Cryptocurrency-meme was on everyone’s lips due to the unprecedented growth of quotations and the endless stream of tweets by Elon Musk.
In late 2013, two developers from IBM and Adobe – Billy Markus and Jackson Palmer – launched an open source peer-to-peer cryptocurrency based on LuckyCoin. Dogecoin, fork of Litecoin, was based on a popular Internet meme depicting a Japanese dog, Shiba Inu. So the status of a “HYIP” token was fixed for DOGE.
The founders created a simple and cheap decentralized payment tool for mining that would attract a wide audience, including those who wanted, but did not dare to trade Bitcoin. In a sense, Dogecoin was conceived as a “cognitive” tool exclusively for the online economy. The owner community shouldn’t have taken investing too seriously and strive to lock in fiat currencies.
The meme cryptocurrency was originally used as donations on social networks Reddit and Twitter. Soon after the launch, the network was attacked. As a result millions of tokens worth just over $ 12 thousand were stolen. Then the community united and replenished the SaveDogmas wallet created for donations with 15 million DOGE. Since then, Dogecoin fans have conducted several crowdfunding campaigns: collecting donations for the Jamaican bobsled team and a racer who participated in the Nascar championship, as well as for the construction of a water treatment plant in Kenya.
A few years later, Dogecoin received support from Tesla and SpaceX founder Elon Musk. In 2019, he tweeted that the token could become his favorite cryptocurrency. After that, the frequency of mentions in the entrepreneur’s account increased dramatically. He began calling himself “The Dogefather”. Among the latest ideas from probably the main member of the community is to accept DOGE as payment for electric cars and send the Doge-1 satellite to the moon next year.
Do you want Tesla to accept Doge?
— Elon Musk (@elonmusk) May 11, 2021
In addition, the billionaire focuses on another quality of meme cryptocurrency. Like the Litecoin network, it uses the Scrypt hash algorithm. Thanks to this, DOGE is also gaining fame as a “green cryptocurrency”, which potentially increases the number of new followers. At the moment, there are several million supporters in the world.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
As a result, despite the initial motivation of the founders, Dogecoin has become a speculative investment vehicle. Against the backdrop of yet another crypto rally and active publicity from the community, from January to early May 2021, the value of DOGE soared 140 times at once, and reached its maximum of $ 0.7 per unit, followed by a two-fold correction.
Infrastructure companies are ready for the surge in demand for the meme cryptocurrency. Most of the major exchanges have already listed Dogecoin, among them: Binance, Huobi, Kraken, Gemini, Bitfinex, Bithumb, Bittrex and others. Coinbase plans to add the token to its platform. Some of the platforms offer buy and sell for fiat – two dozen exchanges quote DOGE / USD, according to CoinMarketCap. DOGE’s total daily trading volume reached nearly $ 10 billion by early June. This is three times less than bitcoin, however, many times more than indicators, for example, Binance Coin, Cardano and XRP. The increase in liquidity and value leads to increased interest from other institutional players. In particular, the public company Hello Pal has thought about providing convenient access to DOGE mining. Its main product is a networking platform for overcoming language barriers and travel, including through streaming.
However, not everyone shares the enthusiasm for the meme token. In a May report by Goldman Sachs, trader Michael Novogratz said that Dogecoin “has no long-term outlook as no institution is buying it and eventually retail investors will lose interest as well. This joke token has grown for two reasons. First, because of the tendency to unite in separate groups with similar views (tribalism). We saw something similar in the history of GameStop promotions. The surge in quotes then occurred precisely due to the actions of clients of financial applications and users of social networks. The second reason is the surplus of liquidity in the American market. The surplus affects the short-term growth in the attractiveness of individual assets, including cryptocurrencies. However, it does not form the basis for a long-term value increase.”
In addition to doubts about Dogecoin’s long-term prospects, opponents of the meme cryptocurrency point to several basic problems: high volatility and concentration, unlimited emission, and a long lack of updates.
Rising volatility remains a significant factor in the valuation of cryptocurrency as an investment asset. As of the end of May, bitcoin was “inferior” to the speculative Dogecoin by four times in this indicator.
The previous peak of the meme token’s volatility occurred during the 2017-2018 crypto rally. During such periods, as a rule, altcoins are bought more actively than benchmarks, hoping to “beat” the latter. As a result, the chance to make money easily pushed traders to increase their DOGE volumes, ignoring the fundamental indicators of the asset and limiting themselves to a short-term planning horizon.
The current 2020/2021 season has been successful for Dodge holders. During the year, the return on investment exceeded 13,000% (133x), despite the fact that the functionality of Dogecoin and its implementation in the institutional environment is still in question.
An associated risk for Dogecoin holders is the high concentration of tokens. According to Bitinfochart, about a third of the cryptocurrency emission lies on one wallet; about half – at eleven addresses. According to this criterion, the meme token bypasses bitcoin, although the difference is small: 94% of DOGE are concentrated on 1% of wallets. The main cryptocurrency has a figure of 92%.
In addition, the high probability of quickly losing the invested funds lies in the flaws in the token architecture. Dogecoin’s offer was originally limited to one hundred billion tokens. However, the developers soon dropped the limit. Now, an increase in the volume of currency in circulation can provoke a serious decline in the price. To avoid such a scenario, the token must constantly increase the number of loyal investors.
However, as practice shows, the presence of a large community of DOGE fans does not guarantee a timely network update. For example, over the past year, not a single release about the changes has been published. Now the developers have big plans. One of them, Ross Nicholl, told Decrypt. It turned out that the team is preparing an upgrade and is based on Bitcoin Core 0.21.
First, the team wants to increase the sync speed of the network. This is evidenced by the first and so far only release for 2021. Secondly, a reduction in the size of the transaction fee is on the agenda. On average, it is about $ 0.4, which is already 42 times lower than, for example, bitcoin in the last five months. The nearest target of the developers of the meme “Dodge” is $ 0.01 or 40 times less than the current level.
But the ambitious “The Dogefather” believes that the commission on the network should be reduced by 100 times. In addition, the network bandwidth should be increased. The speed of searching for a block and its size, according to the entrepreneur, should be increased 10 times.
In response, Vitalik Buterin criticized the proposed scale for increasing Dogecoin network bandwidth. The founder of Ethereum argues that such changes will be difficult to combine with maintaining the decentralization of the network – one of the fundamental characteristics of the project.
Despite serious problems and imperfections, in theory, the token has a chance to turn into a niche means of payment within the framework of the new digital economy. In particular, this is facilitated by the development of the global donation market. Voluntary incentives for producers of content, software and other services quickly become a habit and provide an opportunity to approach the formation of the fair value of a manufactured product differently. In the United States alone, crowdfunding helps raise several hundred billion dollars annually.
In addition, if the enthusiasm of Elon Musk and fans coincides with the capabilities of the development team, Dogecoin, in addition to the hype, will acquire intrinsic value. It will become a less risky investment asset, albeit still outside the deterministic legal status.
China Doesn’t Intend To Ease Pressure On Crypto Community
“Stabledollar”: What USA Offers As An Alternative To CBDC
Will Binance Scam? Regulators Pressure And Future Of Cryptoexchange
Research: 40% Of Countries Are Into Studying The Prospects For Digital National Currency Issuing