In today's internet age, fame can come out of nowhere and in the blink of an eye.

Over summer, 26-year-old partygoer Jack Kay found himself at the centre of the latest internet meme as a video of him dancing in an Ibiza club, complete with a bowl-cut, black vest and a gold chain, became viral overnight as the 'Ibiza final boss'.

As now happens to so many of these memes, it quickly gave rise to all manner of spin-offs, including a mural in Nottingham and more recently his own vodka brand.

It also prompted the creation of a 'meme coin' - a type of cryptocurrency named after an internet fad. 

The token, called Boss coin, surged in value at first. But in a matter of days it met the same fate as many meme coins before it. Large holders sold their tokens and crashed its value by 84 per cent in minutes.

There is no suggestion that Kay did anything wrong, instead his coin fell victim to traders pumping up its value and then rushing for the exit to make a quick profit. 

Crypto website Coin Central has reported that Kay made $100,000 from the crypto token. However, according to Blockchain analysis firm Chainalysis, this profit was likely as a result of trading fees.

The internet has moved on, and before long social media users will fixate on a new viral post and another crypto token will be born.

This is hardly the first meme coin to crash and burn, and it won't be the last.

Late last year, Hailey Welch, the star of the 'hawk tuah' meme, saw her own meme coin, Hawk, crash 90 per cent.

Welch was investigated by the FBI and the US Securities and Exchange Commission, which eventually closed the investigation into Welch.

She later said: 'I led them to something that I did not have enough knowledge about. I did not have enough knowledge about crypto to be getting involved with it. And I knew that, but I got talked into it, and I trusted the wrong people.'

Who is making money from meme coins?

Meme coins, as the name suggests, originate from the hype surrounding an internet meme - essentially a viral online joke.

Ari Redbord, global head of policy at crypto fraud prevention firm TRM labs, says:  'Meme coins sit at the intersection of finance and internet culture, where value often comes from the connection to a creator or community rather than underlying technology. 

'They are the mash-up of markets and influencer culture, and that makes them fascinating but also risky.'

Some of them have grown to be significantly followed crypto tokens, though they are the minority. 

So where do these meme coins come from, and how many of them are so-called 'rug pull' scams, where big investors pump up the price then rush for the exit? 

The first meme coin, Dogecoin, has a market cap of $36billion. It dates from 2013 and takes its name from a Shiba Inu dog. Originally, started as a joke, it then drew the attention of Tesla boss Elon Musk, who's social media posts sent the price rocketing.

Dogecoin, along with a number of other meme coin tokens, have been around for years and are unlikely to go anywhere - although they still may face significant price volatility.

Carter Feldman, chief executive of blockchain firm Psy Protocol, says there is no one large holder of doge that can pull the rug, with its longevity lending itself to a significant community of holders.

'That real, verifiable community traction is always helpful,' he said.

'There's a huge industry around it. Hundreds of millions, if not billions, of dollars are spend on electricity every year mining Dogecoin.'

On the other end of the meme coin spectrum, are the coins that spring up, surge and crash in the space of days or weeks.

Feldman added: 'There's one group which are doing it for the fun of it, or as a joke, which is sort of how Dogecoin started… then there's other ones that are trying to impersonate those projects and are trying to cynically prey on the community's goodwill towards memes and profit from it.

'So there's the good guys and the bad guys, as with everything.'

What this means, according to Feldman, is that the more prominent and popular meme coins - and those that tend to last - are those created for the 'meme', rather than for the profit.

How many meme coins are scams? 

Eric Jardine, cybercrime research manager at blockchain data firm Chainalysis, told This is Money: 'Meme coins are being created by a wide range of actors, from hobbyist developers who enjoy internet culture, to influencers and small teams who see an opportunity to turn viral attention into quick gains.'

This doesn't mean all meme coins are scams, but many are motivated purely for the creators to make money.

'For some creators, this is about building a community or brand, but for many, the main incentive is financial: the ability to profit through token sales, trading fees built into the smart contract, or liquidity management strategies,' Jardin added.

'They're attractive because they're cheap and fast to launch, and if they catch momentum on social media they can bring in large volumes of trading activity in a short time.'

Many tokens, Jardine says, have transfer fees which mean that a small cut of every buy or sell trade is routed to a wallet controlled by the token's creators.

This means that even when tokens are sold during a price crash, the creators still make money.

A large number of the thousands of meme coins out there are, of course, created as scams. 

While it's hard to work out what proportion are linked to scammers, Chainalysis says, the figure touted is often more than 90 per cent.

Feldman, however, says meme coins should be considered more akin to start-ups. He said: 'Maybe ten per cent of them are purely cynical, and then there's probably 80 per cent that are just stupid jokes that aren't going to catch on.'

Of those that are linked to these 'pump and dump' type scams, however, Chainalysis says some 94 per cent are deliberately crashed by the address that created the liquidity pool of tokens used for the coin - known as a DEX pool.

It says the remaining six per cent of rug pulls were conducted by addresses that were funded by the pool or token deployer, meaning that they were given or allocated tokens by the creator.

Jardine said: 'In some cases, the pool deployer address and the address that rugged the pool were funded by the same address source, suggesting there may have been a co-ordinated effort to exploit users.'

Concerningly, Jardine says just 1.7 per cent of the meme coins launched in 2024 have been traded in the last 30 days, indicating that a large number could have been involved in rug pull scams.

Can you invest in a meme coin and avoid scams?

Meme coins by their very nature are an incredibly volatile asset, and one that should be treated by investors with great caution. However, there will still be those who want to buy these tokens.

With so many potential scams out there, is there any way that investors can be sure they aren't about to fall victim?

Jardine says: 'There's no guaranteed way to avoid scams in the meme coin market, but on-chain checks can reduce risk.

'Buyers should confirm that the token's smart contract is verified and open-source, check if ownership has been renounced to prevent code changes, and look at token distribution to see if a handful of wallets hold most of the supply.'

'Liquidity should be locked for a set period, and test trades should confirm that tokens can actually be sold. For instance, most honeypots often block sales entirely.'

While he adds that investors should only risk what they can afford to lose, Jardine says that reputable audits, transparent teams and organic trading activity are signs that a meme coin isn't on that is purely driven by hype.

Feldman, who favours Dogecoin, adds that with specialist mining machines and its own blockchain, 'There are billions of dollars of capital that are rallying around Dogecoin that are highly incentivized to ensure that Dogecoin does not go to zero.'