Since the dawn of cryptocurrency, the world of digital assets has been a playground of speculation, innovation, and volatility. At its core, crypto markets have always favored insiders and early adopters—those who know the system, control initial supply, and orchestrate early hype to capture value before most retail investors even enter. Over time, this trend has evolved through various phases: from the ambitious visions of Layer 1 protocols to the promises of NFTs, and finally to the brazen pump-and-dump landscape of meme coins. Despite the changing narratives and the complex ecosystems that have developed, crypto’s structure has remained the same: insiders win big, and retail investors are often left with devalued assets.

In contrast, traditional finance and venture capital take on risk by investing in companies that create products, jobs, and value. Even though early investors stand to gain the most in these models, their success is built on the growth of tangible businesses that provide returns and benefit society as a whole. Crypto, however, has continued to iterate on speculative financialization, stripping away value propositions until the industry now stands with meme coins—assets that promise nothing, produce nothing, and reward only the earliest buyers.

Layer 1 Protocols: The First Wave of Speculative Value

When Bitcoin and Ethereum first emerged, they introduced the world to blockchain technology and decentralized finance. Layer 1 (L1) protocols like these were touted as the future of digital infrastructure, meant to power decentralized applications, enable transparent financial transactions, and revolutionize sectors from finance to social media. Ethereum’s token, for example, became essential for paying transaction fees and using applications on the network. This gave the impression that L1 tokens had inherent utility, supporting the growth of a larger ecosystem.

But the reality was more complicated. Early investors, often institutional funds and insiders, entered these projects at incredibly low prices, accumulating vast reserves of tokens before the public had access. As demand for these tokens grew, so did their value. Insiders benefited enormously from this early positioning, selling tokens when prices were high and leaving later retail investors vulnerable to market drops. When Solana’s token (SOL) rose from cents to over $250, early investors reaped extraordinary profits by selling into public demand, eventually contributing to a price collapse once hype waned. The projects may have provided utility, but they also highlighted that early insiders held the true power, creating artificial scarcity and profiting disproportionately.

NFTs: The Second Layer of Speculative Promise

Following the initial boom of L1 protocols, NFTs (non-fungible tokens) took the concept of crypto assets in a new direction. NFTs offered something Layer 1 protocols didn’t—cultural appeal and the allure of digital ownership. Projects like Bored Ape Yacht Club and CryptoPunks convinced buyers that they were purchasing unique digital assets, sometimes with added benefits like access to exclusive events. Here, too, insiders capitalized early, holding large amounts of NFTs before they were promoted to the public. As community-driven narratives amplified value, the price of these digital assets soared, allowing early holders to sell at extreme profits.

However, the NFT market followed a similar trajectory to Layer 1 tokens. As insiders began to sell, NFT values fell sharply. Retail investors who had bought NFTs at peak prices were left with assets worth a fraction of their purchase price, and, once again, insiders were the primary beneficiaries. Despite the claims of utility, NFTs became just another version of the crypto pyramid, where early movers controlled value and extracted profits before market interest faded.

Memecoins: The Final Iteration of Pure Speculation

With memecoins, the narrative has come full circle, moving beyond even the pretense of utility or value. Unlike Layer 1 protocols or NFTs, memecoins like Dogecoin and Shiba Inu lack any technological purpose or connection to a broader project. These tokens are created with no inherent functionality, promoted through social media hype, and marketed based purely on humor or cultural references. In the memecoin market, value is entirely manufactured by the influence of Key Opinion Leaders (KOLs) or influencers who pump the price, creating a brief period of intense hype before cashing out and moving on.

The absence of utility in memecoins strips away any remaining comparison to traditional finance or venture investment. While Layer 1 protocols and NFTs at least mimicked traditional business models by claiming utility or future growth, memecoins offer nothing but short-term speculation. They are marketed not as investments but as trends or fads, drawing in retail investors who believe they can catch a wave, only to see prices collapse as early insiders sell. Memecoins represent the ultimate iteration of the crypto pyramid: pure profit for insiders, total loss for latecomers, and no pretense of value.

The Key Differences with Traditional Finance

In traditional finance and venture capital, early investors take on significant risks by funding new ventures. However, they are investing in companies with the intent to generate revenue, build products, and create jobs. For example, a startup like Airbnb requires venture capital to expand, develop its platform, and grow its customer base. The returns that venture investors earn come from the growth and success of the company, which provides value to users and contributes to the economy. Investors are generally tied to the company’s success, as their equity is directly linked to the business’s long-term growth and sustainability.

Crypto projects, however, do not require the same growth or societal benefit. The financialization of tokens, NFTs, and memecoins is more about extracting value from market interest than contributing to a lasting product or service. Unlike traditional finance, where capital builds and supports tangible assets, crypto investments create value by transferring funds from one group (retail investors) to another (insiders) without creating lasting returns. Once the hype fades and the price drops, the project’s value vanishes, offering no benefit to the broader economy.

Memecoins as Crypto’s Most Unfiltered Reality

The evolution from Layer 1 protocols to NFTs and now memecoins reveals an industry that has progressively stripped away any connection to traditional investment principles. While L1 tokens and NFTs flirted with narratives of utility or cultural value, meme coins abandon these ideas entirely. They are marketed solely as speculative assets with no underlying purpose or long-term potential, created to extract value for insiders before the public catches on.

In traditional finance, early investors may profit the most, but they also bear the risk of building real value—whether through products, services, or societal contributions. In crypto, the cycle of pump and dump, hype and collapse, has become the industry’s hallmark, with memecoins as the most blatant expression of this reality. As the market continues to mature, retail investors must recognize this pattern and understand that, more often than not, the only consistent winners in crypto are the insiders who start the game.