So much corruption sails through American headlines these days, it’s become hard to pay appropriate attention to any one outrage. And of course that’s the point — shock and awe until it’s completely normalized and we just let it go. So in the spirit of not letting it go, let’s talk about one example that I actually can speak to in some detail: the $TRUMP memecoin.
You’ve probably heard about it in the news. Just before taking office in January, Trump owned and affiliated companies (basically the same folks selling his shoes and bibles and other shlock) launched a crypto “coin” branded $TRUMP and promoted by the jacka** himself. Its value quickly soared before steadily dropping to the $14 or so it is today, still with a market cap in the billions.
So just what is a crypto “memecoin” anyway, and why did he bother? The TLDR is at the end — but hopefully you’ll find the longer story illuminating too. Let’s dig in.
Tokens and “Coins”
Crypto “coins” are just crypto tokens, so we have to start there. If you want to go even deeper, I’ve written about crypto and blockchain stuff more generally; see here, here and here.
It’s useful to start by thinking about tokens like baseball cards. At the beginning of the season, Topps (or Fleer or whoever) prints up a bunch of cards that make up the “supply.” The cards themselves don’t have any intrinsic value, they’re just cardboard. People can buy the cards from Topps, they can trade or sell them to other individuals, and the price goes up or down based on how much people want them. Easy peasy.
In this case it’s better to think about it as if every card in the supply was just Cal Raleigh — so it doesn’t matter which specific physical card you have, they’re all exactly the same. That’s the difference between “fungible” (every instance is the same) and “non-fungible” (every instance is unique) tokens.
Fungible tokens are everything in the world of crypto finance. One of the most popular platforms on which to deploy them these days is Solana, which in all the ways that matter is the same as the OG Ethereum I’ve talked about before. Solana includes a core “program” that makes it super-easy for anyone to define a token and “mint” instances of it, with no need to write their own code.
$TRUMP is one of these. Trump’s merch companies used the Solana Token Program to define a token/coin with one billion instances (the supply). No intrinsic value, just data they made up on the Solana blockchain. Anybody holding $TRUMP tokens can interact with the program to move them into other wallets in return for a small transaction fee that goes to the Solana stakers (not the Trump organizations yet, stay tuned).
The Meme in Memecoin
Tokens are actually a pretty neat little tool. They can help broker access to limited resources, track rights in voting organizations, be used as currency in virtual (or physical worlds), and a ton more. The “memecoin” use case, however — at best it’s a toy, and honestly it’s just a scam.
“Memecoins” don’t have a use, value or other reason to exist beyond amplifying some trend or capturing news cycles. Except they’re really good for stealing money from people, as in the uniquely American coin $HAWK promoted by the “Hawk Tuah” girl. Minters use viral techniques to con people into “pumping up” the value of their memecoin, “dump” their own holdings at a profit, and leave everybody else holding the bag.
What could be a more appropriate vehicle for the President of the United States to score some quick cash? To wit: 58 wallets have made millions from $TRUMP, 764,000 have lost money.
Trading Liquidity and Fees
But the grift goes way deeper than that. Sure, by holding 80% of the coins, even at $14 a pop they’ve “created” staggering wealth on paper. But there’s a great side game here too — liquidity fees.
Remember we said that anybody who holds a token can give it to somebody else by paying a small fee to the Solana stakers (the same fee that any transaction incurs). But that’s not the way markets typically work — I don’t go hunting for somebody holding Microsoft shares and ask to buy from them directly. Instead, “market makers” sit between buyers and sellers and grease the wheels. This basically happens in two ways (simplifying for my own sanity):
Centralized Exchanges (e.g. Coinbase)
Sites like Coinbase are “custodial” exchanges, meaning that they abstract away all of the crypto/blockchain complexity by holding users’ tokens for them in one big centralized pot.
The exchange then keeps a trading “order book” — lists of users that want to buy or sell tokens. The book matches up these users to fulfill orders automatically, floating the price up or down as demand indicates. No tokens actually move on the blockchain as part of these trades; it all stays in the Coinbase pot and they just remember who owns what.
Of course this relies on trust in the exchange, which isn’t always well-founded. Still, as crypto becomes ever more mainstream (for better or worse), exchanges are incented to behave conservatively.
Exchanges only do this for tokens with significant demand — most memecoins don’t make the cut. $TRUMP is an exception because of its “unique” brand advantage.
Decentralized Liquidity Pools (e.g., Raydium)
Here’s where things get more interesting. Centralized Exchanges are increasingly regulated and require users to prove their identity, report to the IRS, and so on. This is fine for most people most of the time, but can be unattractive to folks that want to trade anonymously (or more generously, without placing trust in a custodial exchange).
These users can instead trade via a “Decentralized Exchange” (DEX) like Raydium that uses “liquidity pools” and its own order book to facilitate exchange.
Any user can create a liquidity pool on Raydium by registering equivalent dollar values of two tokens into an account there. For example, I might create a pool that has $1,000 each of $TRUMP and USDT. Right now that’d be about 71 $TRUMP ($1,000 / $14) and 1,000 USDT tokens.
My pool is now available to the Raydium order book to fulfill orders. This gets a bit complicated, but bear with me. If somebody wants to buy 10 $TRUMP tokens from my pool, the system computes a price that will keep the product of the token count (71,000) constant:
- Initial pool: 71 * 1000 = 71,000
- Extracting 10 $TRUMP: (71 – 10) * (1000 + y) = 71,000
- y in this case equals about 164 USDT, or $16.40 / $TRUMP
The platform adds a fee of around 0.3% to that $164, makes the trade on the blockchain, and shares a portion of the fee back to the owner of the liquidity pool (me). In short, I’m using my personal holdings to create market liquidity, and I get paid for it. Cool!
A side note: while Raydium isn’t a custodian of tokens in the same sense as Coinbase, in any real sense they are acting as one. When you commit your tokens to a liquidity pool, Raydium’s smart contract can move them at will. So there’s still trust involved — just a different kind.
Now remember that the Trump companies still hold about 80% of all $TRUMP tokens. They’ve used 10% of their holdings to create liquidity pools largely on the Meteora platform (equivalent to Raydium). And since they are such a disproportionate holder, their pools are party to many, many DEX transactions. Again, to wit: Trump’s meme coin business racks up fees as buyers jump at the chance for access to the president. Crypto data company Chainalysis estimates $320 million. Yikes.
“Buy my coin, meet me for dinner!”
OK, so we’ve established that the President is using the power of the United States to shake down naïve users for millions. But of course there’s no bottom for these people, so they’ve upped the ante even more.
A couple of weeks ago, the Trump companies announced that the top 220 holders of $TRUMP would be invited to a private dinner with the president at his club in DC. The top 25 will have a private reception with the jacka**. And of course, since that announcement the price of the coin has gone up significantly as people vie for access.
Now of course politicians sell access for funds all the time — hey, just last Monday Trump pulled in $1.5M a plate despite the fact that he can’t even run again. That’s its own huge problem of course, but at least there are some rules around disclosure and how the funds are supposed to be used.
Not so for the $TRUMP contest. The increased value and transaction fees that result from people vying for access here go directly to Trump’s companies and to Trump personally. It is the most obvious, blatant, unbelievable act of corruption one could imagine.
And remember how DEX-based transactions are completely anonymous? I wonder who is currently pumping up the value of $TRUMP so they can show up to dinner? Shockingly: Top $TRUMP buyers vying for dinner seats are likely foreign.
“Corruption Three Ways”
The mechanics are fascinating; unwinding it all is a game I typically enjoy. But the actuality of what is happening is just so craven, it ruins the fun:
- Trump is using his office to inflate the value of a meaningless asset for his own benefit.
- Trump is also profiting from fees incurred on almost every trade of the asset.
- Trump is openly advertising untraceable access in return for dollars.
We are so screwed.
