Dogecoin is a cryptocurrency started as a fun cryptocurrency with no intention of actually being taken seriously – it’s even named after a popular internet meme of a Shiba Inu dog. However, this cryptocurrency suddenly became a little more than a meme in 2021 for reasons that left many in the cryptocurrency world very confused.
This article will explain exactly what is going on with Dogecoin and what the future of the memecoin looks like.
Dogecoin – A Brief History
Dogecoin was launched by software engineers Bill Markus and Jackson Palmer in December 2013. The purpose of the coin was to make cryptocurrency a little more fun, accessible, and less intimidating than the dominant cryptocurrency at the time – Bitcoin.
Anyway, the developers forked Dogecoin from Luckycoin, which itself is a fork of Litecoin. In that regard, Dogecoin is likely the most successful fork of a Bitcoin fork. Forks that are too far from the origin have a tendency to not gain much popularity.
Moving on, the project received a lot of initial popularity with over 1 million visitors to the website in the first month. The price was wildly volatile, yet very low, swinging from $0.00025 up to $0.00094 and back down to $0.00019 within a week.
From then on, the price mostly languished far under $0.01 and was almost entirely used as a way to tip users on Reddit as a sort of joke because the coin was effectively worthless. This briefly changed during the 2017 bull run when Dogecoin surpassed $0.01, but that price surge was short-lived as the coin eventually crashed.
Furthermore, Dogecoin has been subjected to multiple attempts to pump the price of the coin. The most notable incident, prior to the massive surge in 2021, occurred in July 2020 when TikTok users launched a campaign to get the price of Dogecoin over $1. The TikTok pump attempt failed, but the price of Dogecoin did rise from $0.002 to $0.003 due to the campaign.
This brings us to our next section about the current surge in price of Dogecoin.
Why Dogecoin Surged in Price During 2021
The reason Dogecoin surged in price is probably well-known by now. It started in January 2021 as the Gamestop shorting fiasco was coming to its peak. Users on the popular WallStreetBets subreddit were having difficulty purchasing Gamestop stock, so it was decided that the collective would pump Dogecoin.
This saw the price increase from a paltry $0.008 to a less paltry $0.07 in the span of a few weeks. But the price increase was not over as celebrities like Elon Musk and Snoop Dogg offered their support to the cryptocurrency.
To cut a long story short, all the celebrity support and mainstream attention saw the coin rise to an all time high of $0.70 per coin. Elon Musk even made an appearance on Saturday Night Live due to his support of Dogecoin. Unfortunately, Musk called Dogecoin “a hustle” and the price fell back to $0.40 within an hour of the airing of the show.
To summarize, Dogecoin started out as a memecoin in 2013. It was subjected to a large pump by WallStreetBets during the Gamestop short squeeze, celebrities offered their support to the cryptocurrency, and the price surged due to the support. In a way, it’s similar to the rise of Bitcoin, but in a much less organic manner due to the celebrity support it received at such a low price.
The Problems With Dogecoin
Dogecoin is a fun cryptocurrency. For one, it’s named after a popular internet meme and uses Comic Sans text. However, many Dogecoin proponents claim it can be used as a replacement for other cryptocurrencies. We admit that is possible, but it seems highly unlikely based on some of the problems with the team and cryptocurrency.
Limited Development Team
First of all, Dogecoin does not even have a full time development team behind it. It has a team of four part-time developers working on the code, which is not inspiring much confidence in the security of the code nor the ability of the developers to push code in the event of an emergency.
One Wallet Holds 28% of Dogecoin
Dogecoin is not particularly decentralized in terms of ownership. One wallet holds 28% of Dogecoin (36.7 billion Dogecoin worth ~$12 billion source: Coinchefs) and ~100 wallets hold 66% of all Dogecoin in circulation.
That is far too centralized for a comfortable investment as one of those wallets dumping their coins could permanently wreck the market.
Too Much Inflation
Dogecoin is also inflationary, which isn’t a problem for cryptocurrencies that offer more than just a payment service (ie. Ethereum is inflationary). But it is a problem for a cryptocurrency that wants to serve as a payment service as demand for the coin must keep increasing to prevent the price from falling.
It’s also extremely inflationary at a 10,000 Dogecoin reward per block mined with a block time of 1 minute. That means 14 million Dogecoin are minted every single day.
Simply put, there is way too much inflation in Dogecoin to keep up with the demand.
Is Dogecoin a Good Investment?
Dogecoin is a terrible investment from a cryptocurrency project point of view. It’s already a small miracle that the price has increased so much in 2022. Inflation is high, whales hold too much of the cryptocurrency, and it has four part-time developers working on the project.
However, none of that stopped Dogecoin from a 20,000% increase in price, so it’s unknown whether the price will continue to increase. It seems unlikely at this point, but it also seemed unlikely that Dogecoin would hit $0.70 at any point in its existence.
One thing is for certain, it’s a fun memecoin to follow and is not going away anytime soon. But it’s not a cryptocurrency many see as having a future outside of being a fun memecoin to use with friends (and that increased 20,000%).
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