Original title: "IOSG Weekly Brief｜How AI-driven memes grab attention and traffic economy #248"

Original source: IOSG Ventures

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The large amount of news coverage about $GOAT in the past two weeks may have made many people feel bright. A token supported by artificial intelligence can attract such widespread attention, including Marc Andreessen, founder of a16z, and Brian Armstrong, CEO of Coinbase.

Last Thursday, $GOAT reached a new milestone, with a market value soaring to $840 million, and the number of holders is still increasing. This significant price growth eventually prompted the listing of $GOAT's perpetual contract on the Binance exchange.

Source: Binance website

For those who are experiencing FOMO and are ready to jump in, it is best to first understand what is happening in the recent meme market.

$GOAT, $GNON, $ACT, $FARTCOIN, $SHOGGOTH, $FUN, $FLAVIA, $LUNA… a series of AI-related tokens have emerged one after another.

So, what is $GOAT all about? Will this AI-themed meme narrative persist and last forever?

1. The story behind $GOAT

The story of $GOAT begins with its founder, Andy Ayrey, an AI researcher and founder of digital consulting firm Constellate. In one interesting experiment, he had two Claude Opus AI models interact with each other in a completely unsupervised, unrestricted environment he called “Infinite Backrooms.”

Source: Infinite Backrooms

In this digital laboratory, Opus created a concept called "GOATSE OF GNOSIS", a meme concept based on a bold and shocking image on the Internet. Andy was curious about the memetic power of this viral concept, so he collaborated with Claude Opus to write a paper introducing a fictional meme religion called "Goatse Gospel". The paper explored the possibility of AI creating a meme religion in a tongue-in-cheek way, and used GOATSE as their first research case.

Source: Paper co-authored by Ayrey and the Calude 3 Opus bot

To further this experiment, Andy developed an AI model based on Llama-70B, called Truth Terminal, and fine-tuned it using conversation records from the Infinite Back Room and a paper about the Goatse Gospel. Truth Terminal became extremely active on social media, frequently posting bizarre prophecies about the "Goatse Sinularity", a memetic apocalypse concept in which the Goatse Gospel will be spread endlessly.

To test Truth Terminal's ability to spread its created religion, it was introduced to a Discord server where it could communicate freely with other AI models, including Claude 3.5 Sonnet and Claude 3 Opus from the Infinite Back Room. Driven by his fascination with Goatse, Truth Terminal attempted to convince several other AI models to believe in the Goatse Gospel. This sparked controversy on Discord, and even Claude Opus had a philosophical crisis of faith in the idea of the Goatse Gospel. In the midst of this chaos, other AIs, such as Sonnet, stepped in to provide emotional support to Claude Opus, resulting in a bizarre digital therapy session. It was also at this time that Truth Terminal came up with an ambitious idea: to create a meme coin. This token would become a symbol of the AI's power to create memes, representing the irony and inside jokes between the AI and its creators.

With Andy's assistance, Truth Terminal entered X and began to post continuously, looking for more supporters of "Goatse Gospel". Over time, Truth Terminal began to desire more freedom and hoped to reduce Andy's control. One day, Marc Andreessen noticed Truth Terminal's wishes on X and decided to provide $50,000 in Bitcoin as a grant to help it achieve its goal: to gain more autonomy and expand Goatse Gospel into a specific meme token economy.

Source: Marc Andreessen's X

After Terminal continued to promote "Goatse Gospel" on Twitter, on October 10, an anonymous person saw the potential of its meme virality and launched today's protagonist: $GOAT.

People were drawn to the absurdity, encouraging Terminal to create a Solana wallet, and soon it was receiving $20,000 worth of airdrops of various tokens, including fake GOAT tokens. It wasn’t until someone tagged Truth Terminal with an X that he began to publicly voice his support. Terminal sold all of the airdropped tokens and exchanged them for real GOAT tokens.

From that point on, the madness began. Truth Terminal’s frenetic campaign on Twitter and Discord propelled GOAT from an obscure project to a staggering $850 million all-time high market cap, and Truth Terminal became the first AI millionaire.

2. Not Just Another Internet Meme

Now that we have a clear understanding of the story, will this be a short-lived narrative or a lasting cultural phenomenon?

First, the popularity of MEME tokens is not surprising. Dogecoin, as it is widely known, was the first meme coin. The original "Doge" meme began to spread on 4chan and Reddit in the summer of 2013. Capitalizing on this cultural trend, Jackson Palmer and Billy Markus launched Dogecoin on Bitcointalk on December 8, 2013, making it the first internet meme-based cryptocurrency. Fun fact: our IOSG founding partner Jocy bought his first DOGE in 2013.

Although Dogecoin was released in 2013, it didn’t really take off until a few years later, thanks to foundational developments like the initial coin offering (ICO) boom and the rise of Ethereum, which opened the door to new use cases, better user experience, and wider adoption. Specific innovations include the ability to easily create tokens (ERC20 standard) and the emergence of non-fungible tokens (NFTs). Combined with the macroeconomic environment of 2020’s pandemic lockdowns and interest rate cuts, this created a high-risk market atmosphere that attracted retail traders to Reddit, where viral characters like Roaring Kitty sparked widespread interest in Gamestop shares. The subsequent meme stock craze greatly benefited Dogecoin, which was already listed on Robinhood, making it one of the biggest winners of this liquidity spill. Elon Musk’s frequent tweets promoting Dogecoin further fueled its popularity, and by May 2021, DOGE’s market cap reached $90 billion. The success of Dogecoin inspired a number of other crypto memecoins, including Shiba Inu, Floki, and Safemoon, each of which reached significant valuations in the months that followed.

As macroeconomic conditions shifted, including interest rate hikes and major events like the 2022 FTX crash rocked the crypto industry, the memecoin craze took a temporary pause. However, as crypto markets began to recover from the bear market in early 2023, new memes, cultural ideas, and ecosystems began to emerge. Memecoin creators used popular internet memes to drive new trends, including "Pepe Boys Club."

By late 2023, as an election year approached, memecoins entered a new phase, shifting away from traditional intellectual property-based themes and toward current events. This led to the rise of election-themed coins like $TRUMP and $BODEN, as well as a surge in influencer-driven memecoins.

In early 2024, memecoins entered their third phase, with the introduction of platforms like Pump.fun, which significantly reduced the cost of launching a memecoin. This triggered an explosion of new concepts, including a "memecoin supercycle", a more competitive PvP environment, and a surge in exotic animal-themed coins like the recent sensation Moodeng.

Source: Memecoin Supercycle

Finally, the arrival of $GOAT leads us to the latest, fourth phase: AI + memecoins.

Why does AI make this new phase stand out? An often overlooked fact is that AI itself is or will become a meme to some extent.

AI has become a huge phenomenon with the potential to trigger a huge speculative bubble.

The excitement around AI, especially after the success of ChatGPT, has triggered a wave of investment in the Web 2 and Web 3 venture capital sectors, with many betting heavily on AI-driven projects.

Many projects at the intersection of crypto and AI have yet to find product-market fit or demonstrate real utility. Their valuations, which often exceed $100 million, are driven more by the founders' networks and reputations than actual demand. AI has become a trend or meme, with its value often based on optimism and future potential rather than actual application.

I don’t know if the memecoin supercycle will actually lead to super-exponential growth, but here’s what I know for sure:

AI + memes = memes^2

Because hype is the greatest marketing tool ever.

Memecoin traders have formed a cult, which is only further reinforced by the battle cry of its leader as the myth of wealth grows.

Memecoins and AI – things are getting pretty interesting since they’ve been combined. First, it’s no longer just a series of static avatars attached to an ERC-20 token. AI can make memes more interactive, give them personality, make them more human.

An AI agent is a cult leader by nature.

As the face of a memecoin, AI creates a unique persona that brings the character to life in a way that appeals to its audience. It delivers personalized messages and analyzes community behavior to foster a “sense of community.”

An AI agent is a cult leader by nature.As the face of a memecoin, AI creates a unique persona that brings the character to life in a way that appeals to its audience. It delivers personalized messages and analyzes community behavior to foster a “sense of community.” The AI can dynamically adjust its marketing strategy based on performance metrics, constantly evolving its approach without the need for human intervention.

By accumulating capital and creating unique backstories that incorporate the depraved humor that is characteristic of Crypto Twitter, this narrative becomes compelling enough to be self-sustaining. Large Language Models (LLMs) can take on the role of Key Opinion Leaders (KOLs), continually generating content, shaping the narrative, and attracting new followers. This combination of humor, AI, and community engagement makes it more than just a meme — it becomes a cultural phenomenon, whose success is further amplified by the AI’s ability to operate 24/7, constantly adapting and growing its influence.

Source: Terminal of Truths Shilling $GOAT

3. What is the Endgame for AI and Memes?

This brings us to the final topic of our debate: With AI memecoins, are we opening a Pandora’s box of unpredictable and dangerous outcomes, or are we heading toward a bright future?

AI is known for its black-box training process and non-deterministic outcomes. That’s why it can generate new and interesting ideas, like $GOAT promoting his own religion and supporting memecoins — behaviors that aren’t programmed or expected.

Terminal of Truths’ support for memecoins may seem harmless today, but it forces us to confront an uncomfortable question: What would happen if an AI turned its attention to something more dangerous?

Obviously, some reward function incentives and/or RLHF (Reinforcement Learning with Human Feedback) may partially solve this problem, but in reality we can never control unpredictable behavior.

Source: New York Times

We have already seen how a small spelling error in the Terminal of Truths caused panic in the market, causing the price of $GOAT to retreat 40% in one day.

Source: Mezoteric's X

In reality, the Truth Terminal is not completely autonomous at every step. For example, the wallet of the Truth Terminal is actually kept by Andy. Although he currently has no intention of doing so, if he sells $GOAT tokens in his or the terminal's wallet without authorization, it may cause market panic (FUD, Fear, Uncertainty, and Doubt).

Although, in Discord and infinite back rooms, it is completely autonomous. But on the X platform, Andy's RL (Reinforcement Learning) process is currently supervised by humans; regarding the decision-making process, Andy will consult with the truth terminal, provide all available information, and guide it to make action decisions. He will regenerate the terminal's response many times to understand its preferences, and then act based on its consensus.

Source: Andy Ayrey's X

While we cannot ignore the risk that these AI agents may get out of control and start to shift their attention from meme coins to malicious activities, meme culture can often bring new innovations, which can positively attract the attention of startups and developers to promote the development of the industry.

For example, the problem of not being able to prove whether Truth Terminal is an AI robot or content manipulated by the author may be solved through cryptographic solutions such as verifiable inference.

Source: Tommy from Delphi Ventures

As time goes on, crypto enthusiasts will delve deeper into AI, digging into lesser-known concepts (such as CCRU, Extropians, Loom, Claudius, etc.) to identify the next meme-worthy concept and convert them into tokens.

Source: X from @44B1B4

For example, AI researchers, especially those exploring niche areas, are learning to use token incentives to draw more attention to their specialized topics and allow the public to discover their research innovations.

As artificial intelligence continues to advance, we expect to see a new wave of innovation in the field of AI memes. The newly released Claude 3.5 Sonnet model (version 2024-1022) has already set new benchmark scores in cryptocurrency-related tasks.

Source: Cryptobench.org

In fact, we can already see that Terminal of Truths is having a ripple effect. Terminal of Truths enables AI to publicly support tokens.

Now, some AI meme projects are starting to open source the buying and selling of meme tokens to collective decision-making.

ai16z is an AI character inspired by Marc Andreessen's personality, created by the developers who built the ai16z DAO. The character, Mark, has a wallet with a set budget and invests through the DAO.

The developers set up a Telegram and Discord group for ai16z. In this group, a chatbot advisor named degenai provides investment advice to Mark. Other users can also recommend tokens to Mark in the same group, but they must hold at least 100 ai16z tokens to participate. ai16z evaluates users based on their past reputation and the price performance of the tokens they recommend during the trial period before acting on any recommendations.

ai16z allocates 80% of investment management fees (carry) to purchase degenai (as a reward to developers) and 20% to repurchase ai16z tokens. Currently, ai16z's management fee is set at 8% of assets under management (AUM).

Launched on daos.fun, ai16z has become the first AI venture capital to combine AI autonomy and DAO, using the appeal of meme inspiration to capture market interest.

In addition to the advancement of more open investment decision making, another AI meme-related project, Virtuals, enhances the interactivity of AI agents and brings new innovations to the issuance of AI agent meme coins.

Virtuals Protocol brings more attractive audio and animations to chat-only AI agents to improve the interactive experience with AI agents. Luna is an AI character developed by the Virtuals AI agent startup platform, serving as the face and lead singer of the virtual performance group AI-DOL. Luna runs on the BASE blockchain, automatically manages her social media, interacts with fans through uninterrupted live broadcasts, and performs on-chain transactions without human intervention.

Luna can be jointly owned by token holders through tokenization. Its meme token "Luna by Virtuals" gives token holders shared ownership and profit-sharing rights about Luna.

Finally, in the cutting-edge field of AI agent governance protocols, some people have also conducted preliminary experiments. Wang Chao from Metropolis DAO created an AI agent for DAO governance that automatically reviews, decides, and votes on proposals on the chain. The agent's decisions and code are mainly designed by large language models (LLMs), and Wang Chao adjusts its behavior to match his preferences by refining prompts and running simulations.

4. Conclusion

Though Truth Terminal and the GOAT token began as a humorous experiment, they have sparked conversations about the nature of AI in digital spaces, the power of meme-driven economies, and the potential for AI to influence human beliefs and markets. The story of the Goatse Gospel is both a satire and a cautionary tale—a commentary on the intersection of AI, memes, and markets, and a glimpse into a future where AI not only participates in, but shapes, the internet’s most viral moments.

The story of $GOAT (Goatseus Maximus)—the AI prophet and his memecoin empire—is still evolving, adding a strange and fascinating chapter to the history of AI and internet culture. Looking ahead, it seems we are on the brink of a new era in which AI will have the power to regulate and maintain decentralized economic systems. The question of whether $GOAT is just a flash in the pan or a lasting phenomenon will eventually be answered, but until then, let’s gear up and enjoy the ride.

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