Author: Armonio, AC Capital

Twitter: @armonio_liang

Introduction

Humanity chases trends, and trends create value. This is a history that humanity keeps repeating.

Tulips = Trend + Limited Supply

This is humanity’s most famous and earliest super meme. Entering the 21st century, the information age moved beyond the infinitely replicable web 2.0 to enter Web 3.0 with limited information.

Information can now be spread at the speed of light on the internet, and the entities that carry trendy values have leaped from offline items like bags, luxury watches, and sports cars to online strings of non-replicable data. Payment scenarios have spread to every corner of the world alongside mobile devices. Bang! The Meme explosion, thus, created a bizarre world of memes.

In the world of Meme coin, creating trends, especially internet trends, can monetize trends directly through tokens.

So, how do we create a trend? This article first proposes a theory of Meme popularity, and then uses this theory to deconstruct the rise of BTC and Bome.

The Secret to Crypto Popularity

The essence of the popularity of information is no different from that of diseases. In epidemiology, the model used for the spread of information and viruses is the SIR model, which students interested in can view here; details are not expanded upon in this text: https://en.wikipedia.org/wiki/Compartmental_models_in_epidemiology.

The process of information dissemination is divided into two parts: information infection and information immunity.

Information Infection: We convert ordinary people into followers of trendy information.

Information Immunity: Followers of trendy information become outsiders, shedding the influence of the trend.

The core of making information popular is to make the rate of infection exceed the rate of immunity. As long as the number of people infected per unit time exceeds the number of people who become immune, the number of followers of the trendy information increases, and the information spreads more widely. Otherwise, the trend heads towards decline. So, how do we increase the rate of infection and decrease the rate of immunity?

Undoubtedly, if information can reach more new people (who have not been exposed to the information), then the rate of infection will increase. The higher the quality of the information and the stickier it is, the easier it is to spread and the harder it is to shake off. Combining communication studies and social psychology, I summarize four important exogenous factors for Meme’s success:

Four Key Elements

Content

Content is the information itself. It is the subject of dissemination and determines the attributes of dissemination. The target audience for dissemination and the preferred nodes for dissemination are determined by the content itself. For example, $People naturally has a leftist tint, and leftists naturally have an emotional attachment to it. Using such a concept to move the leftist crowd naturally has an advantage. Similarly, $Doge, for dog lovers, is affable. Moreover, this affability is long-lasting.

The stickiness of the content. Some concepts are time-sensitive, like the recent outbreak of political figures’ memes or sports events’ memes. Once the political election is over, the event is held, the trend in the real world ends, and the popularity of the information on the blockchain driven by the real-world trend loses its fuel. The state of infection > immunity may gradually turn into infection < immunity.

The affability of the content includes the ability for secondary dissemination. A good dissemination event must lower the threshold for dissemination; the simpler and more direct, enabling ordinary people to spread it, the wider the dissemination.

Environment

The environment includes two parts: time and space.

Time: Crypto Circle Cycle

Time refers to the unique economic cycle of the crypto circle. The outbreak of Memes should occur when the industry gains attention and users are willing to participate in gambling. Previously, it was in the middle and late stages of a bull market, after all project stories became uninspiring, that pure cultural dissemination of Memes took center stage. The current Meme craze kicked off by inscriptions is an important change. The industry’s attention is drawn by the Memes themselves, and cultural dissemination is no longer an alternative when project content cannot continue but has become a way to attract traffic. Of course, the big background of the BTC inscription Meme is 1, the BTC ETF is about to be approved, making BTC a mainstream asset and gaining mainstream world attention. 2, The BTC halving is imminent, expected to bring a bull market, sparking interest.

Space: Community:

Space refers to the community. A community is defined as a group of people with a common purpose. Having a common purpose means that these people share common attributes. If the content of dissemination matches these attributes, it can achieve faster dissemination efficiency. Just as different diseases spread at different rates among different populations, malaria spreads more easily in places with poor sanitation, such as Africa.

KOL Matrix

Research shows that different individuals have varying abilities to spread trends. Some people are particularly good at expressing their views to others and easily convince those around them. These individuals are super spreaders, KOLs. The more KOLs we have, the more we can form a KOL matrix and influence more groups of people. KOLs are closely connected to the community, and influential KOCs within the community are truly valuable nodes. If they cannot reach the target audience, the value of KOLs significantly decreases.

Wealth Effect

A characteristic of the crypto circle is that the wealth effect leads attention. The so-called “convincing by rising” means using financial facts to aid the dissemination of information. Thus, Memes have a self-reinforcing cycle of token price and cultural dissemination. The higher the Meme token price rises, the wider the cultural dissemination and the firmer the believers. Conversely, the more the Meme token price falls, the less favorable the cultural dissemination and the more detached the believers become. Therefore, Meme tokens often exhibit characteristics of rapid rises and falls.

Operational Analysis of Memes

In this section, we will combine two cases to review projects and explain the theories mentioned above.

BTC

Many people do not acknowledge BTC as a meme coin. But it’s not important. The definition of a meme comes from Darwin’s theory of evolution, indicating that like biological entities, the spread of information also involves replication, mutation, and selection. From a macro perspective, the consensus spread of BTC is no different from other meme coins. The only difference lies in the content of the dissemination.

The content of BTC is the fear of the collapse of centralized finance. In its genesis block, a news excerpt stating “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” was added. This news, as an anchor, became an anecdote. Each time it’s disseminated, this anecdote reinforces the fear of centralized collapse. Every financial storm reinforces BTC’s consensus. The stickiness of BTC’s consensus is very strong. Those who believe in BTC are often hard to give up their faith. The industry well recognizes the stickiness of this belief.

The adoption of fair mining as part of the consensus is a reciprocal design; in the early stages of the project, anyone who contributed computing power could receive BTC. Satoshi Nakamoto himself also airdropped some users in the early days, which can be seen as reciprocal. The act of contributing computing power itself can be seen as a recognition of the BTC project. Through action, those who obtained BTC psychologically recognized it. In terms of supply, BTC programmatically implemented a limit of 21 million coins, making scarcity evident. Satoshi’s documents also described a scenario where, accepted worldwide, BTC could reach 1000 US dollars. Although conservative by today’s standards, it was an enticing promise in the era without a price for BTC.

The initial stage of a meme, like the early stage of a new virus’s spread, is very fragile. In the early stages of meme dissemination, because the potential nodes for dissemination are very limited, it’s essential to increase the likelihood of successful dissemination. The timing of the release of the BTC whitepaper in 2008 was not during a bull market, but it was a time when centralized finance was in turmoil. Everyone doubted the sustainability of centralized finance. The timing and narrative content were highly aligned, which is crucial in the initial stage of meme popularity.

The communities initially chosen for BTC were carefully selected. Satoshi first targeted the cryptography community, whose philosophy highly aligned with BTC’s design philosophy, sharing a sense of urgency and mission towards decentralization. Developing them as seed users faced the least resistance.

BTC’s initial dissemination KOL matrix included major figures in the cryptography community: Dai Wei, Hal Finney, Jon Matonis, Laszlo Hanyecz, among others. To give one example, in Satoshi’s email to Dai Wei, he stated that BTC’s concept and design not only realized Dai Wei’s ideas presented in his paper but Hal Finney had also endorsed such a product. This obtained a credibility endorsement for the product. These individuals might not have been widely known outside the cryptography community, but they had significant influence within it. Their involvement helped BTC quickly take root in the cryptography community.

Bome

Before its launch, whether intentionally or not, the artist Dark Farm was well-prepared for the popularity of a Meme. Content-wise, Bome is about creating a “Meme Book” to record the history of Memes. Placed in the current environment, this carries historical value. As I mentioned earlier, issuing coins through culture, this year, has shifted from being a fallback option when there are no projects to launch, to leading the forefront of the entire industry. Whether it’s Solana, Avalanche, or Ethereum, all consider Memes an important strategy for attracting new users. Investors have also gradually started to regard Meme tokens as a legitimate asset class. The Book of Meme, being a comprehensive work on meme culture, naturally receives attention. This concept inherently appeals to those who are enthusiastic about Memes.

Timing-wise, the launch occurred during an industry bull market, when funds were plentiful. In terms of community, Dark Farm had previously cultivated Meme culture within the ETH ecosystem extensively. The Book of Meme project wasn’t a sudden whimsy; he had a certain influence within the crypto Meme community. His previous works, even before the Book of Meme project took off, had a floor price that remained higher than their launch price, indicating community recognition and a certain level of fame within the community. This community highly overlaps with those interested in meme coins.

Looking at the reposting and spreading behavior of the Bome launch post, many are supported by KOLs who are also artists. Although these artists aren’t major names, they excel in having a real, cohesive follower base. As the Meme develops to a certain stage, it can interact with other traffic, such as promotion by Beeple. As a Meme artist on Twitter, DarkFarm is very aware of traffic and skilled at leveraging super nodes to enhance the influence of his projects.

From the avatars of the early spreaders, it’s evident: the initial promoters came from the SMOWL community. Having a community allowed Bome’s Meme to skip the most fragile stage. This was also part of DarkFarm’s plan; in his Bome manifesto image, SMOWL and these initial KOLs confirm each other’s involvement. After Bome’s success, SMOWL’s NFT prices also jumped to a floor price of 0.7, providing substantial returns to these community members. The entire operation formed a perfect closed loop.

I’ve previously mentioned that in the internet era, projects are supported by three pillars: traffic, technology, and capital. In the world of Memes, there is no technology or product. The success of a Meme project is the match between traffic and capital. Capital can drive up the token price, but merely increasing the token price cannot effectively induce retail investors to chase it.

This also means that, for Memes, there can only be one Bome in an era. From the perspective of the economy of traffic, all other Memes are competitors to Bome. If Bome’s traffic is diverted, Bome will collapse, and it becomes even harder for secondary or tertiary projects to make an impact. If Bome’s traffic isn’t divided, secondary and tertiary projects are merely minor disturbances.

Summary

Meme tokens are a distinctive phenomenon in the Web3 era’s attention economy, where attention is directly assigned financial value. The match between capital and attention creates Meme tokens.

Generating attention involves interacting with people. Beyond the unique wealth effect, emphasis on the KOL matrix, the dissemination environment, and the alignment of information content are crucial. The convergence of these factors is not simple, making the creation of a breakout Meme challenging. When examining the birth and breakout of a Meme, these four factors should be considered.

In the world of Memes, where attention is key, the phenomenon of attention feeding back into investment can be considered. For example, the Bome community helped boost the value of the SMOWL community.

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