Module 7

Memecoins and Niche Tokens

This fun (but cautionary) module looks at the world of "memecoins" and other niche cryptocurrencies, explaining what they are, how they work, and the significant risks involved.

Module Overview

Memecoins represent one of the most speculative areas of cryptocurrency. Unlike Bitcoin or Ethereum, which have clear technological purposes, memecoins often start as jokes or internet memes and gain value primarily through social media hype and community enthusiasm.

This module will define what memecoins are, explain how to purchase them (often using decentralized exchanges), and most importantly, highlight the significant risks involved—including extreme volatility and security concerns. Consider this your guide to the wild west of crypto, where caution and skepticism are your best tools.

Lesson 7.1 – What are Memecoins?

Understanding the phenomenon of internet-driven cryptocurrencies

Defining Memecoins

Memecoins are cryptocurrencies that often start as jokes or internet memes, usually without a serious technical project behind them. Their value is driven largely by social media hype, community enthusiasm, and viral marketing rather than fundamental utility or technological innovation.

Key Characteristics

Viral by nature: Value driven by social media trends and community hype

Extreme volatility: Can experience thousands of percent gains or losses in short periods

Limited utility: Unlike Bitcoin or Ethereum, most lack intrinsic utility or technological innovation

Speculative nature: Primarily launched for fun or as speculative instruments

Popular Memecoin Examples

Dogecoin (DOGE)

Created in 2013

Created as a parody of Bitcoin featuring the Shiba Inu dog meme. Despite starting as a joke, it gained a huge following and has been endorsed by celebrities like Elon Musk, causing dramatic price movements.

Shiba Inu (SHIB)

Gained popularity in 2021

An ERC-20 token on Ethereum inspired by Dogecoin, marketed as the "Dogecoin killer." It rocketed in popularity in 2021, creating several billionaires among early investors before experiencing significant corrections.

Real-World Example

In early 2021, Dogecoin, which had been trading at fractions of a penny, surged over 1000% in a matter of days after viral TikTok videos and tweets from Elon Musk. This showcased the power of internet culture on a coin's price, as the surge had little to do with any fundamental changes to the cryptocurrency itself.

Lesson 7.2 – How to Buy Memecoins

Platforms, chains, and the process of acquiring niche tokens

Many memecoins and niche tokens are not listed on major centralized exchanges, especially when they are very new. To buy them, users often turn to decentralized exchanges (DEXs) on the blockchain where that token lives.

Common Platforms for Buying Memecoins

Blockchain	Popular DEX	Base Currency Needed	Compatible Wallet
Ethereum	Uniswap	ETH	MetaMask, Trust Wallet
Binance Smart Chain	PancakeSwap	BNB	Trust Wallet, MetaMask (BSC config)
Solana	Raydium, Serum DEX	SOL	Phantom, Solflare
Centralized Options	KuCoin, Gate.io	USDT, BTC	Exchange account

Step-by-Step Guide to Buying Memecoins on a DEX

Step 1

Set Up a Compatible Wallet

You'll need a wallet that's compatible with the blockchain where the token exists. For Ethereum-based tokens, MetaMask is popular. For Binance Smart Chain, Trust Wallet works well. Make sure your wallet has some of the base cryptocurrency (ETH, BNB, etc.) to cover both the cost of the token and transaction fees.

Gas fees on Ethereum can be high during network congestion. Sometimes you might spend more on gas fees than the tokens are worth, especially for small purchases!

Step 2

Find the Token's Contract Address

Before buying, you need the token's exact contract address. This is a unique identifier for the token on the blockchain. Always get this from official sources (the project's official website, Twitter, or Discord) to avoid scam copycat tokens.

Critical Security Warning

Double-check the contract address from multiple official sources. Many scammers create tokens with similar or identical names to popular memecoins to trick buyers. Using the wrong contract address could result in buying a worthless copycat token or worse, a malicious token that can drain your wallet.

Step 3

Connect to the DEX and Swap

Go to the DEX's website (e.g., Uniswap for Ethereum or PancakeSwap for BSC)
Connect your wallet to the DEX
Select the base currency (e.g., ETH) that you want to swap from
For the token to swap to, paste in the contract address you verified
Enter the amount you want to swap
Check the estimated amount of tokens you'll receive and any fees
Approve the transaction in your wallet and confirm the swap

Example: Uniswap Interface

Step 4

Verify the Token in Your Wallet

After the transaction completes, you may need to add the custom token to your wallet to see it. In most wallets, you can do this by adding a custom token and pasting in the contract address.

Once added, you should see your token balance in your wallet. Congratulations, you've successfully purchased a memecoin!

Liquidity Considerations

Many new or niche tokens have low liquidity, which can cause high slippage (meaning the act of buying can itself drive the price up significantly). DEXs will typically warn you if slippage is high. Consider setting a slippage tolerance limit to avoid paying much more than expected.

Lesson 7.3 – Safety and Volatility Considerations

Understanding the risks and protecting yourself in the memecoin space

High-Risk Warning

Memecoins are among the most speculative and volatile investments in the already volatile cryptocurrency space. Many people have lost significant amounts of money in this market. This lesson is educational in nature and should not be considered investment advice.

Extreme Volatility

Price Swings in Memecoins

Memecoin prices can swing wildly in short time frames—it's common to see a token jump 500% one day and drop 90% the next. These dramatic price movements are often driven by:

Social media hype and celebrity mentions
FOMO (fear of missing out) from traders
Coordinated buying or selling by large holders
Listing or delisting announcements from exchanges
Broader market sentiment in the crypto space

Common Scams in the Memecoin Space

Rug Pulls

Developers create a token, generate hype to attract investors, then suddenly "pull the rug" by removing all liquidity from the trading pool, making it impossible to sell the token and effectively stealing investors' funds.

Warning sign: Anonymous team, no locked liquidity, sudden large price increases

Honeypots

Smart contracts designed with malicious code that allows users to buy the token but prevents them from selling it. The developers can sell their tokens while regular users cannot.

Warning sign: No one seems to be selling, only buying; contract code is not verified

Pump and Dumps

Organized groups artificially inflate the price of a token through coordinated buying and spreading positive misinformation, then sell their holdings once enough unsuspecting investors have bought in.

Warning sign: Aggressive promotion in chat groups, unrealistic price predictions

Real-World Example

In 2024, a meme token tied to a viral internet trend surged over 200% in just 48 hours, attracting thousands of new investors. Within days, the price crashed below its launch price as early investors and creators sold their holdings, leaving latecomers with significant losses.

Safety Checklist for Memecoin Investors

Protect Yourself: Essential Safety Measures

Never invest more than you can afford to lose entirely

Treat memecoin investments as you would lottery tickets—assume the money could disappear completely.

Research thoroughly before buying

Check if the token's liquidity is locked (preventing rug pulls), if the code was audited by a reputable firm, and the distribution of tokens among holders.

Only use trusted DEX interfaces

Always access decentralized exchanges through their official websites. Bookmark these sites rather than clicking links, as phishing sites are common.

Be aware of token ownership concentration

Unlike established coins, memecoins often have concentrated ownership (whales holding large percentages) which can dump at any time. Check token distribution on blockchain explorers.

Consider network fees

On Ethereum especially, gas fees can be substantial. Sometimes you might spend more on gas fees than the tokens are worth, particularly for small purchases.

Final Thoughts on Memecoins

Memecoins are akin to penny stocks or even lottery tickets—they can yield quick gains but can just as easily lead to heavy losses. While they've become a notable part of crypto culture and some early investors have made significant profits, the vast majority of memecoins eventually lose most or all of their value.

If you choose to explore this space, do so with extreme caution, thorough research, and a healthy dose of skepticism. Remember that in highly speculative markets like these, entertainment value and education might be the most reliable returns you'll get.