Dubai: Dogecoin’s evolution baffled the world. It originated as a funny tweet and turned into a digital currency. It gained ground because it was a meme and its price touched a peak of $90 billion. The biggest question remains, how did the joke end up funding a satellite to the moon?
A few years after Bitcoin’s inception in 2009, cryptocurrencies bagged the spotlight. Several new currencies popped up hoping to achieve bitcoin’s hefty marketshare and people craving to become a part of the new technology considered the “next internet” were buying digital currencies in a frenzy.
Jackson Palmer, a marketer at Adobe, sarcastically tweeted “investing in the dogecoin, pretty sure it is the next big thing” with a picture of Shiba Inu, a fluffy Japanese dog on a coin. The picture of Shiba Inu striking a pose with random words like “wow” and “so scare” is a famous meme. Doge comes from a meme on a misspelling of dog. Prompted by his amused followers to make his tweet a reality, Palmer created a website for it. Billy Markus, a software engineer, stumbled on it after his own failed attempts at creating a coin and developed it into a virtual coin.
Easy to generate, cheap digital coin
Palmer and Markus launched Dogecoin in 2013 as an easy to generate, cheap digital coin because after all, it was just a joke. People who shunned bitcoin due to its connections to crime welcomed this new coin with an adorable dog on its logo. As it’s a meme that actually became a currency, Dogecoin acquired the name ‘meme coin’ and started a whole new category of cryptocurrencies under the title.
The fun currency developed a tight knit community of doge enthusiasts who used it to tip each other for good jokes on the social interaction platform Reditt. The currency stayed afloat among the swarm of over 3000 cryptocurrencies in existence due to the community and other miners - people who solve mathematical equations to generate cryptocurrencies.
Dogecoin attracted miners at large because it takes less than a minute to generate and each mine reaps a reward of 10,000 Dogecoins. In comparison, Bitcoin takes 10 minutes to mine and rewards the miners with 6.25 Bitcoins. The time it takes reflects the computing power it drains, making Dogecoins far more environment friendly than bitcoin and many others.
Low energy consumption and cost
Dogecoin’s low energy consumption and cost encouraged celebrity endorsement, as Tesla’s founder Elon Musk called it people’s crypto. The tech giant’s tweets got dogecoin trending on Twitter and eventually lead to massive price hikes. The currency’s features merit the reputation to a large extent.
Dogecoin is one of the easiest cryptocurrencies to mine and with 10,000 coins released every minute, 14.4 million dogecoins are created on average everyday. The constant supply protects the digital coin from steep changes in price. There is no limit on the number of dogecoins that can be mined, ensuring its price will always come back to a low average.
The unlimited supply makes it an inflationary coin. In comparison, Bitcoin is a deflationary coin as its production is capped to 21 million. People tend to hold on to deflationary coins expecting a price hike as the limit creates a perception that it is more valuable than it actually is.
Can Dogecoin become a currency?
Bitcoin currently has a $37,300 (Dh137,001) price tag but a cryptocurrency’s value is literally the profit made from the price it sells for from the point of purchase as they don’t hold intrinsic value that tangible commodities such as gold possesses. Dogecoin’s deflationary capacity makes it a good candidate for turning into a transactional currency.
Dogecoin is founded on an open source platform, a software development practise that allows contributors to volunteer their services for enhancing a product. This eliminates arbitrary control and makes development easier as it has to be vouched only by the top developers. Elon Musk recently announced that he is working with the Dogecoin developers.
The tech genius who anointed himself as the Dogefather announced in May 2021 that Space-X’s was sending a new satellite called Doge-1 to the moon funded entirely by Dogecoins. The digital currency that was worth less than half a US cent (0.8 dirham) until the end of 2020 traded at 68 US cents (Dh2.5) in May.
Prices are more volatile than its rivals
Musk’s tweets made waves in Dogecoin’s prices. His tweets in April lifted the digital coin by a whopping 526 per cent. After praising the coin vehemently on Twitter, when asked what the Dogecoin was on an interview with the Saturday Night Live show, Musk replied “it’s a hustle”. This poses the biggest question about Dogecoin’s value, how reliable is the Dogefather’s endorsement?
Nick Spanos, founder of Bitcoin Center NYC, the world’s first ever crypto exchange, said “Let’s not also forget that Elon wouldn’t waste his time hijacking a meme coin if it didn’t suit his wallet or his brand. If he believed in crypto he would not have turned on Bitcoin,” citing Tesla’s surprising ban on bitcoin payments for its cars.
Elon Musk used to be an ardent supporter of Bitcoin and purchased $1.5 billion in bitcoin in February 2021, announcing Tesla’s plans to accept the digital currency as payment for Tesla’s cars. The sudden reversal of his decision was frowned upon especially because he blamed bitcoin’s energy consumption for the change of heart, a stale fact that did not stop him from purchasing bitcoins before.
Is its price dependant on Musk’s erraticism?
When Musk purchased Bitcoin in February and added #bitcoin to his Twitter bio, Bitcoin surged over twenty percent. Tesla’s revocation of the currency two months later that sent it crashing down 17 per cent, hinted at manipulation and raised serious concerns about the tech genius’ intentions.
Musk’s ‘market manipulator’ reputation has a precedent that cost him the role of chairman at Tesla’s company board. The Securities and Exchange commission charged Elon Musk for with fraud for his misleading tweets about Tesla turning into a private company in 2018.
Dogecoin’s co-creator Jackson Palmer also took to Twitter to call Musk a “self-absorbed grifter” after the bitcoin manoeuvre. Dogecoin has other cheerleaders, including American rapper Snoop Dogg and Marc Cuban, the judge from the popular show Shark Tank.
Landing or crash landing?
Support from Twitter and especially from big names in social media has resulted in Dogecoin making it to the top ranks in cryptocurrencies. But this doge is not expected to run very long. While bitcoin developed into a store of currency with its high value, dogecoin has failed to acquire a particular function or quality that will keep it relevant.
Mahadev Vasireddy, CEO of freelance work platform based on decentralised blockchain-based finance, Freela said “Dogecoin is very volatile and only backed by hype. It has actually no real use and most people who entered it because of Elon Musk or Snoop Dogg don't know anything about it.”
Dogecoin prone to Musk’s tweets
Dogecoin’s price changes like sudden mood swings, it jumped 689 per cent in January. This volatility is not an appealing quality but can be used for quick benefits. Dogecoin’s vulnerability to Musk’s tweets and its high volume of an average of $3 billion worth of trades in just the last 24 hours can be used to advantage but investors have to tread quickly and carefully.
Omar Darwish Alzarooni, a cryptocurrency investor from the UAE, drew short term profit from Dogecoin trading with future orders which are stipulated to close on the same day on reaching a pre-decided value. A future order shaves off a small degree of risk as its delivery relies on the satisfaction of a particular condition and prevents further gamble. Alzarooni recommended going short and long on orders, where a bet is placed with an expectation of fall or a rise in price respectively, to capitalise on its high volume and sudden reactions.
Verdict: Should I invest in Dogecoin or not?
Dogecoin started as a joke and got popular because it was a meme, but with a total value of $65 billion, the virtual currency has kept users constantly wondering if it’s a very expensive joke or the next best investment.
On April 1, Tesla co-founder Elon Musk tweeted, “Space X is going to put a literal Dogecoin on the literal moon.” The tweet could’ve been brushed off as an April fools quip but the story of Dogecoin is a series of jokes that end up materialising into market share.
With no significant value and low price, it is not considered a good investment to shed big quantities of money into, especially in the long run. Vasireddy added “Doge is more like a gamble where you can win or lose money depending on when Elon and market makers decide to complete the market cycle.”
Will the Dogecoin trend fade away?
Experts emphasise on the importance of evaluating the risks before jumping on to make an investment. Spanos said “If you are looking at Doge, or any token, you’re on the right track and still ahead of the curve. Learn how they work and the ways how blockchain is changing our world. But before you buy, ask yourself: what is the real world use case that might give this coin some value? Read the white paper, look at the team, then decide to jump in.”
Dogecoin can be purchased through cryptocurrency exchanges where it can be purchased in exchange for dollars and stored in a virtual wallet. Binance, EXMO, bitpanda and Changelly are exchanges that offer Dogecoin in the UAE.
The story of Dogecoin seems like a crude satire of how value is perceived and developed in society. Built on a lacklustre foundation and fuelled by uncertified promises, it is a cruel joke on trust and optimism. Despite evolving to gain significant market share, Dogecoin is essentially what it was conceived to be, a meme.
As Spanos remarked about Dogecoin’s prospects “It’s difficult to speculate what will happen in the coming days and weeks, but due to its lack of utility, it’s almost certain Doge will eventually become irrelevant. Don’t all memes eventually fade away?”