Javier Milei, Argentina’s “libertarian” resident promoted a memecoin ‘Libra’. The project’s website, which Milei linked to, claimed that the project was “created with a clear mission: to boost the Argentine economy by funding small projects and local businesses, supporting those who seek to grow their ventures and contribute to the country’s development.” While this certainly sounds laudable, the game was rigged from the start.
It turns out that shortly after hitting a lot of quick attention, the price quickly dropped 89%. Javier Milei even deleted his tweet supporting the project. This controversial launch, featured things that look like a pretty typical pump and dump scheme. This whole incident is noteworthy because of how much memecoin shenanigans are tolerated in politics and activist circles. Even president Trump has his own official memecoin. It’s worth asking ourselves, is this the behavior we want to see from our ‘allies’?
Coffeezilla interview highlights
Coffeezilla does fantastic work. I’m a huge fan of his reporting. Coffeezilla managed to get Hayden Davis, one of the creators of the Libra memecoin to talk about the incident. If you haven’t given much thought to the memecoin hype, this is very much worth your time. Coffeezilla manages to get some quite detailed and shocking admissions from Hayden. It’s worth expanding on some of the small details of the conversation to get a better picture of the memecoin schemes.
The reality distortion field
The most fascinating part of this interview is listening to someone from a particularly strong reality distortion field. Much of what Hayden says shocks Coffeezilla, and likely much of the public as well. When one is surrounded by people with particular strong preferences and beliefs it becomes difficult to question the atmosphere we are in. It is a great reminder to question our own assumptions about many things, even where there may even be consensus.
As an outsider, it’s very clear that Hayden is surrounded by people who claim to believe that while these memecoins often end up as naked rug-pull scams, there is surely a bright future for ‘social finance’. His attitude is nakedly nihilistic about these schemes because of corruption throughout the rest of society. Going so far as to argue “but then how else can we make money?” as if to say that profitable returns are the only meaningful indicator of productive economic activity. It’s understandable to be cynical about the bigger picture, but at what point do we take responsibility for our own actions?
This reality distortion field is itself troubling to contemplate. That many bright, entrepreneurial people are being given a strong signal that fraud is a good and productive use of their talents. In the interview, Hayden explicitly makes the case that the entire cryptocurrency industry, or even the economy at large is fundamentally no different. Even if one accepts this premise, it’s not difficult to make the case that there are wildly varying degrees to which this is true in particular places. The nihilistic refusal to make these distinctions seems to be a fundamental pillar of this reality distortion field. While it’s certainly true that neither Hayden or I will change all this, there’s something tragically dim about giving in to these forces. Is this truly the best we can hope for? I beg to differ.
Sniping
Much of the conversation revolves around discussion of ‘sniping’ the memecoin supply. This is when people will quickly buy up a sizable chunk of the memecoin supply before it’s even announced. For example, between when the Libra smart contract was deployed, and when Javier Milei tweeted about it. This gives the ‘snipers’ an extraordinary advantage over all the people who find out about the memecoin later.
If this activity was purely organic, it would be easier to defend the behavior. It gets worse when behaviors like insider trading gets involved. It’s one thing to buy up a memecoin quickly because you think the name has potential, it’s a whole different world when you know in advance it’s going to be promoted by big names. Given the way these launches are structured, it’s guaranteed that there will be some with access to information that can be used to get massive returns at the expense of the rest.
To take things to a whole new level, in the interview the co-creator of Libra explains that those launching their own memecoin feel a need to snipe their own tokens. Not only was it done in this case, he argues that this is common practice in the space. This makes an already quite predatory arrangement even more slanted. Not only are the ‘outsiders’ competing with those who specialize in sniping memecoins, inside traders, but also the creators themselves. By having a large control of the token supply, the creators and insiders can directly manipulate the price of these assets with very little transparency.
Insider perks
In addition to all the other issues related to the Libra launch, Dave Portnoy was offered a substantial amount of tokens to hype the project. David claims that after being told he was not to disclose this, that he returned the tokens. It just so happens that this very favorable exchange happens after the tokens had already crashed in value.
One insider who had lost about $5.34 million on LIBRA was compensated $5 million.
This insider, none other than Barstool founder David Portnoy, had spent 29,000 SOL worth $5.77 million on LIBRA tokens roughly 9 minutes after it launched at $2.51 per coin but quickly lost over $5 million as the token crashed amid speculation of foul play and as President Milei pulled his support, Lookonchain analysis showed on Monday, February 17.
After the loss, however, Portnoy was sent 5 million USDC in two tranches of 4.5 million USDC and 500,000 USDC. He also dumped his remaining LIBRA holdings after receiving this compensation.
How LIBRA Token Creator Compensated Dave Portnoy While Others Hold the Bag
Unlike other bag holders, David was given the opportunity to be made whole. The very fact that this was done demonstrates the nature of these memecoin schemes. There are many losers and a few winners by design. It’s worth considering how memecoins exemplify cryptocurrency at its worst, and what incentives they create for content creators. Despite a great deal of rhetoric about eliminating central banks, it’s troubling to see many trends all converge on the mere privatization and digitization of central banking.
Opposing the grift industrial complex
How memecoins work:
To put the interview in perspective, it’s worth contemplating the scheme from start to finish.
- People get together to plan to launch a cryptocurrency asset
- Deals are made, to get investment and buy off influencers
- Branding and marketing is put together, then the token is launched
- Word gets out, project creators, insiders and skilled traders leap on the opportunity to secure large amounts of the token
- The influencers and figures promote the token to the masses
- Enticed by a rising price, the captive audience flocks in and buys the overpriced collectibles
- Large holders dump the token absorbing a majority of the funds put in by wider public
It does not matter if the price tanks immediately, or after some time, the scheme is the same. All the buyers of the token are effectively a commodity being sold to investors by leveraging their parasocial connections. As was brought up in the interview, people you follow ("key opinion leaders"/KOLs) have many opportunities to exchange your trust for financial gain. Sponsorships absolutely have their problems, so it is on you to judge your sources of information based on what they market to you.
Memecoins are far from the only way this happens, it’s just one of the more blatant iterations of it. It is an instructive example of what kinds of behavior are indicative of mass manipulation. Looking at the bigger picture, we can consider how predatory modern social media is. Centralized platforms like Big Tech and Alt-Tech all have the ability to pick winners and losers. As the selected winners grow large audiences, they then have the opportunity to make substantial amounts off promoting various products and schemes to them. It’s worth asking how ‘independent’ many of these voices can be when they are beholden to not only the platforms they choose, but also the partnerships that fund their operation. If we truly want to build up independent voices in the public discussion, we have to support them. Payment processors notwithstanding, it’s often just as easy to directly support great investigative work as buy a memecoin.
We can do better
I would encourage you to adopt high standards. Not just in the voices you let influence your thinking, but also for platforms and what your wider community tolerates. There is definitely a limit to how effective your activism or cause can be if you permit your constituents to be fleeced by frauds and needless time-sinks. There is a great deal you can do to uplift truly independent voices, sharing great works directly with others is much more revolutionary than jumping to the “next great platform”. If we want a meritocracy in public discourse, it’s up to all of us to be the stewards of it.
Above all, it’s important to consider how many social and political phenomenons are primarily driven by the desire to emotionally manipulate audiences to put them into a ‘marketable’ mindset. We all have buttons that can be pressed to raise fear, urgency, or insecurity. Recognizing that social media manipulation builds real fortunes can help put the need to disentangle from these machinations into perspective. It’s largely a matter of judgement: do you want to put your efforts towards supporting the most sleek and popular leaders, or would you rather discover and share genuine insight that others need?
No matter how sophisticated our digital prison becomes, never forget that we have the ability to shape the future together. You would be genuinely surprised at how effective even the smallest of steps can be. Diverting your attention away from hype and instead turning it towards what you can do to make a difference on the small scale will yield fantastic results over time. There are many ways to make a difference, don’t let clever marketing trick you into thinking a purchase is the first step.
