The Application of Game Theory in the MEME Token Phenomenon

The uniqueness of MEME tokens such as DOGE, PEPE, and SHIB stems from complex speculative motives, community collaborative behaviors, meme culture dissemination, and the impact of emerging technologies (like AI) on the market. From a game theory perspective, MEME tokens exhibit multiple interactions of collective belief, coordinated behavior, and market speculation, providing new insights for analyzing financial market behavior.

The recent surge in MEME tokens, exemplified by DOGE, PEPE, and SHIB, has captivated the financial world. These tokens, distinct from conventional cryptocurrencies, exhibit unique characteristics that challenge traditional market analysis approaches. To unravel the complexities governing MEME tokens, this article integrates game theory, behavioral economics, and cultural studies perspectives.

The Application of Game Theory in the MEME Token Phenomenon

1. Speculation and the Prisoner's Dilemma

Investors' decisions in the MEME token market often mirror the classic "prisoner's dilemma." This game theory concept highlights the tension between individual incentives and collective interests, especially in speculative scenarios. In the context of MEME tokens, investors must decide whether to prioritize short-term profits or contribute to the long-term growth of the token's value. This decision is particularly relevant given the potential for rapid price fluctuations and the impact of community trust on these fluctuations.

Case Study: The Rise and Volatility of DOGE

The price volatility of DOGE is heavily influenced by community trust and celebrity endorsements, such as Elon Musk's tweets about the token. This speculative phenomenon reveals the conflict between short-term and long-term interests in the game. In the early stages of DOGE's price surge, many investors joined the bandwagon, motivated by the prospect of quick profits. However, as the token's value continued to rise, some investors became concerned about the sustainability of the rally and chose to sell their holdings. This decision was driven by the fear of missing out on potential gains if they held onto the token for too long.

2. Coordination Games: The Self-Realization of Value

Successful MEME tokens often depend on the coordinated efforts of the community. This phenomenon aligns with the concept of coordination games, where the value of an action depends on the choices made by others. In the case of MEME tokens, the community's collective belief in the token's potential for growth drives its market value. This shared optimism becomes a self-fulfilling prophecy, leading to the token's appreciation.

For example, the success of the GOAT token is attributed to the community's strong promotion of its narrative and the support of AI tools (like "Truth Terminal") for market dynamics. This collaboration reflects the essence of coordination games: as long as the majority acts together, the growth of the token's value may become a reality.

3. Signaling Games: The Role of Authority Endorsement

When well-known institutions or individuals (such as venture capital firm a16z or its founder Marc Andreessen) support a token, they send a signal to the market. This signaling effect strengthens the market's recognition of the token's value, triggering more investment behavior. In the world of MEME tokens, this phenomenon is particularly pronounced.

Example: PEPE garnered significant attention in its early days through influencer support and cultural symbolism, despite its limited practical use, leading to a price surge.

4. Common Sense and Collective Action

Many MEME tokens rely on a collectively assumed consensus: "This is a meme token." This shared understanding drives market behavior and value inflation. A consensus on price growth is established through viral dissemination, but this growth often detaches from its actual utility. This phenomenon can be attributed to a combination of factors, including the inherent virality of memes, the strong community engagement with these tokens, and the speculative nature of the crypto market. As a result, many investors participate in the MEME token market with a common sense that these tokens are not valued based on fundamentals but rather on collective belief and market sentiment.

AI-Driven MEME Tokens: The Interaction of Technology and Emotion

1. AI and Market Dissemination

AI technology is changing the generation and dissemination patterns of MEME tokens by optimizing meme content and monitoring emotions. In the world of MEME tokens, AI plays a crucial role in generating, disseminating, and amplifying market narratives. This phenomenon is evident in the rise of AI-driven projects, such as Truth Terminal, and their impact on the market dynamics of specific tokens, like $GOAT (Goatseus Maximus).

Truth Terminal is an AI chatbot created by Andy Ayrey, designed to explore AI's performance and impact in social media environments. Initially, this project operated on X, inspired by unsupervised conversations between two Claude AI models, aiming to study how AI generates content without human intervention. Truth Terminal interacts with users through its X account, primarily discussing a fictional religious concept called "Goat Gospel," whose humor and quirky nature attracted significant attention.

In July 2024, venture capitalist Marc Andreessen donated $50,000 in Bitcoin to Truth Terminal, after which the AI showed interest in issuing tokens, leading to the birth of the $GOAT (Goatseus Maximus) token based on the Solana blockchain. Although Truth Terminal did not directly create $GOAT, its promotional activities significantly enhanced the market value of this meme token, sparking widespread discussion, particularly regarding how AI influences market dynamics, social media culture, and cryptocurrency