Although memecoins have grown to be a significant component of the cryptocurrency space, they also carry a significant risk: frauds. Insider fraud is causing a lot of investors to lose money. Some cryptocurrency leaders recommend employing social pressure, or a “social layer,” to discourage scammers as they continue to proliferate. But is this a viable strategy?
Why Do Scammers Target Memecoins and What Are They?
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Memecoins are cryptocurrencies with no actual value that were established primarily for amusement. Many are merely hype-driven, but some become popular. Scammers are drawn to this, manipulating prices to earn rapid profits at the expense of regular traders.
The Proposal for the Social Layer: Shutting Out Scammers Samczsun, a paradigm researcher, suggested combating scams by utilizing a social layer.
The concept is straightforward: scammers may be discouraged from making money with memecoins if the community rejects them. The financial advantage from frauds might not be worth the social danger of being publicly humiliated.
Support for Social Pressure: Some members of the bitcoin community provide evidence in favor of this notion, such as the Mango Markets exploiter, who was prosecuted after generating public outrage.Scams in the future can be prevented if society holds the perpetrators accountable.
The Challenges in Implementing Social Pressure
Not Everyone Gives In: Not everyone shares the view that social pressure will be effective. Anatoly Yakovenko, the co-founder of Solana, posited that fraudsters could easily move to other influencers and proceed with their scams. He believes that social shame would be remedial and not preventive.
Crypto trader The Shameless Scammers Cobie agrees that scammers are brazen and would capitalize on public outrage. Social pressure will not stop them since they know the benefits and risks perfectly well.
Real-World Examples of Memecoin Fraud
Political memecoins and massive losses: In recent years, political memecoins such as Trump’s TRUMP token and Argentina’s LIBRA token have cost billions of dollars. Investors suffered enormous losses when TRUMP’s stake fell 80%. LIBRA is a prime example of the extent of the harm caused by such frauds, as it reached $4.5 billion before insiders cashed out.
Does Social Pressure Work?
The idea of using social shame to stop memecoin scams has its supporters and detractors. Some believe it could be a deterrence, while others argue it won’t work because scammers can easily avoid the consequences. The crypto community might require a combination of stricter laws and social responsibility to safeguard investors and maintain market legitimacy.
