The Innovative Path of Cryptocurrency: Dogs Created from Passion

Author: Zhu Weisha

Dogecoin (Doge), whose logo is a very cute Shiba Inu, is also a widely used meme that almost everyone on the internet has seen. The biggest breakout application of cryptocurrency is this little Shiba Inu. Dogecoin was born on December 6, 2013, created by Billy Markus and Jackson Palmer from the United States. Technically, Dogecoin has no innovations; even "mining" is done alongside Litecoin and others. The early slogan was "Mine Litecoin, Give Dogecoin," and it was merely a "gift" from Litecoin. However, as of September 5, 2023, Dogecoin ranks 8th on Coinmarketcap with a market cap of $8.999 billion, while Litecoin's market cap is $4.6 billion, ranking 15th. Dogecoin has surpassed Litecoin by nearly double, indicating that it must have done something right.

The reason is that Dogecoin fills a market gap. From the current market perspective, cryptocurrencies like Bitcoin only satisfy people's material needs, while Dogecoin is different; it meets people's spiritual needs. It has a good cultural background—"tipping culture," a good humanitarian background—"charity culture," and a good popularity background—"grassroots culture." This type of coin is referred to as meme coins. The market understands meme coins as air coins, which is a material-level understanding because they have no practical use; this statement cannot be considered entirely wrong.

However, the main selling point of Dogecoin is spiritual demand, and it cannot be measured by the material standards used for Bitcoin. From the perspective of air coins, it is difficult to understand Dogecoin's market value. Spiritual activities are intangible; they represent liking, love, pursuit, recognition, and faith. Just as Bitcoin intertwines interest, value recognition, and faith tightly together. Bitcoin has a community of believers that creates spiritual value, and its ideological value has not been assessed in Bitcoin's value; who would use Bitcoin to "tip"? The founders of Dogecoin discovered the spiritual demand, and they have a deep ideological understanding of Bitcoin.

Dogecoin originated from Markus and Palmer's belief in Bitcoin. Their purpose in founding Dogecoin was to popularize the spirit of Bitcoin's fairness, freedom, voluntariness, immutability, altruism, and a bit of rebellion, using a cute little dog to represent a spirit that people genuinely like. This explains why so many celebrities like Dogecoin; to put it simply, it is full of positive energy. This also explains why Musk likes Dogecoin, as the pursuit of spirit is a higher-level pursuit that far exceeds the pursuit of material. This is the reason for the existence of meme coins in the cryptocurrency space. Just like people who love figurines and pets gather due to the same hobby, this gathering forms a community that generates enormous traffic value—people's own aggregation value. Aggregation is not entirely about ideological value; it also brings the ability to act. This explains why Litecoin cannot compete with Dogecoin. Litecoin lacks community value and only has material value of "mining, withdrawing, and selling." Faith can form an intangible community; comparing the faith of Litecoin and Bitcoin makes it clear the power of faith.

"Like" represents value recognition, which creates Dogecoin.

Dogecoin does not limit the total supply; it increases by about 5.2 billion each year, as it does not want the price of Dogecoin to skyrocket and damage the spiritual connotation of Bitcoin. In 2019, Palmer criticized Musk on Twitter for leading the trend, believing that Musk's promotion of Dogecoin's rise deviated from its spirit, and thus he left in anger.

In fact, the community originates from interest, develops through benefits, and ultimately forms faith. This is itself a process of value development.

Palmer and Markus's spiritual realm is very respectable, but they did not understand Musk. With Musk's influence, as long as he issues a similar coin to Dogecoin, there is a possibility of reaching a market cap of $280 billion. Someone has sued Musk, claiming that this is the value generated by him promoting Dogecoin. Although Musk is an outsider to cryptocurrency and finance, as can be seen from his naive statements about cryptocurrency and his clumsy Twitter acquisition, how can a sparrow know the ambition of a swan? Indeed, Musk has pursuits that are higher than mere interests. Like Satoshi Nakamoto, Musk is also an "alien"; their intuition is excellent, and perhaps Musk sees the potential for Dogecoin to become extraordinary. What is spirit? Musk fell in love with Dogecoin at first sight.

Problems Displayed by Dogecoin

Before Musk entered the Dogecoin community, it was in a "stateless" condition. I explained in my articles "The Long Way Ahead for Cryptocurrency Communities" (https://chainless.hk/) and "Let Satoshi Nakamoto Step Out to Welcome the New World" (https://www.bitpush.news/articles/tag/) that Satoshi Nakamoto should come out to lead the Bitcoin community and discussed the importance of establishing an organized community. The "stateless" ideology within the cryptocurrency circle has ravaged the Dogecoin community, leading to a proliferation of scammers. Is it right to let Dogecoin return to its original jungle state? An organized community is different from the "stateless" community left by Satoshi Nakamoto, but the latter has become the standard for judgment, becoming an "ancestral system" that cannot be changed, which is absurd! Why do humans organize nations? It is a transition from disorder to order. One cannot completely deny the state just because there are problems within it. As long as the grassroots, charitable, and tipping nature of Dogecoin remains unchanged, an organized community is certainly better than a disorganized one.

Vitalik from Ethereum entered the Dogecoin Foundation, hoping to replace the current proof of work (POW) with proof of stake (POS), but faced opposition and could not proceed smoothly. Senior members of the Dogecoin community threatened to fork Dogecoin if this were done. After Ethereum switched to proof of stake, some people forked Ethereum using the original proof of work, but it was unsuccessful. Because Vitalik is right and has the support of the majority. I believe that forking Dogecoin will also not succeed. I highly suspect that those threatening to fork are representatives of mining interests.

Changing Bitcoin to proof of stake is incorrect because the continuously rising energy costs are the source of Bitcoin's value, so it must adhere to proof of work. If Dogecoin continues to use proof of work, it will lead to rising costs, increasing the costs of tipping and donations. Thus, the benefits generated by the 5.2 billion tokens mined each year will only benefit a few miners, diluting the rights of the majority of Dogecoin enthusiasts, which goes against the original intention of Dogecoin. If Dogecoin is designed to be non-inflationary like Ethereum and is only a fixed supply currency, it will help realize Musk's wish—Dogecoin becoming a currency for the people.

Conditions for Dogecoin to Become a Stablecoin

In my fourth article in this series—"The 'Pig' That Rides the Wind of Ripple" (https://chainless.hk/), I introduced how to turn Ripple into a stablecoin. However, Ripple achieves a centralized stablecoin, while Dogecoin can achieve a decentralized stablecoin. From the graph, $0.05 is basically its value center. This is one-twentieth of a dollar, which meets the requirements for small change payments and is not difficult to implement. However, unlike Ripple, its implementation difficulty lies in unifying community opinions.

The following figure clearly shows that by 2021, Dogecoin was basically a horizontal line, performing like a stablecoin. After being disturbed, it again stabilized around $0.06; without interference, it would continue to stabilize, which is a natural quality of a stablecoin. Of course, stablecoins still need further stabilization mechanisms. Figure 1

Regarding stablecoins, I have published a series of articles. Interested readers can take a look at my analyses on Bitcoin's dollar peg and Bitcoin's Hong Kong dollar peg (https://www.bitpush.news/). Specific implementation methods can be found in "DW20 Decentralized Stablecoin Implementation," which will be published soon on the Chainless website (https://chainless.hk/).

Prospects for Dogecoin to Become a Stablecoin

Cryptocurrency has come to this point, and the current speculative approach is only suitable for the experimental stage of cryptocurrency. It can be used for value discovery in cryptocurrency, to examine which currencies are popular, and which ledger models are more successful and what their flaws are.

As cryptocurrency has developed to this stage, there seems to be little technological innovation under the framework of blockchain; the next breakthrough is aimed at commercial applications, and stablecoins are the next trend in cryptocurrency. Dogecoin occupies a very advantageous position, as Musk's intuition tells him. He is always one step ahead.

The essence of currency is a medium of exchange, but early members of cryptocurrency did not understand the concept of a currency standard as a medium of exchange. Missing this step has prevented cryptocurrency from moving towards large-scale commercial use. Musk allows the use of Dogecoin to buy small items on the Tesla website, but why does he not dare to allow Dogecoin to buy cars? If Dogecoin were a stablecoin, Musk would dare to allow it. If Tesla electric cars could be bought with Dogecoin, it would undoubtedly be a heavy bomb thrown into the fiat currency system, allowing people to gradually regain financial discourse power. However, Musk and his advisors do not understand monetary theory and do not know how to make Dogecoin a stablecoin. There is no technical barrier here, just a thin layer of paper. The realization of a distributed stablecoin for Dogecoin could boost the price of Ethereum.

Bitcoin + DW20, Ethereum + Dogecoin can both form decentralized standard currencies, which is the modern "gold and silver standard," just like the dollar, euro, and pound standards in fiat currency. The rise of cryptocurrency standards will gradually eliminate fiat currency, thus realizing the ideal of cryptocurrency elites transforming society. A society of integrity will gradually replace the speculative society caused by fiat currency, and our descendants will have a brighter future.