Every network that supports smart contracts is looking for its own niche. For example, Polkadot relies on developers to create a user-friendly and functional parachain-based environment. Ripple is bringing distributed ledger technology to traditional finance by offering governments a turnkey service to create central bank digital currencies (CBDC). Avalanche, on the other hand, took the controversial route of focusing on meme coins.
The attitude toward meme coins has been ambiguous in the crypto space and more so among regulators who have banned the circulation of these coins in certain countries. The issue is in the lack of a useful payload and high speculative interest. The meme coin boom can overwhelm some networks and cause significant increases in fees in others.
For example, due to the emergence of ordinals (a protocol that allows quasi-tokens to be minted and exchanged) in the Bitcoin network, the average transaction fee jumped from $2 to $31 in May and to $37 in December.
Image source: bitinfocharts.com
On Solana, the hype around meme coins has reached the point where several thousand new tokens have been minted a day since December. At first, users experienced delays in transaction processing. Then, on 6 February, the blockchain stopped for 5 hours.
Image source: analytics.solscan.io
Most networks view such bursts as a necessary evil, calling what happens a stress test. Avalanche, on the other hand, decided to open the doors to meme coins by rewarding users for being active and purchasing coins for their own fund as part of their Culture Catalyst programme.
"In particular, we note that meme coins generally have high community value because of the engagement, community spirit, and culture that they engender, which goes beyond the humour and virality that they embody".
Last week, the team allocated $1 million to reward users. These funds will follow a complex bonus scheme to reward activity with the following coins: COQ, KIMBO, NOCHILL, GEC, TECH, HUSKY, MEOW, KONG, MEAT and KINGSHIT (see detailed terms and conditions).
The ambiguity of Avalanche's policy is that many crypto participants (if not most) characterise such assets as nothing more than "shitcoins". For example, to get on the Culture Catalyst list, the age limit is limited to just a week (see a full list of requirements).
It's obvious that Avalanche is trying to reach Solana's figures with similar programmes. However, in terms of the number of active addresses, the network has seen a decrease compared to the previous year.
Image source: avax.network
What's more, buying quasi-tokens with the fund's money in the long term lays a bomb under the sustainability of the underlying AVAX token since most quasi-tokens fail.
Image source: StormGain Cryptocurrency Exchange
AVAX has only risen 42% this year, lagging behind both Solana and Ethereum. If developers continue to emphasise meme projects, this gap is very likely to widen.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)