In February, the Libra scandal involving Argentine president Javier Milei shook the crypto sector. It also angered many Web3 members, who argue that meme coins damage the ecosystem’s growth and unfairly target smaller investors. 

BeInCrypto spoke with Memeland CEO and Founder Ray Chan at Consensus Hong Kong to discuss recent events involving meme coin launches and the sector’s future.

LIBRA: From a Token to a Meme Coin

The LIBRA meme coin scandal was unique in many ways. An unidentified group created a website for the “Viva La Libertad” project, inspired by a slogan Argentine President Javier Milei uses regularly.

The website, which is still active, has a mission statement of boosting the Argentine economy by funding small projects and local businesses. The LIBRA token was launched to channel funding as part of the project’s strategy.

According to the token distribution diagram, 50% of tokens would be used to fuel Argentina’s growth.

A couple of hours after the website went live, the LIBRA token was created on the Solana blockchain. Half an hour after the token launched, Milei published his first X post.

“A liberal Argentina grows! This private project will dedicate itself to incentivizing the growth of Argentina’s economy, funding small businesses and Argentine start-ups. The world wants to invest in Argentina,” it read.

In that same post, Milei included a link to the Viva La Libertad Project website and LIBRA’s contract number. This identification made it easy for investors to locate and start trading the cryptocurrency immediately. 

Soon enough, people started to realize that, more than a token, LIBRA resembled a meme coin.

Meme Coins Face a Piling List of Pump-and-Dumps 

Milei’s social media post triggered a surge in the token’s price, with the market cap hitting over $4 billion in hours. This surge allowed insiders to cash out over $100 million in profits.

However, the rally was short-lived. The meme coin had no tokenomics; the website was created hours before the launch, and over $87 million was cashed out in the first three hours. The token’s value crashed soon after, indicating a classic pump-and-dump scheme.

The scheme resulted in mounting criticism, which led Milei to delete his post and attempt to backtrack. The president stated that he had not fully understood the project and that, after learning more, he chose to stop endorsing it.

But the damage had already been done. A joint investigation released by blockchain analytics firm Bubblempas and on-chain researcher Coffeezilla added salt to the open wound.

The investigation revealed evidence that suggested that there were links between the teams behind the LIBRA token launch and the MELANIA coin, launched by First Lady Melania Trump a day before Donald Trump assumed the US presidency. 

The analysis confirmed suspicions of insider trading and market manipulation in both cases. It also suggested that this group spearheaded several other token launches, including TRUST, KACY, VIBES, and HOOD, which all ended in sniping schemes and rug pulls. 

In response to the scandal, crypto community members took to social media to vent their disappointment in the industry. Some argued that meme coins are extractive, benefiting large insider traders while permanently driving smaller retail investors away from Web3. 

“The crypto industry needs to engage in serious self-criticism if it doesn’t want to end up as an irrelevant circus. For years, the major players in the ecosystem have been creating narratives, inflating them, and then dumping tokens on retail investors, securing massive profits while driving the public away from the space. It’s about time we all focus on building value instead of constantly figuring out how to cash out quickly at the expense of those who are just trying to explore what this space is all about,” said blockchain researcher Pablo Sabbatella.

For Memeland founder Ray Chan, a crypto expert with nearly two decades of experience in the meme coin industry, this incident must be analyzed from different perspectives. 

It’s common knowledge that the meme coin industry is extractive. Community engagement alone mostly drives many of these coins. Trading is largely speculative, and the market is inherently volatile.

“To me, I think it’s quite important to understand who is launching a token, and what the token is for. If it’s a meme coin, you should expect it to go to zero. Because literally, I think most of these meme coins mentioned that this token doesn’t have any road map or utility. I think this is an entertainment purpose only. If you expect it to go to billions all the time, you’re crazy. That’s on you,” Chan told BeInCrypto.

However, the LIBRA scandal differs from insider cases like the MELANIA coin launch. When Milei shared his original X post, he said the funds would support small businesses and budding Argentine entrepreneurs.

“But at the same time, for some tokens, maybe LIBRA, they mentioned that they are launching a token to support some other companies, to support some goals. If they don’t do it, I think that’s an issue,” he said. 

When asked how to safeguard users against common practices in meme coin trading, such as rug pulls, pump-and-dump schemes, insider activity, market manipulation, or sniping, Chan said these issues will likely become less frequent over time.

Meme Coin Industry Still in Its Early Stages

Meme coins have existed for slightly over a decade. The “doge” internet meme became widely popular on social media in mid-2013. 

Leveraging this trend, Jackson Palmer and Billy Markus created Dogecoin, launching it as a cryptocurrency on the Bitcointalk forum in December of the same year. This event marked Dogecoin’s distinction as the first cryptocurrency based on an internet meme.

According to Chan, given that this industry is still in its nascent stages, investors need to accept the market’s natural instability before deciding to participate.

“Before going in, or whether you invest $10,000 or $100,000, you have to understand that this industry is very new, and any new thing is very volatile. So, it’s very important to understand the risk before you make the investment or make the gamble,” he said.

Players with extensive knowledge and experience in the field will inevitably have the upper hand.

Expanding the User Pool

Because the meme coin industry is so new, players already well-versed in its mechanisms are more likely to profit from the common schemes associated with the market.

“I think it’s just part of the growing pain because, just like any tech and any sector, someone who is very sophisticated right from the beginning will probably understand the loophole. They will understand the opportunity, be it good or bad, and will just grab the opportunity to make some money,” Chan told BeInCrypto.

As the market ages and the meme coin industry draws new players, these schemes will become less frequent.

“Ultimately, expanding the audience to include more builders who understand crypto and blockchain will attract reputable individuals with their own goals and reputations to uphold. As more legitimate companies and builders enter the space, I expect the entire industry to grow in a healthier direction,” Chan explained.

Consequently, the meme coins will rely less on an important public figure to back them up and focus more on the message they are trying to convey.

“I think the space will be in a better place when support for tokens isn’t driven by influencers but instead by an understanding of the team and their work. Once we reach that stage, it will be a healthier and more sustainable environment,” Chan added.

He also underlined that, though inflating the price of a token based on community engagement has negative aspects, there is also a silver lining.

A Positive to Every Negative

In his interview with BeInCrypto, Chan emphasized the key difference between building on Web2 and building on Web3. 

“In Web2, companies heavily rely on venture capital and IPOs, facing numerous constraints. In Web3, however, if you can mobilize a community that understands and supports what you’re building, VC funding becomes far less essential,” Chan explained.

Moreover, launching a meme coin is one of the easiest processes on Web3. Anyone can do it, and this has become one of the most important drivers of its success.

“Number one is the ease of creation. I actually think that tokens are kind of like content. When you lower the barrier of creation, more quote-on-quote creators will join, and they create more content. I think the meme coin is the lowest barrier in crypto. That explains why there are so many new coins launching every single day,” he said.

Jointly using these fundamental aspects of meme coin launches for a specific purpose that prioritizes substance over hype can create much more meaningful outcomes.

“You actually can turn your so-called consumer into a supporter, even into your investor. I think all these kinds of developments and breakthroughs, once you understand them, you won’t give up that easily in crypto and in blockchain,” Chan added. 

Given these unique aspects, Chan expects meme coins to have a bright future.

The Future of Meme Coins

Chan argues that the meme coin trend reflects a generalized tendency in technological development. Science and technology are often invented to provide a meaningful solution to an existing problem.

Scientists developed vaccines to prevent terminal diseases like polio and influenza, while engineers invented planes to make the world more interconnected. 

Satoshi Nakamoto similarly developed Bitcoin to offer an alternative to traditional financial systems. Blockchain solves acute issues related to data storage, user security, supply chain management, and voting systems, to name a few. 

But not all technology is equal in popularity. 

“For example, when you look at social networks, the most useful social network is LinkedIn, but the most popular social network is TikTok. That’s because it’s fun, engaging, easy to join, and participate,” said Chan.

Since meme coins in Web3 serve a similar purpose to TikTok in Web2, they can be leveraged to drive further adoption in the long run.

“I think meme coin is the TikTok of crypto. A lot of people say it’s useless, but a lot of people are joining it. And this is actually the biggest driving force of mass adoption. So what I’m believing in when crypto gets more mainstream and when blockchain gets more adopted, meme coin as a category, will gain more market share,” Chan concluded.

Whether or not Chan’s predictions come true largely depends on the sentiment of the crypto sector– especially how newly onboarded users interact with meme coins. 

Only time will tell whether the crypto industry’s recent flurry of schemes will push people out of the sector for good or whether the meme coin market will mature like fine wine.