Investment Thinking Behind Memecoins and Launchpads
notes from podcast Web3 101's interview of Pima, a legendary crypto OG
About Web3 101
Web3 101 is now my favorite crypto podcast. Its host Liu Feng used to be the Editor-in-Chief of Chain News, the largest and best Chinese crypto news media until its closure in late 2021. Most podcast hosts lack of basic moderator skills - can’t articulate a clear question, asking very binary if not narrow-minded questions, interrupting guest’s flow, using imposing rhetorical question, enjoying his own talking too much at the expense of his guests, etc. Liu is anything but those. He’s a real pro.
This podcast features some of smartest thinkers from the Chinese crypto circle. Every episode is a treat.
About Pima the Guest
Pima is a legendary crypto OG who invested in many leading L1 blockchains.
Pima's major hit: Polkadot. His current bag: Solana.
Pima's most memecoin holdings are in Solana. There is no enough liquidity for memecoins in other L1 blockchains.
Pima didn't have any bag on the Base chain, and therefore missed the opportunity to invest in Virtuals.
Memecoin
Usually the memecoin ecosystem is valued at about 1-5% of its underlying L1 blockchain's market cap.
The key is to track the No. 1 memecoin (“Grand Dragon”) in an L1 blockchain. Even after a drop, Grand Dragon can still rebound to ATH (all-time high).
Most memecoins valued at above $1 billion have been around longer than six months. There is a positive correlation between a memecoin's market cap and its listing history.
$BONK and $TRUMP's meteoric ascend to $1 billion is NOT the norm.
Memecoin is a perfect manifestation of System 1 in Thinking: Fast and Slow - impulsive, intuitive and fast decision
Memecoin is an excellent demonstration of behavioral economics, where everyone is irrational.
Memecoin's rise is not only happening in crypto, but also in the traditional finance market. It's a reflection of the main themes of our current time:
The diminishing dividend from population growth
The fading of globalization
The rise of populism
The rising sentiment of anti-establishment
The disillusion of achieving class ascend
Populism and counter-globalization are bringing massive new users into speculation market and memecoin.
One motivation for Pima to invest in memecoins is to keep an eye on the infrastructure for memecoins, such as launchpad and gas fee.
Memecoin means different things to different users:
For whales: a tool to validate and re-evaluate existing beta positions
For retail: a means to hit alpha and change his fate
Regardless, memecoin has already become a force to be reckoned with
Memecoin Launchpads
For launchpads, revenue is the most important measure. This follows the same logic to evaluate a DEX (decentralized exchange).
Launchpads are also very similar to blockchains. Both are 2B business models trying to attract developers, not user-based 2C business models.
It's easy to attract retail users. They just go for the money makers.
Three major launchpads in the current memecoin craze:
Believe
Making $100K a year is already quite a feat for independent solo developers
It helps micro businesses and independent developers for fun-raising
pump.fun
pump.fun's success comes from its ability to minimize the frictions in issuing a financial asset.
The only important standard for a launchpad: transaction volume.
Gas Fee
The most crucial business element in crypto is gas fee. Whoever can extract more gas fees from the L1 blockchain, or get users to pay more gas fees, will have higher cash flows and thus higher valuation.
Retail investors are willing to pay high MEV (“Miner Extractable Value”) gas fees for a chance of hitting alpha.
Crypto's gas fee is declining rapidly. Blockchain's marginal cost of gas fee should be zero. When gas fee disappears, what would support the current crypto business models?
It's the acceleration. NVIDIA doesn't profit from doing general compute, but from accelerated compute.
Gas fee consists of base fee and acceleration fee:
MEV, REV (“Realized Extractable Value”) and Priority Fee are the equivalent acceleration fee for Ethereum and Solana
Acceleration fee's percentage in total fee is increasing
Balance transfer uses the base fee. Getting through the traffic requires acceleration fee.
Users are willing to pay high acceleration fee to complete a transaction.
About 80% of Solana's daily revenue comes from acceleration fee.
Crypto Industry
L1 Blockchain's landscape is more or less settled. What is not settled, is how much your L1 bag is.
Between Solana and Ethereum, Solana will win out.
Ethereum's L2 has major problems. They compromise the value of Ethereum L1 and their growth doesn't circle back to Ethereum L1.
Public chain's profit margin can be calculated. It's about 90%.
Crypto + AI: many technologies come from the traditional industry
Crypto + gaming: the most reliable revenue model in gaming is pay-to-win. In crypto, it would be hard for a project to charge a fee to its users if it has already issued its token.
"OG" (original gangster) is now out. "Warrior P" (P小将） and "Marshall P" (P元帅) is in.
2025 is a great time for crypto. Stablecoin has +$200 billion market cap now. It might grow into $1 trillion in 3-5 years.
What would an "on-chan NASDAQ" do exactly?
Issuing assets and transacting assets.
TRON has very stable revenue streams, thanks to its support of stablecoin.
Investment
The key to investment, is dedicated research.
One advantage of investing in crypto is to feel the vibe and pulse of the global capital market with very small amount of capital.
Three core questions for investing
Dare to buy?
Dare to build a heavy bag?
Dare to hold when it's dropping?
My Reactions
Pima offers very thought-provoking insights. It’s a great conversation that would help people understand why memecoin has become a global movement. I particularly like his analogy of memecoin launchpads to L1 blockchains.
I was mildly surprised that when they discussed which blockchain would challenge Solana’s speed and cost, neither Liu Feng or Pima seemed to remember there is another major L1 blockchain the Internet Computer (“ICP”). I met Liu Feng at ICP’s highly-anticipated road show in Shanghai in May 2021 before its mainnet launch and Pima was once very favorable on ICP too. Guess they have moved on.