A controversial coin based on a popular internet meme, Dogecoin (DOGE) was originally created as a joke currency to mock the crypto markets in 2013.
DOGE drew massive media attention following cryptic tweets by Elon Musk and reports that the Tesla CEO had bought millions of dollars’ worth. On the 4th of May 2021, Dogecoin surpassed the $0.50 mark - an increase of more than 21 000% over a year.
But what is Dogecoin really?
Dogecoin is an altcoin that was designed to be and remain a joke, but 2021 changed the game for the currency when the price rose by 5 digit percentage points.
It’s now one of the highest ranking crypto coins by market cap, as it’s community is one of the largest in the cryptocurrency community.
Jackson Palmer, one of the co-founders of the project, commented this year on cryptocurrency in general, having left the project years ago.
"Cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity." Palmer was quoted saying.
This is a harsh view of cryptocurrency, which through it’s technological innovations, namely the increasingly sophisticated nature of new developments in blockchain architecture, has brought technological marvels that have been co-opted for use in medical database tracking, crime prevention and environmentalism, a far shout from Palmer’s oversimplification.
Bitcoin has a fixed supply of 21 million coins. That is the maximum that can ever be mined. In stark contrast, DOGE diverges from most cryptocurrencies that are “mined” in the sense that more coins are introduced each year. Dogecoin’s initial supply was 100 Billion coins, with an inflationary model that introduces more coins each year at a reducing rate.
It’s been said that bitcoin has ‘Ponzi scheme’ characteristics to it due to the massive amounts of coins that were mined with ease in its early days. The people or person using the name Satoshi Nakamoto, bitcoin’s inventor/s, hold over a million bitcoins, giving a huge amount of market power to very few. Due to the slow adoption of bitcoin, the ‘over-rewarding’ of early adopters is considered by most crypto enthusiasts to be an unfortunate yet unavoidable price to pay for the technology.
Dogecoin suffers from this same problem, but on a much, much larger scale.
Akand Sitra of cryptocurrency risk management platform TRM Labs claims that Dogecoin highlights that over 65% of Dogecoins are held by 98 wallets across the world. He also claims that the largest wallet holds 28% of all Dogecoins, and the top five wallets control 40% of the coin’s entire supply. Whilst this is just one analysis, not many have come out of the woodwork to deny such accusations.
This spells financial disaster.
One person’s disaster is another’s dream.
One of the reasons for the surge in popularity of Dogecoin is precisely it’s market volatility, making it an attractive choice for many traders.
And whilst trading is central to the decentralization of crypto asset prices, we have to keep in mind that when we prop up a coin just to dump it, someone is losing out somewhere.
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