Understanding Doge and why it’s a long-term risk.

Doge is the Schrodinger’s cat of crypto. It’s simultaneously a joke and not a joke. But what is it? What does it do and why do so many in the crypto-sphere hold so much disdain for it? Read on to get a broad understanding of the meme currency of the internet.

Dogecoin (shortened to “Doge”) is a cryptocurrency. Bitcoin, Ethereum, Litecoin, Cardano etc. are all cryptocurrencies, but they can all be used differently. Some act as alternatives to fiat currency (£, $, and €), some are stores of value, and some power their own blockchain. It’s ok if you don’t really know what that means, all you need to know right now is that Crypto is more flexible than traditional currencies.

The thing about Doge is, it has no real use.

It can’t be used to buy things, it can’t be used as a store of value like Gold, and it doesn’t power any blockchain networks. Indeed, it has been rolled out for small use cases, like tipping or Tesla merch, but that barely registers.

So what is it good for?

Well, that’s just it. Absolutely nothing. And that’s the point.

It was created as a deeply flawed, useless entity.

This is where people might get confused. They ask, “If society can adopt Bitcoin as a currency, why can’t we accept Doge?”

And it comes down to how Doge is created.

With Bitcoin, miners use computational power to be the first to secure transactions on the blockchain. Every ten minutes the successful miner is rewarded with some Bitcoin. This incentivizes miners to keep the network running.

This may not be the most efficient way to run a network, but it is a proven method that has worked for over a decade.

In the earliest days of the network, each reward was 50 Bitcoin. Now it’s only 12.5. The reason for this is that there will only ever be 21 million bitcoin, so the more that is mined, the less is rewarded to steady the flow of new bitcoins into the economy.

Doge, on the other hand, adds 10,000 new coins every minute and it has an infinite supply. Each day, 14400000 Dogecoins are mined and put into the public. It’s unsustainable.

And therein lies the “joke”.

The creators, Billy Markus and Jackson Palmer, thought people were taking Cryptocurrency too seriously in 2013 and decided to make something that poked fun at it.

To make an allegorical version, imagine you live on the beach, and one day, a diamond washes up on the shore. You are amazed because it is a totally unique diamond, huzzah!

A minute later, the waves roll up the beach, and ANOTHER diamond is there. This pattern repeats itself, so that every single time that the wave laps the beach, it leaves a diamond.

So you sell them, and at first, it’s great. The diamonds are so rare that people will pay through the nose for one! But as the days go by, the diamonds keep coming. Eventually, everyone has at least one diamond, some people have hundreds, but the waves keep on leaving them on the beach. People might trade their diamonds for other things, but because new diamonds are washing up on the shore every minute, people don’t want to trade anything for them.

Years go by, and the relentless deposit of diamonds does not let up. Now there are mountains of diamonds around the beach, with no other practical use, the pileup is creating a crisis as space is running out, people are being relocated to avoid being killed in a diamond avalanche and all semblance of the environment has been buried. But still, the diamonds. Keep. Coming.

And that’s Doge!

But seriously, the ease and volume of Doge being added per day makes it impossible to maintain a price as it is constantly losing value due to coins entering the market. Eventually, there will be so much Doge out there, that 10,000 new coins being added is as small as a spec of space dust compared to the cosmos, but Doge has to survive a lot until we get that kind of stability. And even at that, we’d end up paying billions of Doge just for a Big Mac.

But as shown in the tweet above, this unwavering deposit of new Doge is at least transparent and that, in a sad turn of fate, is actually more reliable than government entities like the federal reserve, which just prints new money when they see fit.

So should I invest?

Look, Doge went up by something like 14,000% last year before it crashed. But its not the only meme coin making waves. More meme coins that come onto the market will further divide communities and weaken support for existing ones. While there is a massive chance it could suffer a massive crash in the near future, there is also a chance Elon Musk could tweet a picture of a Shiba Inu and send the coin 3000% upwards.

Not even the most effective traders and analysts can predict what will happen, because the massive price swings are based on tweets from celebrities and Reddit meme lords, which, surprise surprise, isn’t exactly quantifiable.

Investing what you are comfortable with is always sound advice, but while we can all be relatively sure that Apple, Microsoft, or Netflix isn’t going to lose 50% of their value tomorrow, we can’t be with Doge. Even otherwise solid cryptocurrencies like Bitcoin are still volatile enough to be affected by this type of behaviour. So invest carefully and as always DYOR!


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