Eli5: How exactly do “memecoins” make money ??
In: Economics
Anyone can get a computer generating a blockchain ledger very easily. If you can convince someone to pay you money to increase their number in that ledger, congratulations, you have made money with cryptocurrency. You would call your cryptocurrency a “memecoin” if it’s branded a certain way, I guess? But that’s just the branding.
You can use a few different techniques to get someone to pay you that money. You can try to convince them that later on, someone else will pay them *even more* money to change the numbers. This was the dominant strategy for a while – just generate a ton of hype and hope someone will buy that hot potato from you in the hopes of passing the hot potato on to someone else.
You can tie an asset to the number, like NFTs, or those businesses that “sell stars” (i.e. charge you money in order to write your name down next to a star in a book they keep in their offices).
Or you can use your blockchain/memecoin as a ledger that tracks something real and important, like say, gym membership; then people would pay you real money for this real asset, only rather than record their membership in a tiny text file or database on your office computer, you store it as a giant computationally-intense blockchain spread out across several computers, because “it’s crypto” might generate interest on that merit alone.
For 99% of people they dont. For the 1% that earn money its simply buy at a low value sell when its higher leaving someone else with the worthless coin and them with the money. It is a scam in everyway but everyone knows that it is a scam so its not illegal, unless something else illegal is involved.
The only people that make money in memecoins are the creators and other insiders. This is mostly due to fraud. Some money is made by traders. No money is made by holding memecoins. Bitcoin is the only digital asset worth holding long term.
These cryptos are creating very easily and then marketed heavily. Everyone knows meme coins are bullshit but everyone wants to buy the bottom and sell the top, of something, of anything really. Good traders can time this better than the average person.
The fraudulent memecoins creators are the ones who create the top by selling massive amounts of their coins, and are in cahoots with cascading levels of paid for sell signal groups.
No crypto “makes” money. They’re essentially a pyramid scheme…
If you buy some coins early on for little money, and other people buy them after you for more than you spent; you can sell your coins for more than you originally paid.
The coins themselves have zero productivity and don’t actually do anything to appreciate in value. Which is why the only people that benefit are the people that created the coin and the insiders they cut in early to try to generate hype to get other poor saps to buy in.
Memecoins make money for the ones who orchestrate, pump then dump on the suckers who get scammed fall for the hype.
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