Riffing on Ameen’s talk at ETH Denver today I took to Farcaster to criticize Warpcast and Rainbow implementing memecoin trading features.
Just to clarify, I don’t want to slander the reputation of people at Merkle Manufactory or Rainbow and so on. I did attack them there ofc. I don’t want to insist here in this post that their intentions are only to advance the fraud on Ethereum. They probably have a legitimately interesting concept or reason for implementing memecoin trading into their products, or they are merely incompetent about the risks that come with trading memecoins, even if they’re launched by clear-named, legit people.
Tangentally, for those unaware, one of the issues is that on-chain there are snipers who will buy up the token supply really early, and they then take advantage of the coin being advertised on social media, the price rising, and then dumping on people who buy after them. I’m not aware of any technical solutions to fully prevent this. Happy to be wrong here.
Also, to clarify, for me a Memecoin is anything that doesn’t come with any kind of right to make back the money that you’ve initially invested into the project. So Bitcoin is also a memecoin, but Ethereum is not a Memecoin because you can stake it and earn the transaction fees and MEV back.
I don’t have the data ready for how much of Ethereum’s MEV and transaction fee accrual is coming out of Memecoin trading, but my guess would be that it’s a lot if not a majority of all fees. If you look at Base, it’s essentially exclusive for Memecoin trading. Solana has made a lot of money last year from Memecoin trading too, and I say this because I don’t know many legitimate projects which have launched a token on Solana which would justify saying that most of Solana’s fee accrual comes from trading legitimate coins.
Unless I’m wrong here, and I would love to be wrong about Ethereum accruing most of its fees and MEV from Memecoin trading, as an Ethereum investor and as a software developer who has spent a lot of time on becoming good at working with Ethereum, for me vertically serving Memecoin trading really well is a problem because I don’t think this is a good ecosystem for generating our income from. A lot of Memecoin trading is outright fraud. The Coffeezilla and Milei situation has highlighted this sufficiently. There are Memecoins like Trump and others which could easily evolve into political bribes. And then there are only a literal handful of crypto projects which have a token that actually makes sense because when you hold it and you stake it, you get a right to the future cash flows etc… And for me, as I said, in my analysis, this is really just a handful of projects. So most coins are anyways Memecoins. And in the best case, they are Memecoins or utility coins, but in that case often their evaluation is questionable.
Anyways, I don’t really want to argue about whether memecoin trading is fraud or not. I think there are a lot of us in this community that have seen a lot of the practices and that have solid opinions about this. I don’t think I need to convince many of this.
I think the core issue, which Ameen also highlights in his talk, is that we would have to hold people accountable who are in leadership positions, which I have naively tried today by attacking the Warpcast and Rainbow Team for implementing memecoin trading features. And surprise, surprise, I have gotten backlash. And to be honest, I’m not complaining about the backlash because I can’t be entitled about what other people are building on Ethereum. That said, I genuinely tried to realign Ethereum here by pointing this out and now I’m basically getting personally attacked.
That said, it is worrying me that we are starting to see memecoin trading as the main source of income for the Ethereum protocol and that there is no way of realigning the Ethereum community without facing extreme personal backlash online.
Strictly speaking, as an Ethereum investor, and I think you can probably agree with me, while it is beneficial that we make some fees and MEV proceeds from memecoin trading, it worries me very much that as of now this is what we have product market fit in.
You could say that this will lay the foundation for real-world assets being traded on Ethereum and this is a positive outlook as an investor. I agree. But this is not what we are seeing because Warpcast and Rainbow, for example, are not building the next Angellist or at least that’s not what it looks like today.
I read Beylin’s post about the Ethereum social layer being broken and I can agree with him in that way that it is practically impossible to criticize meme coin trading without facing intense personal backlash.
Of course I could have written yet another article describing how the practice of meme coin trading is morally bad or create awareness around the dangers of it and so on without personally attacking or holding anyone accountable. But let’s be real, this would have not generated any reach and it would have not been powerful basically. The reach is generated by calling out bad behavior directly. But also: nobody wants to constantly create awareness, it’s totally not fun.
We don’t have a regulator in crypto that takes care of deciding what is the right path for everyone. Sometimes a Vitalik post is our best bet but Vitalik is not coming out against meme coins for I don’t know which kind of reasons. Even Vitalik would face most likely a very intense personal backlash if he were to slash the meme coin trading community altogether on Ethereum.
In fact I’m not even asking to slash the entirety of the meme coin trading community on Ethereum. Merely what I’m saying is that I’m worried about our protocol accruing most of its fees from illegitimate/shady activity and the roadmap being planned in a way where this enables more of that activity and at the same time we have the most popular consumer building companies also embracing this questionable practice now.
I just wonder how we realign Ethereum to really solving the hard problems that we have promised it would solve.
Because right now everyone is just pulled towards making short-term gains with trading MemeCoins. And we’ve really sold the project with much grander visions than this. I’d love to just pretend that we have to be real. And if we had to be real in a normal social situation, for example by having face-to-face conversations among us, I think most of us would agree that MemeCoin trading cannot be it. Yet on the internet there is somehow always room to insert arguments that complicate this social agreement.
My opinion as an ETH investor is that unless one day we swap out all MemeCoin trading infrastructure for doing real-world asset trading, then building towards MemeCoins is a huge distraction for Ethereum. It is a huge risk regulatorily and morally for its reputation. And it is a big distraction because I still believe that this technology can serve and be used to solve more pressing problems. The issue is just that solving these problems doesn’t make you get rich quick.
I think the crisis within Ethereum arises from what Beylin describes as Ethereum’s broken social layer because there is no way, like in a real company, where you could just change the trajectory of the entire ecosystem through command.
A company leader can just say that they don’t want to embrace a certain practice anymore. That leader also is accountable through the law. They would do that because they are responsible. But one could say that Vitalik is not responsible for everyone building on Ethereum. This governance of what we should be doing within Ethereum is somehow left to the chaos of people trying to figure things out as they go. But if you ask me, then for the last one or two years this really has not worked for Ethereum. And price and sentiment are good indicators of that too.
Again, I don’t want to be the guy that is totally against memecoin trading here. Rather, I would like to highlight that Ethereum cannot be steered even if we individually might come to the conclusion that there are better directions to go towards. And I would love us to solve this as a problem because I think it could save Ethereum.