The Potential Network Effect of Crypto Token Crowdfunding
- Shane Plumer
- Feb 19
- 4 min read
Updated: Apr 7
The cryptocurrency market has long been a playground for innovation, speculation, and, occasionally, humor. Enter the "meme coin," a term that conjures images of Dogecoin’s Shiba Inu mascot or more recently, a country meme coin for Argentina called Libra that became one of the most scandalous rug pulls of all time. Coined to describe tokens born from internet memes and viral culture, meme coins have historically been dismissed as speculative novelties with little intrinsic value. Yet, as the market matures, a closer examination reveals that the most successful meme coins, those with staying power and significant capital inflow, are not mere jokes. Instead, they often operate as sophisticated crowdfunding mechanisms, leveraging compelling narratives to rally communities and fund underlying projects. This blurring of lines raises critical legal and regulatory questions for investors, project developers, and regulators alike.
Beyond the Meme: A New Breed of Tokenomics
At first glance, meme coins appear to epitomize speculative excess. Dogecoin, launched in 2013 as a satirical jab at Bitcoin’s meteoric rise, gained traction through Elon Musk’s tweets and a loyal online following, peaking at a market cap of over $88 billion in 2021. Created by President Trump's affiliate CIC Digital, LLC, the TRUMP token surged to a market cap of nearly $15 billion on January 19, 2025, less than 24 hours after it launched. In contrast to cartoon drawings and celebrity coins, L1 blockchains with decentralized exchange tokens like Hyperliquid’s HYPE, while not a traditional meme coin, demonstrate how community-driven momentum can intersect with serious project ambitions. Karthik Senthil explains how the "network effects" of a crypto token can be positive or negative and that serious builders need to consider those effects.
The co-founder of Venmo, Iqram Magdon-Ismail, and investor Sam Lessin harnessed the capital raising potential of Solana meme coins with the launch of JELLYJELLY, a token tied to a TikTok style video sharing app for creatives. JELLYJELLY soared to a market cap of $250 million and plans to integrate the token into the AI-powered app used for marketing and audience building. Magdon-Ismail claims that the creative community that thrives on JellyJelly's Discord and Telegram channels are users of the app and hold the token. This cultural lock-in could be the holy grail for builders and their underlying products.
What separates these successes from the countless failed meme coins littering the crypto landscape? The answer lies in their evolution from memes to crowdfunding vehicles. Unlike true "joke" tokens that rely solely on viral hype, successful meme coins often pivot to support tangible projects with narratives that resonate. Dogecoin’s community, for instance, has funded charitable initiatives and sponsored events, while Shiba Inu’s developers introduced Shibarium, a Layer-2 blockchain solution, signaling a shift toward utility. Hyperliquid, meanwhile, underpins a decentralized perpetual futures exchange, blending meme-like branding with a robust technical foundation.
This shift mirrors crowdfunding: a decentralized community pools capital, often via token purchases, to back a vision articulated by the project’s creators. The token becomes both a fundraising tool and a symbol of collective belief, much like Kickstarter backers pledging funds for a prototype. But unlike traditional crowdfunding, meme coin investors typically receive no equity or guaranteed product, just the token itself and the hope of future value tied to the project’s success.
Crowdfunding’s Narrative Edge
What fuels this crowdfunding masquerading as meme coin mania? Narrative. Successful projects craft stories that transcend the meme, tapping into cultural or technological zeitgeists. Dogecoin rode a wave of anti-establishment sentiment and Musk’s [then] populist appeal. Shiba Inu leaned into the "underdog" trope, promising to outshine its predecessor while delivering Shibarium as proof of intent. Hyperliquid, though less overtly meme-driven, positions itself as a decentralized alternative to centralized finance, resonating with crypto’s ethos of sovereignty.
These narratives galvanize communities, turning token holders into evangelists who amplify the project across platforms like X and Discord. This organic marketing, far cheaper than traditional campaigns, mimics crowdfunding’s reliance on grassroots support. But it also raises red flags: exaggerated claims or "pump-and-dump" schemes can cross into fraud territory, as seen in the SEC’s crackdown on Bitconnect and other hyped tokens. Projects must tread carefully to avoid misleading investors, lest their compelling narrative become a legal liability.
Implications for Investment Management
For investment managers, the meme coin-crowdfunding hybrid presents both opportunity and risk. On one hand, early participation in a token with a strong narrative, like Hyperliquid’s HYPE, can yield outsized returns if the project delivers. On the other, the regulatory uncertainty and volatility demand rigorous due diligence. Key considerations include:
Project Viability: Does the token support a functioning product (e.g., Shibarium, Hyperliquid’s decentralized exchange), or is it pure hype?
Regulatory Status: Could the token be classified as a security, triggering compliance obligations?
Community Dynamics: Is the narrative sustainable, or will it collapse under scrutiny?
Firms must also weigh fiduciary duties. Advising clients to invest in meme coins, crowdfunding or not, requires balancing potential gains against the risk of enforcement actions or market crashes. Disclosures should be robust, emphasizing the speculative nature and legal ambiguities.
Conclusion: A Meme by Any Other Name
The line between meme coin and crowdfunding is thinner than it appears. Successful meme coins thrive not on humor or cultural significance alone but on their ability to rally capital around a vision, much like a crowdfunded startup. Yet, this evolution invites regulatory scrutiny that could redefine their place in the crypto ecosystem. For now, they remain a paradox: part jest, part ambition, and wholly dependent on the stories they tell. Investment managers and project developers alike must navigate this shifting terrain with caution, recognizing that what starts as a meme may end as a landmark case.
