Meme vs Governance Tokens: In fact, everything is about Meme coins.

Original Title: "Memecoins > Governance Tokens"

Author: Yash Agarwal

Translation: Deep Tide TechFlow

A discussion and insights on how and why memes offer a fairer distribution compared to VC-backed governance tokens and TradFi - lessons for crypto founders.

The CTO of A16z recently argued that meme coins are "not attractive to builders" and "may even be net negative when considering externalities."

• "A series of false promises masking a casino"
• "Changing the public, regulators, and entrepreneurs' perception of cryptocurrencies"
• "Not attractive from a technical standpoint"

And so on.

Meanwhile, Chris Dixon published a more sobering article, emphasizing the systemic absurdity of U.S. securities laws - highlighting how top projects get caught in regulatory quagmires while meme coins can stand out because they don't "pretend that meme coin investors rely on anyone's management efforts." This indirectly acknowledges the masquerade (pretense) of the rest of the crypto space - various teams' management efforts on protocols, which we call governance tokens.

Our goal is not to defend meme coins (or governance tokens) or diminish their importance; our purpose is solely to advocate for fairer token distribution.

Governance Tokens are Memes with Extra Steps

I believe all governance tokens are essentially memes, their value depending on the protocol's meme origin. In other words, governance tokens are memes dressed in suits. Why do I say this?

Typically, governance tokens do not offer any revenue distribution (due to securities laws), and they perform poorly as community-driven decision frameworks (holders often concentrate, participation enthusiasm is low, or DAOs generally suffer from dysfunction), making their role similar to memes, just with some extra steps. Whether it's ARB (Arbitrum's governance token) or WLD (Worldcoin's token), they are essentially meme coins attached to these projects.

This is not to say governance tokens are useless. Ultimately, their existence serves as a constant reminder of why legal updates are needed. That being said, governance tokens can cause as much harm as memes in many cases:

• For builders: Many well-known VC-backed governance tokens start distributing before product launches, leading to severe disillusionment. This directly damages the reputation of founders who have worked for years to achieve adoption. For example, Zeus Network launched with a $1 billion FDV even before product release, making it challenging for many founders to reach such valuations even after significant progress.
• For the community: Most governance tokens are VC-backed, launching at high valuations and gradually transitioning to retail investors.

Research on ICP, XCH, Apecoin, DFINITY, etc., even 2017 ICOs are better than current VC-backed low-circulating supply tokens because they had most of their supply unlocked at launch.

Let's look at the case of EigenLayer:

EigenLayer, arguably the largest Ethereum protocol of this cycle, is a classic example. Insiders (VCs and teams) hold a significant portion, 55%, while the initial community airdrop is only 5%. This is a typical low-circulating supply, high FDV game, supported by VCs owning 29.5% of the shares. Last cycle, we blamed FTX/Alameda, but this cycle, we aren't any better.

EIGENDAO managed by EIGEN now functions like any Web2 governance board because insiders control most of the supply (initial community supply only 5%). Remember, the whole concept of EigenLayer is rehypothecation (leveraged yield farming), making financial engineering as much of a Ponzi scheme as memes.

If a group of insiders holds over half of the supply (in this case 55%), we severely hinder the redistribution effect of cryptocurrencies, making a few insiders extremely wealthy through low-circulating supply, high FDV issuances. If insiders truly believe, given the astronomical valuations of token issuances, they'd better reduce distribution.

Let the Real Cartels Step Forward

Given the absurdity of capital formation processes - we'll eventually see VCs blaming memes, while meme creators blame VCs for the regulatory chaos and reputational crisis in the field.

But why are VCs so harmful to tokens?

VCs inflating FDV has structural reasons. For instance, a large VC fund invests $4 million for 20% equity, valuing it at $20 million; logically, they must raise the FDV to at least $400 million in the TGE (token generation event) to profit LPs. Protocols are driven to list at the highest possible FDV to boost returns for seed/pre-seed investors.

In this process, they continuously encourage projects to raise funds at higher valuations. The larger the fund size, the more likely they are to give a project a ridiculously high private valuation, build a strong narrative, and eventually list at a higher public valuation, forcing retail sell-offs during token issuance.

• High FDV launches only lead to a spiral of decline and zero attention. Refer to the Starkware case.
• Low FDV launches allow retail to profit from repricing and help build community and mindshare. Refer to the Celestia case.

Retail is more sensitive to unlocks than ever before. In May alone, Pyth worth $1.25 billion will be unlocked, along with hundreds of millions from Avalanche, Aptos, Arbitrum, etc.

Some unlocking data

Memes are the Byproduct of Financial System Collapse

It can be said that Bitcoin is the largest and oldest meme coin, born after the 2008 financial crisis. Negative/zero real interest rates (interest rate - inflation) force every saver to speculate on new shiny asset classes (e.g., meme coins). The market environment created by zero interest rates is filled with desperados sustained by cheap capital. Even top indices like the S&P 500 have about 5% zombie companies, and as rates rise, their situation is set to worsen, making them no different from memes. Worse, they are marketed by fund managers, with retail buying in every month.

Speculation never dies for a reason, in this cycle, they are memes.

FRED via Kana and Katana

On top of this, the term 'financial nihilism' has recently garnered much attention. It encapsulates a viewpoint that the cost of living is choking most Americans, with more and more unable to access upward mobility, the American Dream essentially a thing of the past, and the median ratio of house prices to incomes reaching a

At a level where it is completely unsustainable. The fundamental driving force of financial nihilism is the same as populism, which is a political method that attracts ordinary people who are tired of the established elite groups - 'this system doesn't work for me, so I want to try something very different' (for example, buying BODEN instead of voting for Biden). ### Meme Testing Infrastructure Meme is not only a great entry tool for cryptocurrencies but also an excellent way to test infrastructure. In contrast to A16z's position, we believe that Meme has a net positive impact on any ecosystem. Without Meme coins, chains like Solana would not face network congestion, and all network/economic vulnerabilities would not surface. Meme coins on Solana have had a net positive impact: - All DEX not only handled the highest trading volume ever but also surpassed their Ethereum counterparts. - Currency markets integrate Meme to increase TVL. - Consumer applications integrate Meme for attention or marketing purposes. - Validators can earn huge fees due to priority fees and MEV. - With increased liquidity and activity, network effects in DeFi are more effective. The monthly active devices of Solana's Phantom wallet have reached 7 million for a reason, as they are supported by memecoins, making it one of the most widely used applications in the cryptocurrency space. For true RWAs, on-chain transactions require infrastructure with sufficient liquidity (look at top Memes, they have the deepest liquidity besides L1 tokens/stablecoins), stress-tested DEXs, and a broader DeFi ecosystem. Memes do not distract people's attention; they are just another asset class on a shared ledger.  ### Meme as a Fundraising Mechanism Meme has proven to be an effective means of capital coordination. Take Pump.fun, which has facilitated the issuance of nearly millions of Memes, creating billions in value for Memes. Why? Because for the first time in human history, anyone can create a financial asset in less than 2 dollars and less than 2 minutes! Meme can serve as an excellent fundraising mechanism and listing strategy. Traditionally, projects raise large amounts of funds by allocating 15-20% to venture capital, developing products, and then issuing tokens while building communities through Meme and marketing. However, this often leads to communities being eventually abandoned by venture capital. In the era of Meme, people can raise funds by launching their own Memes (no roadmap, just for fun) and forming early tribal communities. Then, they can continue to build applications/infrastructure, continually adding utility to Memes without making false promises or providing roadmaps. This approach leverages tribalism in the Meme community (e.g., holder bias), ensuring high engagement from community members who become your BD/marketers. It also ensures fairer token distribution, countering the low circulation high FDV pump and dump strategies employed by venture capital. ### This is Already Happening BONKBot, a Telegram bot (with a daily trading volume of up to 250 million USD), originated from the BONK Meme, uses 10% of trading fees to buy and burn BONK. It has accumulated around 7 million USD worth of BONK through fees, aligning its economy with holders. Degen, a Meme in the Farcaster ecosystem, allows contributors to reward/tip others for posting quality content with DEGEN. Additionally, they have built an L3 chain for degen. Similarly, one of the most popular Memes in the previous cycle, Shibatoken, is now building an L2. This trend will ultimately lead to the fusion of Memes and governance tokens. It is important to note that not all Memes are equal; scams are common, but they are easier to expose than the scams carried out by venture capital in silence.  ### Future Outlook Everyone wants to be ahead of the next big event, and Memes are one of the few areas where retail investors can enter earlier than most institutions. As access to private transactions by venture capital is restricted, Memes provide a better potential market fit for retail capital. While Memes do make cryptocurrencies look like a casino, they do empower communities. So, what is the solution? Venture capital firms like a16z should pool their trades to allow anyone to participate. Platforms like Echo are ideal for this. For venture capital, put your trades on Echo, involve the community in pooled trades, and witness the early community gathering magic similar to Memes. It should be clarified that we are not against VC/private funds; we advocate for fairer distribution, creating a fair competitive environment where everyone has the opportunity to achieve financial sovereignty. Venture capital should be rewarded for its early risk-taking. Cryptocurrency is not just about open and permissionless technology; it is also about open early financing, which is currently as opaque as traditional startups.  ### In Conclusion - Everything is a Meme. - Research Memes as fundraising and community-building mechanisms. - Projects should lean towards fairer launches. It's time to make early financing more open. MemeCoin Research Institute tracks the Meme trend, believing in the power of the masses. Special Topic Associated Labels: Meme ICP XCH Apecoin DFINITY ChainCatcher reminds readers to rationally view blockchain, enhance risk awareness, and be vigilant against various virtual token issuances and speculation. All content on the site is market information or the views of relevant parties and does not constitute any form of investment advice. If sensitive information is found in the content on the site, you can click "Report," and we will handle it promptly. 　　Disclaimer: Includes third-party opinions. No financial advice. See Risk Warning.