This the second part of an essay in which I explore the relationship between memes and open networks. Part 1 of the essay can be found here.
To preface this conversation, Memetics is still very much considered pseudoscience and none of the underlying theories should be taken as fact. However, it is becoming a more rigorous field of study as the internet continues to permeate all parts of culture. In the face of unstoppable and borderless communication, it’s become much easier to see that the ideas underpinning Memetics become more pertinent each day.
Formally, Memetics refers to the theoretical and empirical science that studies the replication, spread and evolution of memes. The field analyzes cultural ideas the same way evolutionary biologists analyze genes. Memetics makes the conclusion that ideas are subject to the same Darwinian forces that guide evolution, namely that ideas and beliefs only have staying power if they are able to survive and outcompete other ideas.
Memetics attempts to illuminate the reasons why — throughout the course of humanity — we’ve gone far and beyond just focusing on things that help us survive. Why do we play games? Why do we love creating art? Both of those acts don’t directly contribute to a higher survival rate, yet we dedicate a lot of our mental and physical resources to them.
If genetics is the study of our predisposed nature, Memetics is the study of how we respond to nurture.
Cultural evolution, including the evolution of knowledge, can be modelled through the same basic principles of variation and selection that underlie biological evolution. Just like genes, ideas have traits that help them spread and some that make it more difficult to spread. If we want the ability to accurately pinpoint these traits, we need a framework by which we can characterize and identify success.
According to Memetics, a successful meme must go through the four phases of the memetic life cycle:
Assimilation refers to a meme entering the memory of its host. Once a meme presents itself to a host for the first time, it must be noticed, understood, and accepted. The success of assimilation boils down to a few factors, namely does that meme help connect existing cognitive structures and does that meme make rational sense?
Retention refers to whether or not the meme is able to remain in the hosts memory for a prolonged period of time. Few memes survive this stage, which makes it one of the most important phases in the cycle. Generally speaking, retention depends on how important the meme is to the host and how often the host repeats the meme in a given time frame.
Expression is the process by which a host communicates the meme to other individuals. While the most common form of expression is speech, it can also be accomplished through text, pictures, and behavior.
Lastly, transmission occurs when a meme reaches another host. For this to happen, a meme needs a physical carrier or medium which can sufficiently transmit the expression without too much distortion. A successful meme is usually one that is transmitted in high frequency (many copies).
Let’s again circle back to the ‘digital gold’ meme as a successful example. Thinking of bitcoin as a digital version of gold was much easier to understand because most people already cognitive structures around gold and it’s valuable properties. This meme was also easier to retain because it matched with most holders’ cognition. They want it to be digital gold because that means it’s potential market capitalization is much higher than it is today. The fact that the digital gold meme was placed across a number of different mediums increased how frequently the meme was copied. Mediums like live television (CNBC & Bloomberg), audio (Rise of the Crypto Podcast), and of course, written text (crypto twitter) all helped spread the meme.
Within each stage of the life cycle, there are certain characteristics that influence whether or not a meme will be selected and successfully move to the next stage. At each stage, there is selection in the sense that only the ‘fittest’ memes will survive. These criteria are similarly broken up into four categories:
- Objective Criteria — objects or ideas independent of the host or meme
- Subjective Criteria — selection based on the host who assimilates the meme
- Intersubjective Criteria — selection based on the interaction within groups
- Meme-centered Criteria — selection based on the characteristics of the meme itself
Within those four segments, the following represent the different types of fitness tests that a meme must undergo:
- Utility — The meme contains useful or valuable information
- Novelty — The meme is sufficiently different from already known memes
- Coherence — The meme is consistent with the knowledge that the hosts already have
- Simplicity — Complex memes are more difficult to pass on
- Formality — Memes that are expressed more explicitly have a higher chance of survival
- Expressivity — The meme is easily expressible in the available languages or media
- Authority — The source is recognized as being trustworthy
- Conformity — The majority of hosts agree on the meme
- Proselytism — The meme explicitly incites its hosts to spread it further
Generally speaking, a meme that scores the highest across all of these factors will be the fittest, and therefore will be the likeliest to spread. The main issue with this framework is that it’s all qualitative. As such, it’s more of a barometer on the probability that a meme grows rapidly. We would need to be able to falsify some hypothesis if we wanted to be empirically sure. Regardless, we now have a basic framework by which we can more accurately deduce the probability a meme has of surviving and spreading.
Blockchain Asset Fitness
Memes are arguably one of the most powerful drivers in the crypto capital markets today. Considering the lack of consensus around quantitative valuation metrics, investors have latched onto these stories as a way to both accurately describe the past and to extrapolate on the future of a particular network. Again, it’s much easier for an investor to develop a Bitcoin thesis centered around the fact that it might one day become ‘digital gold,’ rather than rest everything on nascent valuation models. Memes have actually been so influential in explaining the market that we’ve created a Crypto Narrative Index to help he track of all the possible beliefs.
A lot of this influence also stems from the fact that blockchain networks are inherently social systems. Users will only store value in a system they believe in, and it becomes much more psychologically welcoming to do so when the other participants are similar to you.
The bottom line is that these memes should be taken with a grain of salt. They are both valuable heuristics and often over simplifications of complex realities. Nonetheless, given how prevalent they are in the determining how our industry evolves, it’s interesting to analyze the most popular market memes against the criteria laid out by Memetic scientists. If a specific meme is much more ‘fit’ than it’s out counterparts, it will have significant influence the market.
Bitcoin as an Uncensorable, Self-sovereign, Store of Value Asset
By far, the most sticky story attempting to describe Bitcoin is the ‘fat monies’ meme. It asserts that Bitcoin is the first form of sound money — a monetary system unable to be seized and controlled by a central state — and the reason why it will accrue the most value. This idea has become the dominant thesis as to why Bitcoin is the most superior asset.
Drilling deeper into the memetic fitness test, we can clearly see this meme contains valuable information as it’s the strongest justification keeping a $100 billion asset afloat. Similarly, the SoV meme is novel compared to other investable asset classes. Bitcoin is the first true form of sound money that can compete in the open market alongside other currencies. It’s very much a unique phenomenon that necessitates new mental models to properly assess it’s value.
This meme is also expressive and is subject to proselytism, both of which apply to the asset class at large, not just Bitcoin. Hosts are very incentivized to infect others and they often use the same mediums to do so, causing an oversaturation of competing memes.
Where this meme fails is in its coherence and abstract nature. The concept of a unseizable form of money is very foreign to most individuals, and frankly, a good portion of the crypto community is not facing a direct threat from a central government. Also, fully grasping the understanding of an unseizurable SoV asset takes time and resources. Most people are not familiar with Austrian Economics and rarely seek a foray into the field.
Individuals must be well versed in economics, monetary theory, sociology, computer science, and much more. It makes it much more difficult to believe a story when you need so much extra context and when it creates a lot of dissonance with your existing beliefs.
The Ethereum community has coalesced around open finance as one of the network’s tangible use cases. Many think that Ether can develop a monetary premium if it becomes the currency that powers a parallel financial system, making it a very valuable meme. Open finance is a very coherent meme as well because the community has heard the phrase ‘bank the unbanked’ since the technology’s inception. Similarly, open finance has a lot of real-world analogs because developers are essentially creating existing financial services, just with a more decentralized back office.
Open finance is similarly complex because it takes time for individuals to fully grasp the complexity of smart contracts and why they’re more efficient than analog systems. This is exacerbated by the extreme infancy of decentralized financial services. There is still a massive amount of infrastructure that needs to be built before a majority of people get tangible benefits from using it.
The chart makes the conclusion that sound money and open finance are comparably good memes, but it’s clear that the market isn’t in agreement. I’d posit this is the result of two factors: One, these qualitative metrics leave much to be desired, they should be used more as a surface level evaluation of whether or not something can be palatable to a large network of people. Second, the open finance meme really only took hold in Q3/Q4 2018, and since then, prices across both memes have moved in a similar fashion.
- Proof of Stake as Bond Yields
- Maker as the crypto credit facility
- Zero-Knowledge Everything
- Funding models for cryptocurrencies
From first glance it’s obvious that these frameworks need some way of turning into quantitative data. Without that rigor, their interpretation is extremely subjective relative to the interpreter. As someone who ascribes to both memes, my view points are likely skewed compared to the general public.
However, what we do have at minimum is a way to screen the descriptions we use to explain the technology to others. I suspect that over time, stakeholders will learn how to best distill down the value propositions of their favorite networks because that will be a key in getting support from others. At their root, these networks rely on more people to enter them if they are to be more valuable. Crafting memes around the most beneficial parts of a blockchain will be an integral factor in their growth.
If you have any ideas or want to chat about the content of this essay, please feel free to reach out to me on twitter!
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