The Emergence of PolicyFi: A New Era in Civic Engagement

Are we on the cusp of a PolicyFi era? In a previous article, I discussed how memecoins are transforming civic engagement by creating speculative markets tied to government policies. This allows citizens to trade coins that signal support for specific policies, providing lawmakers with valuable insights when crafting public policy. I termed this phenomenon PolicyFi, highlighting its potential as a constructive use of memecoins. With the rise of the Trump administration and the launch of memecoins by the President-Elect and First Lady, it's an opportune time to reassess the emergence of PolicyFi and its implications for policy-making. I firmly believe that we are entering the PolicyFi era, and it's a development that should be welcomed. The convergence of a meme-savvy administration, a meme-aware citizenry, and meme-driven advocacy has created a fertile ground for PolicyFi to flourish, potentially leading to better policy decisions. PolicyFi requires the presence of meme-sensitive government actors, or a 'meme admin.' The incoming administration, with its understanding and respect for the power of memes, fits this bill. The President-Elect's issuance of his own Solana memecoin, followed by his wife's, marked a significant milestone in the history of memecoins. The Trump memecoins not only soared in value but also drew liquidity from various crypto ecosystems, almost overwhelming the Solana blockchain. This event was a watershed moment for the crypto industry, demonstrating the potential of memecoins to engage the masses. The Trump coins also contributed to the large-scale onboarding of citizens to memecoins, particularly those with a political focus. The statistics surrounding these coins are impressive, with many holders being new retail buyers who had never previously purchased a Solana altcoin. A substantial proportion of buyers created their wallets on the same day they bought the tokens, and most holders have less than $1,000 worth of assets on Solana, indicating a strong retail presence. Alongside the meme admin and meme citizenry, there has been a proliferation of innovative, policy-focused memecoins. Tokens like D.O.G.E. and SBR attracted significant trading volume as investors speculated on the new administration's initial policy steps. However, these policy tokens are still relatively primitive, as they focus more on attention flows or prediction rather than engagement with government actors. The MILK token, which aims to change U.S. food policy to allow the sale of unpasteurized milk, is a better example of PolicyFi in action. The MILK community advances its policy position through token holdings, market cap, and the production of memes on social media. In the PolicyFi era, we can expect to see a surge in tokens like MILK. The expression of political will through meme policy markets is essential but not sufficient for PolicyFi. Governments must also engage with these markets when crafting policy. There are early indicators of this happening, with President Trump monitoring the price of bitcoin and his own memecoin. Other politicians, such as Elon Musk and Senator Cynthia Lummis, have also engaged with memes related to government policy. Assuming we are moving towards PolicyFi, is this a positive development for governance? There are several reasons to believe it is. Firstly, introducing speculative markets into government decision-making improves the quality of information, as these markets can process a large volume of information and crystallize it into consensus prices. Secondly, PolicyFi creates positive externalities, such as civic engagement and education, driven by self-interest. Anyone hoping to profit from PolicyFi must become an expert on government workings, policy-making, and emerging policies. This is a strong incentive for ordinary citizens to engage constructively with politics. Thirdly, PolicyFi is engaging a growing class of internet-native citizens who express themselves through speculative markets. This was evident in the GameStop frenzy, which was about income inequality and challenging traditional finance. PolicyFi is also driving the price of memecoins like SPX and Fartcoin, which satirize traditional finance. A common concern about PolicyFi markets is their susceptibility to manipulation by hostile actors. However, this concern may be overstated. The permissionless prediction market Polymarket, which consistently favored a decisive Trump win in the election, was not manipulated by foreign interference and instead proved to be a reliable barometer of voting sentiment. My goal is not to advocate for PolicyFi or apologize for memecoins but to recognize their potential as a powerful viral capital formation technology that will impact various domains, including politics. I will be closely watching the development of PolicyFi, and so should you.