Bitcoin is a Meme
Spreads like a virus. Constantly evolves and mutates.
Intro
This writing is a detailed continuation of my brief twitter discussion with Jim O’Shaughnessy. In the initial tweet, he mentioned viral-like spreading of memes despite them being untrue or illogical. Later, I added that I saw a lot of commonality between memes and stock market bubbles, going so far as calling Bitcoin a meme.
At this point, I think it is wise to start with the definition of a meme, so here it is:
“Meme* is a “unit of culture” (an idea, belief, pattern of behavior, etc.) which is “hosted” in the minds of one or more individuals, and which can reproduce itself in the sense of jumping from the mind of one person to the mind of another. Thus what would otherwise be regarded as one individual influencing another to adopt a belief is seen as an idea-replicator reproducing itself in a new host.” [1]
*Note that “funny-pictures” are just a small subdivision of memes.
This point of view on memes detaches us from the level of a single individual and elevates us on the crowd-behavior plane. On this level, we can look at the spreading of a meme as on a phenomenon independent form whims of a particular person.
Going back to Bitcoin being a meme
To be more precise, it is not a meme, but a memeplex — a complex of closely related memes.
Speaking the “normal” language, the main point of this writing is that Bitcoin is a complex of ideas that spread and captures minds of more and more people in viral-like style, making it alike.. memes.
Reasoning
- After almost 10 years since its launch, Bitcoin still has no widespread adoption. We do not use it for payments. It doesn’t pay dividends. There are only a few businesses that accept it. Without actual adoption, there is no balance of supply/demand for real usage to set the price. Bitcoin costs exactly what people think it should cost. The price is a mere reflection of the human perception of its value.
- Yet, it grows in classical market-cycles, with every consequent one capturing broader and broader auditory.
Why does it happen? With each turn, the lucky and newly rich adopters from the previous cycle build better and better infrastructure, making it possible for more and more new people to get involved. The unlucky ones, who lost their money previously, are also more likely to join the new rise when they see that they “were right” about the eventual BTC growth. Both write books, articles, make films about decentralization, corrupt governments, financial democracy, banking the unbanked — spread the ideological virus (I will show the similarities with memes later).
The virus is beliefs. It is beliefs that moved cryptocurrency forward so far. Bitcoin has a vision — a decentralized p2p censorship-resistant money, and this vision has a price. What price? Nobody knows how to value Bitcoin. However, the people’s expectations and excitement about Bitcoin’s vision become the demand for this vision to come true. It attracts builders, who try to make it happen. But until they build businesses and products on Bitcoin, until the world switches to Bitcoin and gives it real demand, they are just believers in bright decentralized future.
Of course, it is easier to buy into something that brings good for the world. Bitcoin exploits the currently popular “liberal” memeplex. Democracy, liberty, equality — all are parts of it. Mass media propagate it. Hollywood puts it in almost every movie. Humanity has been moving towards less centralization of power for hundreds of years. Absolute monarchy-parliament-the universal suffrage pass shows the direction of the mankind evolution. Bitcoin is a comfortable continuation of this story. That is why its ethos feels right and beneficial.
It is not just words. There are also proofs now. The “noble” Bitcoin’s vision about decentralizing the world’s financial system and the huge profits for the early Bitcoin adopters made them fanatical about BTC. In fact, most likely, they already had been predisposed to contrarian, libertarian views, when they first bought it. The tremendous dopamine injection of thousands of percent of price increase has cemented their beliefs. They are “rich and successful” in the eyes of the newcomers. They are the authorities, the holy apostles of decentralization memeplex (some actually call themselves evangelists).
Why does the magnitude grow? Because during each cycle Bitcoin attracts the enormous amount of financial and human capital that wants to get returns. They build both the infrastructure and shamelessly shill BTC in the conscious/unconscious desire to attract more users and get their profits. Crypto flourishes with new ideas, applications and infrastructure that broadens both auditory to which it can appeal and infrastructural capabilities to onboard more people.
The similarities with memes’ viral-like spreading
In Russia, different social groups use different messengers and social networks. Moreover, various age groups have different behavior online. Some consider frequent meme-sharing a norm, some do not. Not speaking of different values and preferences. For example, young people may share memes about the corrupt Russian government, the older ones can send each other pictures with heroes of the WWII. It is interesting to notice that the informational spheres of these two groups rarely intersect. They are separate ecosystems with own information filters.
However, these two are very general and broad groups. They itself are divided into many smaller subgroups. Girls, guys, medical students, financials students, young parents, gamers, 9gagers, members of a particular group on Facebook. These groups, in their turn, can be further divided into even smaller ones. Eventually, the financial-students community goes down to the students of a particular university, students of a particular year, students of a particular class. A hierarchy of interconnected communities with their own informational filters and meme-generating capabilities.
What happens when a meme is born?
If it is too specific and is born, for example, when your classmate or coworker came to the study/work in funny yellow pants, the meme will unlikely leave the boundaries of your close group and stay your “local meme”. Another example of a “local meme” can be a stupid situation in which two lovers got to know each other, how they kissed the first time or a song that had been playing when they saw each other. Too specific and uninteresting for the broader public but enough to give you laughs and emotions for some time.
However, if it is funny enough and can be applied to a large variety of situations, such meme can capture the minds of millions. The lecturer says something, a guy from the first row mishears and says something stupid, everybody laughs, they remember this situation for a week, somebody makes a picture out of nonsense the guy said, posts it online, people share on Facebook, their friends see it, like and share, financial public groups pick up, some guy, who is both a member of such group and of a supporter of a particular political party slightly changes the picture (the meme evolves) and posts it in the conservative public group, meme spreads further and furthers, in a couple of weeks it reaches the most popular publics, some people send it to their parents, some of them even like it and BOOM in two months (when you completely forgot this meme) your grandmother sends the familiar picture with text about cats.
A good meme starts within a specific community and then continues to broaden the auditory going from one group to another. It should have a rather broad meaning and some versatility in order to appeal to a large number of groups. During this spreading, it can mutate and evolve to make itself more compelling with a specific auditory, sometimes changing in such a way, that it even becomes unappealing to its initial group.
Back to Bitcoin and financial markets
People buy into something not because it really has the potential, but because they think it has the potential. Also, they like their decisions to be rational. They like reasons. Memes don’t have to connect with reality. They need to give you the sense that they reflect it.
Speaking about Bitcoin, there is no proper valuation framework for that thing. Everyone knows that there is some kind of reality, but its valuation highly depends on the crowd perception. Perception is shaped by reasoning. People like the pictures of potential. Even though they can be totally clueless about what “Digital Gold” means, they see the association with gold, see 7 trillion gold market cap, see only 100 billion Bitcoin market cap, and think that there is potential. The rationalization of buying Bitcoin is crucial.
Now, look at the evolution of cryptocurrencies investment thesis rationale overtime:
— p2p Electronic Cash, for cryptographers, anarchists and cyberpunks;
— Money of the Darknet, for all of above + narco dealers and other criminals;
— Digital Store of Value, for the financial system and emerging economies;
— Foundation of Web 3.0, for, basically, everyone.
In every iteration, the Bitcoin memeplex found its auditory and sucked in increasingly larger numbers of people. Like funny-pictures memes, the decentralization idea has been evolving and becoming suitable for more and more people. We can easily track the amount of attention first Bitcoin, then BTC and other crypto attracted on every stage of its development.
If we look at how “funny pictures” gain and lose popularity, we can gain insights into how market bubbles form and bust. These things are not so different. The market is just a reflection of human sentiment and interest. It shows if people believe in something (with the buy/sell decision) and how strong they do it (with volume).
Not surprisingly, the broader (and less competent) the auditory, the less sophisticated becomes the language of a memeplex. During the bear markets, when only the true believers stick with Bitcoin, people come up with new very logical and rational arguments. During the bull markets the narrative reduces down to this:
Such a reduction in the complexity of narratives allows attracting the greatest numbers of people, who pump the price to the moon. You cannot explain to them what sound money is or why fiat is unreliable. But you can post a picture with a gold bar = Bitcoin and that will be enough.
Summing up:
My assumption is that “funny pictures” memes show us how information spreads in human society. And the same or very alike principles can be applied to other fields. Cryptocurrency, financial markets, ideas of socialism, feminism, democracy and other should have the same laws. They are just ideas, like any others. It is humans who spread them. And there is only one way human brains work.
Bitcoin (and now other cryptos) shows us the spreading of decentralization memeplex. Starting with a small group of cryptographers, it passed through several cycles of iteration and attracted increasingly more financial and human capital. The newly rich and influential people from the previous cycles build better infrastructure and promote benefits of decentralization and crypto money — spread the ideological virus. Their initial assumptions about the bright future of crypto cemented by huge financial profits. That gives them the halo effect and authority in the eyes of neophytes. Everyone wants to get rich (like other people in the crypto space) and make the world a better place (to decentralize the “evil” corporations). Greed and noble cause. The holy war.
That cycle will repeat itself until it either becomes a new paradigm or memeplex evolves into something different. The open-source nature of crypto, and the possibility of easy code forks make it scary-alike to the meme-evolution process. Especially given that crypto is all about networks. Which means it needs users, developers, miners, traders, evangelists — people. And you can win more people because of the better network culture, brand or “seeming fairer” — non-technical aspects of your project. Fun meme-pictures can come in handy too.
Also, given the democratic nature of many world governments, the victory of the virus is more than real. Eventually, crypto supporters will just vote down the politicians who speak against it (hello South Korea!).
Like memes? I think that in the future you will be able to invest in them. Check out my this post to find out more 😉
Disclaimer
This writing cannot be taken for granted. Throughout the text, there are many assumptions without the appropriate number of references and backing research. Do not trust the ideas in this text blindly. Do your own research.
References:
[1] Meme. Wikipedia https://en.wikipedia.org/wiki/Meme
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