged from $0.0018 to $0.009.

Then, in May 2021, Elon Musk tweeted a joke about it, and the price jumped to $0.6.

It lost 35% of its value within 24 hours after another Elon Musk tweet. It gained 30% back when the new emperor of Twitter switched out the app’s logo for the internet’s favorite Shiba Inu. This move triggered the return of the latest “memecoin season.”

At first glance, the influence of memes on crypto markets appears nonsensical. But this isn’t unique to Web3.

The popular WallStreetBets subreddit led the charge to pump GameStop stocks using the same playbook. Memes are a modern vehicle for effectively pushing economic trends.

But how do memes get so popular?

An interesting theory describes three elements at the heart of meme virality.

• They carry cultural information

• They are easily replicated

• They can circulate easily

The latter two of these features make memes a favorite for bad actors. Low-effort scams have the capacity to do immense damage to victims. For instance, many derivative coins and NFTs turn out to be bogus.

With the return of memecoin season, the pattern has been recycled. Social media pump-and-dump scams ran on memes and vibes. More sophisticated actors like jaredfromsubway.eth used MEV bots to reap vicious bounties on the blockchain.

In the post-Pepe frenzy, people were itching to throw money at anything related to memes. A simple social engineering scheme raked in $7 million in less than a week. The now-infamous Ben.eth teamed up with BitBoy to extract over $20 million from the market.

Even Elon Musk’s place in DOGE’s history has come at a price in the form of a $258 billion racketeering lawsuit. The claimants are victims of several scams who supposedly thought the memecoin was a safe investment because of Elon’s influence.

The viral nature of memes is a double-edged sword that can be used to drive progress or sow chaos in society. People aren’t to blame for loving memes. The problem is that not enough good guys can harness this force.

Today’s leading NFT brands all have something in common: a strong narrative.

One of the reasons why this has become a hidden trend is that strong narratives are easy to spread. For a savvy team, they’re also easy to capture and circulate.

This S-rank combo converts any ordinary narrative into cultural information, and boom! You’ve got a viral meme on your hands. Below are a few case studies:

• Frank Degods and the DeLabs teams did it with the “shooey” videos. The internet challenge became a cultural moment that made its way all across the world. This snowballed into one of the world’s biggest NFT brands.

• GodHates NFTs staged a protest at a Web3 event in New York. It also introduced gimmick culture through the persona of its founder, Sr. Peters. This blew up into a global community of holders and multiple collections.

• Azuki had really cool PFPs, but they lacked the “kawaii” factor. A surprise airdrop of a secondary collection formed a strong narrative for Beanz. It was easier for the team’s marketing efforts to activate new audiences.

• Sappy Seals built an AI-powered meme machine. A tidal wave of user-generated content hit the internet, and the seals turned into a cultural mainstay.

• Pudgy Penguins published a brand bible for holders to easily create their own content. The team flipped this idea into Pudgy Toys that allow for physical customization, breaking Amazon sales records.

I took some time to really study these brand narratives and condensed my learning into three parts. You can think of these as the pillars of Web3 viral marketing.

Brand Alignment

Azuki wanted to become more than just a thumbnail project, just like every major NFT brand that survived the bear. So what did they do? Azuki's founder, ZAGABOND knew the secret of aligning the brand with customer incentives.

Within four months, the team launched seven campaigns. As exciting as that sounds, the watchword here is "dilution."

Customers don't like buying stuff that loses value. But many Web3 "community incentives" only extract value instead of reinforcing it.

Take, for instance, the popular trend of releasing secondary collections as a form of utility. This often ends up reducing the market value of the entire NFT brand once the hype cycle is worn out, leading to a short-term pump and a long-term dump.

Community Culture

The intrinsic value of community culture creates an emotional element that strongly factors into the market value of a brand.

This is not a new concept. People in financial straits opt to pawn family heirlooms rather than sell them outright. It's also the same reason why you'd never consider selling your pet, no matter how broke you might be.

User-Generated Content (UGC)

This is a super fast and effective way to scale up your brand’s reach.

Let's say 50 people create unique content every day. If each piece of content costs $10 to create and deliver, that would cost $3,000 weekly. Instead, you could create a brand kit for $1,000 and get an infinite return on investment!

Pro tip: Build a strong community culture, then plug in your UGC flywheel.

• You will have a core audience.

• It's easier to form a recognizable mental image for your brand.

• You can control the narrative and optimize UGC for unique campaigns.

Disclaimer: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.