From Joke to Billions: What is Memecoin and Why This Phenomenon Dominates the Crypto Market

In January 2021, Dogecoin was worth fractions of a cent. Four months later, its market capitalization surpassed $80 billion, driven by tweets from Elon Musk and a collective wave of speculative betting. This episode introduced millions to a question that remains relevant: what exactly is a memecoin? The answer involves internet culture, global speculation, and risks that Brazilian investors need to understand before hitting the buy button.

What is a memecoin, in practice?

A memecoin is a cryptocurrency whose value proposition arises from cultural references from the internet—memes, jokes, and online communities—and not from a specific technological or financial utility, relying essentially on collective engagement to generate and sustain its price.

The concept emerged with Dogecoin, created in December 2013 by developers Billy Markus and Jackson Palmer. The coin used the Shiba Inu dog meme as its logo and was deliberately launched as a satire of Bitcoin. No one expected it to last. It did, grew, and paved the way for hundreds of imitations.

Unlike projects like Ethereum, which support smart contracts, or Bitcoin, designed as a decentralized store of value, a typical memecoin does not solve any technical problem. Its engine is the narrative. When the community goes viral, the price rises. When the enthusiasm cools, the price can plummet in hours.

How does a memecoin work?

From a technical standpoint, most memecoins operate on existing blockchains. Shiba Inu, for example, is an ERC-20 token on the Ethereum network. More recent projects, like BONK and WIF, run on Solana, which offers lower fees and faster confirmations. Creating a memecoin requires little code; on platforms like Pump.fun, launching a token takes minutes.

This low creation cost explains the flood of new projects. According to data from the on-chain analysis platform Dune Analytics, over 7 million tokens were launched on Pump.fun between 2024 and early 2025. The overwhelming majority lost all value within a few days.

The cycle typically follows a recognizable pattern:

1. Creation of a token with a viral brand: funny name, mascot, or cultural reference.
2. Initial concentrated distribution: founders retain a relevant share of the supply.
3. Engagement campaign on social media: X (formerly Twitter), Telegram, and TikTok are the preferred channels.
4. Listing on decentralized exchanges: Raydium and Uniswap lead this process.
5. Speculative peak followed by a sharp drop: the so-called pump and dump.

Not every memecoin follows this script. Dogecoin and Shiba Inu have maintained active communities for years. But they are the exception. The rule is extreme volatility and total loss of invested capital.

Why do memecoins matter in Brazil?

Brazil is one of the largest cryptocurrency markets in the world. Data from Chainalysis ranked the country as the largest in Latin America in terms of crypto transaction volume in the 2023 report Geography of Cryptocurrency. Memecoins represent a significant portion of this volume, especially among younger investors.

On the regulatory side, the Federal Revenue Service requires that operations with crypto assets be declared in the Income Tax, including memecoins. Capital gains above R$ 35,000 from sales made in the month are subject to rates of 15% to 22.5%. Those operating through exchanges abroad must report transactions via a specific declaration (the former obligation IN 1.888, now integrated into the Legal Framework for Crypto Assets, Law 14.478/2022).

In BlockTrends' coverage, we observed that interest in memecoins in Brazil grew in waves closely synchronized with Bitcoin's bull cycles. The search for the term "memecoin" on Google Trends Brazil surged in March 2024, coinciding with the launch of dozens of tokens on the Solana network and the significant appreciation of BONK and dogwifhat (WIF).

It is worth noting: B3 does not directly list memecoins. Cryptocurrency ETFs traded on the Brazilian stock exchange, such as those for Bitcoin and Ethereum, do not include these assets in their indices. Access occurs through centralized crypto brokers (Binance, Mercado Bitcoin, Coinbase) or through self-custody wallets connected to decentralized exchanges.

Is memecoin a scam?

Not necessarily. But the ground is fertile for fraud. The term rug pull describes the practice where creators of a token drain the liquidity of the project, leaving investors with tokens of no value. An emblematic case was the SQUID token, inspired by the series Round 6, which saw its value increase by over 75,000% before its creators disappeared with the funds in 2021.

Legitimate memecoins like Dogecoin have open code and a decentralized community. The difference lies in transparency, the distribution of supply, and the existence (or lack) of mechanisms that prevent a single wallet from selling everything at once. Before buying any memecoin, check the concentration of tokens among wallets, the smart contract code, and the developers' history.

Related Entities and Concepts

Memecoins orbit a broader ecosystem. Knowing the neighboring entities helps to understand the phenomenon:

• Altcoins: any cryptocurrency that is not Bitcoin. Memecoins are a subcategory.
• ERC-20 and SPL Tokens: technical standards of Ethereum and Solana used by a large part of memecoins.
• DEX (decentralized exchanges): platforms like Uniswap and Raydium where memecoins are initially traded.
• Pump.fun: a platform on Solana that facilitated the massive creation of memecoins in 2024.
• Market capitalization: a metric that multiplies the unit price by the circulating supply, used to rank cryptocurrencies.