DOGECOIN: A (Potentially) Superior Crypto
Here are some of my recent thoughts on dogecoin. The challenge I was trying to overcome was: "Why would I, as a rational participant, participate in dogecoin instead of litecoin?" In a world where a new crypto can be created in any given moment (and many are), this is a fundamental question for any "coin."
Litecoin is obviously the closest comparison to dogecoin, closer than bitcoin, but I might use bit/lite interchangeable in the following paragraphs. I am by no means "new" to cryptocurrencies, but I am not technically proficient and everything I say may be blatantly incorrect. So!
What distinguishes one coin from another? Why would a meme-based joke coin have inherent value of billions of dollars (let alone $.0001?)
COMMUNITY:
Like a social network, a key factor is adoption. If people use and value a coin, it will be valued and used.
But this is an intangible factor, as well as a chicken-or-egg. Do people adopt the coin because it is superior, or is it superior because it's adopted?
No matter what, however - and especially in the case of a currency - adoption is necessary for any given coin to succeed. A coin only exchanged between two parties can hardly be called a successful form of currency.
The manifestation of adoption is "Community," and dogecoin's community is not just strong, it's of a fundamentally positive, carefree character. It is generous and - so far, at least - a strong tipping culture. The community (generally speaking) is supportive, rewarding, mutually beneficial, and naturally produces content that benefits the dogeconomy and, in turn, the participants in that economy (affectionately called "shibes").
But is community enough? It can't be! It is too transient. There is no fundamental reason for a community to simply migrate from one service/economy to another, if the barriers of entry are otherwise non-existent. What unique properties retain participants (maybe "users" is a better term), as well as attracts them? "Community" itself is not a coherent explanation. There must be more - call these community-independent benefits "real values."
Fortunately, I think dogecoin does have real value, and could have considerably more. These values distinguish it from all other current coins, including bitcoin and litecoin. The values I suggest may not currently accurately represent the technology, in which case they are proposals and not assertions. As I said, I am not entirely competent regarding the technology here.
MASCOT:
One of these values - and a somewhat "intangible" one, like Community - is Branding. While this applies to the marketing/presentation of dogecoin at large, I am using it to refer to one specific concept - the mascot.
The round-faced Shiba Inu that forms the image of "Doge" itself has (in my opinion) the potential to be a globally recognizable and universally appealing icon of the 21st century. In other words, Doge could be for dogecoin what Mickey Mouse is for Disney, Mario is for Nintendo, and the Golden Arches (or Ronald) are for McDonalds.
Although the examples I listed are the results of corporate interests, a mascot does not necessary have to be a device to generate wealth. However, a good mascot - a "face" - is precisely the thing that every other cryptocurrency lacks, especially bitcoin and litecoin.
I think this iconic figure - DOGE - is key to another concern for doge: how do we outlive the meme? Many memes are flash-in-the-pan phenomena that (presumable) are incapable of retaining long-term appeal. Critics have raised this concern, rightly so, regarding dogecoin.
The DOGE mascot potentially alleviates these concerns. It transforms the transient nature of a "meme" into a universalizable (but also uniquely representable) "icon" which is no more transient than Mickey Mouse or Mario have been in the public consciousness.
DOGE as mascot has already began development - it is the literal face of the coin, after all - but I believe more targeted efforts towards establishing the most marketable and recognizable version of Doge will provide lasting benefit to dogecoin itself.
INFLATION:
"Branding" is a fairly intangible factor, however, and subject to the whim of the community. No matter how good our branding may be, it may just lose its effect.
This is where the truly technical factors come into play, and I believe the most important - and exciting - opportunities lay for crafting a superior coin. This is also where I may be entirely mis-informed.
Essentially, dogecoin is inflationary.
Bitcoin and litecoin are almost universally rejected as currencies because of their low fixed limits (and entropic nature) make basic modern economics impossible. On a macro level, it encourages hoarding and destroys the loan/credit system.
What it does well is create artificial scarcity, which, in the case of something like a commodity, is valuable. That is perhaps how bitcoin has such value; not because people desire it as a currency, but because it is considered a store of value/speculation vehicle, which results from its deflationary nature.
But deflation is simply not acceptable in the modern global economic consensus (sources needed, for sure). And bitcoin and litecoin were specifically designed to be deflationary. That is an insurmountable hurdle.
Dogecoin is different. It's cap is way higher - which makes it more accessible and encourages spending, I think. But more importantly, the "hard cap" doesn't really exist - as I understand it, the current protocol allows for indefinite (if not small) block rewards for miners.
If this understanding is correct, I believe this built-in inflationary is the single most desirable aspect of dogecoin as a currency. It may mean the value of dogecoin may not reach gold-market levels (because that wouldn't make any sense), but it would mean the far more important thing - that it is a sustainable and functional solution for global transactions.
For example, without true utility as a currency, something like bitcoin or litecoin can only achieve value as a speculative commodity, and that can only go so far - and is built on thin air. However, with true utility as a currency, dogecoin could attain a "market cap" equivalent with any other currency - like the USD - as well as grow with the global economy in time, sustained not just by its perceived value, but by its actual long-term utility.
Despite the USD's inflationary tendencies, it still has immense "value." Dogecoin would be the same way.
(Any real economists out there? Are my distinctions between deflation/inflation, commodity/currency accurate?)
COST EFFICIENCY:
Now I'm really getting ahead of myself, but I think the inflationary tendencies of dogecoin have an implication on another area of concern.
Integral as they are to the protocol, I don't like the following aspects of cryptocurrencies (bitcoin): universal transaction fees, long confirmation times, and unwieldy blockchains.
Transaction fees in particular are terrible in my opinion. They are fundamentally necessary to the bitcoin network, especially when block rewards stop, and I can't understand why anyone would be comfortable paying a fee on every single transaction.
It is bad enough paying $.07 for every dollar I spend buying goods or services in America as sales tax. To think that simply handing my friend a dollar would cost money, however "trivial" that cost (fee) may be, is absurd.
Thus I would hope for a currency that minimizes - if not removes - universal transaction fees altogether.
And this is where I think an inflationary currency could help - the need for incentivization for miners that transaction fees provides could be mitigated by eternal block rewards.
In other words, a superior currency would have low/no transaction fees.
My other two concerns I am not sure how to fundamentally solve, nor confident that they can be solved, or if dogecoin would be the protocol to solve them. But I suggest that the superior crypto will be the one that does so.
Faster confirmations - in the real world, having transaction confirmations take an indeterminable (and often lengthy) amount of time is simply unacceptable. It should be possible to instantly verify a transaction - faster than a credit card processor, if not as fast as handing someone cash.
Efficient blockchain - this is actually where I foresee the greatest negative for dogecoin. Many small transactions of billions of coins means that the blockchain will grow to a size that, although possible for up-t0-date computers to handle, is prohibitive to a large amount of the population, and detrimental to the accessibility and functionality of doge.
The blockchain - at least on the user's end - needs to remain as efficient and unobtrusive (while still remaining totally functional) as possible.
I am not sure how to solve this - other than doing many transactions off the blockchain, likeu/dogetipbot services provide (and likewise involve a large trust factor that renders the protocol unnecessary in the first place) - but I believe a superior crypto would mitigate blockchain inefficiencies.
TL/DR:
In summary (and in my opinion), DOGECOIN is superior because:
It has a positive and growing community
It has massive branding potential with an appealing mascot
It is INFLATIONARY (most important!)
It may or may not alleviate concerns of: transaction fees, confirmation times, and blockchain growth.
I would love to hear what everyone thinks. Since any developer could invent a crypto at any moment, I think the fundamental attributes of each coin are going to matter more than ever going forward, and any rational participant in a crypto-economy would have to have legitimate reasons for choosing one over the innumerable alternatives. Because I've backed dogecoin, I want to pin those reasons!
/r/dogecoin