A serious Analysis of Dogecoin — Or: Why I am all-in on dogecoin.

dogecoin

Introduction:

For those of you who don’t know me, I am Tuxedage — organizer of the dogecoin lite wallet fund, moderator of the thousand-user strong #dogecoin and #dogecoin-market IRC channel, as well as an active member and supporter of the dogecoin community. If you are reading this, I will assume you are already familiar with cryptocurrencies, so I won’t beat around the bush.

This document explains why Dogecoin is going to the Moon.

Personal Story:

I am a Bitcoin early adopter. I put in trivial amounts of money into Bitcoin because I saw it as a protocol and community with significant potential. I have made some ridiculously good returns on my initial investment because of that decision.

When I first heard about Dogecoin in mid-December of 2013, I initially dismissed it as a stupid meme coin. I publicly stated that I do not understand Dogecoin, and that anyone who put money into it was stupid. In my mind, Dogecoin was simply a useless clone that tried to imitate Bitcoin’s success, one that was doomed to inevitable failure.

But then I started to think about it more seriously. Were my initial criticisms of dogecoin valid? Could I have been wrong?

I was wrong.

On Christmas of 2013, I became a dogecoin believer. A shibe.

Over the next week, I cashed out every single one of my bitcoins that I had bought into dogecoins. At the start of the New Year, I was officially all-in on dogecoin.

At that time, doing so was completely and utterly insane. Dogecoin’s market cap was barely 7 million. Dogecoin was still a speculative and new meme currency — unworthy of attention. All the cool projects we’ve funded, such as the various Olympic candidates, had not yet existed. Furthermore, I had willingly violated the two rules essential of investing:

  • (1) Don’t put in money you cannot afford to lose
  • (2) Don’t put all your eggs in one basket.

This essay was written to explain my reasoning about why I did this, and why I continue to all-in on dogecoin. I like to justify my actions. Writing this document serves as a quick and easy way to refer people to if they ask me “Why did you do it?”

The second reason why I wrote this essay was because I saw no satisfactory document that met my standards of eloquence in explaining how ridiculously undervalued dogecoin is. Whilst many of the following factoids are scattered throughout the internets or on reddit, they are hidden behind some level of obscurity, and there is no single document listing all of them. Therefore I must do it.

Thirdly, I wanted to archive my thoughts so that in the future, I will be able to remember my exact reasoning for doing this. Memory is often faulty, and I didn’t want to misremember myself as being more overconfident or under-confident than I actually was.

I realize that writing this document in and of itself breaks the spirit of dogecoin. Firstly, because it talks about profit-making, rather than community-building. As we like to say; Community before profits. The dogecoin community is not typically very fond of profiteers who care about the coin only for a quick buck, rather than because they genuinely believe in dogecoin and support it as a mechanism for change.

Writing this document casts me in a bad light as a greedy profit-maximizer. It also may lead to greater amounts of speculation and a greed-fueled hype bubble in dogecoin, which may destroy the very thing we are attempting to accomplish. Furthermore, this document takes a serious tone, and I dislike that. I enjoy dogecoin because it allows me to act like an idiot and talk in shibespeak.

Because of the aforementioned reasons, I have hesitated to write this for a very long time. But eventually, I broke. In an ocean of people talking about how dogecoin would never work, I just wanted to grab the nearest person, and yell at them “BUY DOGECOIN!” whilst shaking them vigorously and slapping them across the face. Of course, I can’t do that over the internet, so writing this document was the next best thing.

So I relented. Much sorry. Very apology. Wow.

hotdoge

The Prediction

I predict that Dogecoin’s market cap will, at minimum, exceed Litecoin’s by the year of 2014. (P> 0.8) . Depending on the exact date of this occurrence, this gives Dogecoin an approximate price of 1000-2000 Satoshis, or about 7-10 times today’s price.

This is my conservative estimate. My optimistic estimate is that dogecoin is going to hit escape velocity and pierce the heavens! Not just the Moon, but Alpha Centauri as well. Even reaching ten cents per coin is not impossible! Why maybe even a dollar per coin!

The Argument:

Why am I so confident of this?

The biggest and foremost reason is that dogecoin has an insanely high reproduction number (R-factor).  I first identified this phenomenon during 20 Jan, and so far, the evidence heavily confirms it.

A basic reproduction number is a variable used in the modelling of infections to determine, on average, the number of people the carrier spreads the disease to over the course of a certain period of time. The higher this variable, the faster this disease spreads, and the more dangerous and infectious it is.

Dogecoin has a number of traits about it that causes it to spread incredibly quickly – traits that cannot simply be explained by the fact that it is a new coin. Each dogecoin convert tends to spread dogecoin to a high number of other people within a short number of time.

I believe this is because dogecoin exists not only as a p2p protocol, but as a powerful cultural meme. I use meme not merely in the context of being an ‘internet meme’, where funny pictures of various animals are captioned with funny text, but of the classic Richard Dawkins definition – a powerful, self-replicating idea that spreads from person to person.

This meme has is so ridiculously good at self replication  for the following reasons:

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Just the Tip

Although my involvement with bitcoin has waxed and waned over the last few years, I was still lucky enough to observe its growth from very early days, despite being unable to make a decent profit from it. One big difference between dogecoin and bitcoin during its early days is the inclination of its users to tip each other small amounts very frequently. This is not just anecdotal – a quick search on the statistics of the dogetipbot vs. the bitcointip bot on reddit will confirm that dogecoin is tipped around 100x as much as bitcoin.

This strikes me as an incredibly effective evangelizing tactic.

just tip

This works for three reasons, the first being the most obvious – if you have been tipped some dogecoins, you’re very likely to download a wallet and try to keep some marginal involvement with the dogecoin community. After all, who’s going to refuse free money? Even if the opportunity cost of downloading that wallet and researching the protocol may outweigh the amount of money that value of dogecoin is worth, I suspect that not many people will do so. My own experiences proselyting dogecoin only confirms this.

This is because when people try to evaluate the current value of dogecoins that they are receiving, their minds will anchor to the next-closest situation that they are familiar with of people being given free cryptocurrency.

That is bitcoin. Stories about people having hundreds of bitcoins in the past, but throwing them away, are all too frequently heard. People will fear throwing away their dogecoins in the subconscious fear that the same situation will result. They will believe that it is “better to be safe than sorry”, regardless of how utility maximizing doing so actually is.

The second reason is the reciprocity principle. As someone generally very interested in social engineering, the desire for people to reciprocate is usually so powerful that it is so often taken advantage of by confidence-tricks. The following experiment is told as an example:

  • Regan had subjects believe they were in an “art appreciation” experiment with a partner, who was really Regan’s assistant. In the experiment the assistant would disappear for a two-minute break and bring back a soft drink for the subject. After the art experiment was through, the assistant asked the subject to buy raffle tickets from him. In the control group the assistant behaved in exactly the same manner, but did not buy the subject a drink. The subjects who had received the favor, a soft drink, bought more raffle tickets than those in the control group despite the fact that they hadn’t asked for the drink to begin with. Regan also had the subjects fill out surveys after they finished the experiment and found that whether they personally liked the assistant or not had no effect on how many tickets they bought. One problem of reciprocity, however, focuses on the unequal profit obtained from the concept of reciprocal concessions. The emotional burden to repay bothers some more than others, causing some to overcompensate with more than what was given originally. In the Regan study, subjects paid more money for the tickets than the cost of the (un-requested) soft drink.

The fact that these tips are cents in value does not matter. Scope insensitivity will ensure that regardless of the actual monetary value of the tips given, people who were tipped would feel obligated to contribute back to the community, including being an evangelical themselves.

Finally, this tendency for widespread tipping contributes to the familiarity principle, also known as the mere exposure effect. This is a complicated way of saying that because it is tipped so widely amongst non-shibes, it will be familiar to other non-shibes. Ceteris Paribus, the more often something is seen, the more pleasant and likeable it is. This will create pressure for other non-shibes to join the dogecoin community on their own volition, out of free will. This will ensure that dogecoin spreads really quickly.

The Twin Memes

However, widespread tipping is not the only reason why dogecoin has such a ridiculously high basic reproduction number. Let’s now analyze dogecoin in the context of an internet-meme, not merely the Richard Dawkins definition.

Critics argue that dogecoin will never succeed because it is a meme. They are badly mistaken. Dogecoin will succeed precisely because it is a meme – and a very powerful one at that!

Yes, dogecoin is ridiculous. It is a joke. The Shibe Inu meme, whilst a fascinating phenomenon, is silly. But who’s to say that silly memes can’t be worth ridiculous sums of money?

For example, the “I can Haz Cheezburger” site, based on user-uploaded pictures of cats with funny captions, has been valued at a minimum of $30 million dollars. Their book, “How to Take Over Teh Wurld”, has entered the number one spot of the New York times bestseller list. Humor is a fundamental part of the human experience, and it’s a contributing factor to memetic appeal, not a handicap. There is no reason why dogecoin is somehow an exception.

At great risk of jinxing cryptocurrencies to the same fate, I will also note that at their peak, soft stuffed toys called Beanie Babies were also worth ridiculous sums of money — hundreds of millions of dollars.  Much like doge, something that was initially cute and funny became very valuable. Is it stupid? Yes. But is there profit to be made? Yes.

Like it or not, the dogecoin community is cute and funny in a way that no other cryptocurrency has managed to be. Look up the /r/dogecoin subreddit, and you’ll find that a great number of popular posts are jokes and pictures of cute dogs, rather than talking about the evils of Ben Bernanke or the fractional banking reserve system seen in /r/bitcoin.

doge ruins guy’s life. wow.

Even if you might find it uncute and unfunny, it’s difficult to deny that the Shibe Inu meme appeals to many others. Good investors don’t buy or sell instruments based on what they personally enjoy. That is irrelevant. It is more important to predict what others are likely to enjoy. The same concept applies here. The Shibe Inu meme appeals to people, so even if I don’t personally like it, I buy based on the expectation that others will.

The Red and Blue Oceans

This brings me to my next point, which is that dogecoin has successfully managed to tap into a demographic that no other cryptocurrency has. Bitcoin appeals to libertarians and anarcho-capitalists.  /r/bitcoin even lists /r/anarcho_capitalism on its sidebar! While this ideological association was beneficial in attracting fanatics during the early days of bitcoin, as we move towards mainstream adoption, the same advantage can become a disadvantage — subsequently driving away many others who aren’t radically right wing. Eventually, as the pool of radical right wingers get exhausted, bitcoin will find itself with insufficient room to grow.

Dogecoin does not suffer from this flaw. It is non-political and funny – appealing to people from all sides of the political spectrum; as well as the apolitical. The technical term for this tactic is the Blue Ocean strategy. It is not necessary to offer a superior product than your competitors to gain a profit — you can also find a way to create demand in an untapped market space. This is exactly what dogecoin attempts to do.

red blue

If you fit the target audience of this document, you will not believe that there are actually those who are scared off by your politics. But such people are commonplace — for instance, this guy. People want to run away when you try to convince them of the evils of the Federal Reserve. Your assumption that everyone is as political as you are is a case of the typical mind fallacy. After all, if it were complete consensus that it was an awful thing, it would long have been voted away already.

But I digress. Does dogecoin appeals to a mass market in a way that no other cryptocurrency can? Yes it does.

This is a very good thing. It means that dogecoin has a lot of room to grow. It can hit mainstream status with greater ease than any other coin.

The Madness of Crowds

 The other thing that struck me about dogecoin is that it has fanatics in the way that bitcoin had during its early days. The fundamental reason bitcoin succeeded was not because of its superior protocol. It was because bitcoin had fanatics. People who would proselyte bitcoin as though it were the second coming of Jesus – that it was the solution to all the evils of banking and government, that it would fully anonymize currency and wrest control out of the hands of our evil Federal Reserve overlords.

If Bitcoin didn’t have fanatics, then it would have been like any other speculative bubble — over at the first crash. Why would anyone choose to be the first few people to put money into such a risky asset? Without the promise of greater profits to come, only a belief that investing in bitcoin was actually an ethical duty could convince super-early adopters. This happened to be the case.

Of course, with the benefit of hindsight, we now know that the promises of bitcoin was an exaggeration. Don’t get me wrong, bitcoin certainly improved things – I myself was a bitcoin fanatic. But we can see now that the status-quo was still maintained – that Governments still exert control over cryptocurrencies, and that it’s still the case that a very small number of bitcoin owners hold a disproportionate number of bitcoins.

But that’s not my point. My point is that fanatics are powerful because they will obtain converts at any cost, regardless of profit margins. They will announce their causes from the tops of mountains and will never give up, regardless of how awful the situation looks. They refuse to change; so the world changes along with them.

The only cryptocurrency I have ever observed to have a similar fanatical community is dogecoin. Don’t get me wrong, there are certainly a number of fanatics in ripple, litecoin, and peercoin as well. I’ve talked to them. But what impresses me is the number and quantity of fanatics in dogecoin. People who will donate massive amounts of their own money in order to promote dogecoin. People who generously tip when they should have defected and let other shibes tip for them. People who refuse to sell out their dogecoin in the face of a crash, only buying more.

In the end, I suspect that it is this attribute that will ensure Dogecoin’s long term success.

Developers, Developers, Developers!

Many other cryptocurrencies — Litecoin particularly, argue that strong developer support is evidence of the superiority of their coin. The more active the developers, the more likely that cryptocurrency is to succeed. I agree with this. Developers are important because they are key to providing the infrastructure around a coin, allowing greater levels of adoption and ease of use. They also allow greater incentive to adopt the coin through the provision of important goods and services.

developers

If this is the case, then Dogecoin’s ability to succeed depends on its developing community.

There is strong evidence that Dogecoin has one of the fastest growing and most active developer communities of any other altcoin. The two founders of Dogecoin, Jackson Palmer, and Billy Marcusare very active. They openly discuss any issues that Dogecoin might face in the future, as well as work with the community to find the best way to resolve them. They reply quickly and concisely to proposed changes to dogecoin’s protocol. This immediately gives Dogecoin an advantage that many other cryptocurrencies do not have — Bitcoin being a major example.  Satoshi Nakamoto, the main person responsible for bitcoin, disappeared in 2010, never to be seen again.

On the other hand, it can be argued that the protocol’s developers not as important as the developer community surrounding a cryptocurrency. This is because whilst the founders of the coin are necessary on rare occasions where forks are necessary, the developer community surrounding the coin are what’s really necessary necessary to allow the coin to propagate.  In this area, we have a clear leg up above all altcoin-competition. The following is a list of what I believe is the most critical infrastructure necessary to the propagation and usage of a coin.  (*2) It is immediately obvious that Dogecoin clearly wins against all the other major altcoins.

Infrastructure Dogecoin Bitcoin Litecoin Peercoin Namecoin
Dedicated Reddit Tip bot Yes Yes Yes No No
Lite Wallet Yes Yes No No No
Email/Text/Twitter Tip bot Yes No No No No
ATM Yes Yes No No No
In-store currency sales support Yes Yes Yes No No
Dedicated Gambling Services Yes Yes Yes No No
Dedicated Fiat Exchange No Yes No No No
Dedicated Black Market Yes Yes No No No
Total: 7 7 4 0 0

And yes, I admit that although Dogecoin’s development team is impressive, the ultimate victor is Bitcoin. However, it is important to remember that we have come this far despite dogecoin being a cryptocurrency less than two months old — whilst all the other coins have had years to develop services. The fact that we have managed to compete at all is a testimony to dogecoin’s development community. It’s reasonable to extrapolate that in time, Dogecoin will have the same top-tier infrastructure that Bitcoin has.

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*2: This list is based on research to the best of my googling abilities. If it is inaccurate in any way, please drop me a message, and I will correct it.

By “dedicated”, I mean a site that is solely dedicated to that particular type of cryptocurrency, and not used for any other. As a result, Vault of Satoshi for dogecoin does not count.

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The 4chan Effect.

Although it is impossible to talk about 4chan as one coherent, organized entity, it is still fair to say that dogecoin is very popular at 4chan. Popular 4chan boards like /g/ or /biz/ usually have up to three or four dogecoin related threads at any one time. This is significant for 4chan because it threads are pruned very frequently on a regular basis — the average thread lasts for only an hour or two before being deleted due to lack of activity.

Furthermore, 4chan is known to have great ability to spread memes, ideas, and coordinate projects if the proper motivation exists. Some rumors state that every single meme every created begins at 4chan. 4chan

The good news is that this motivation exists. We have seen constantly high levels of interest at 4chan. This discounts the financial incentive they have for making Dogecoin popular. So it will.

It is difficult to explain how significant this power is for those who are not familiar with 4chan, so I ‘ll leave it at that. You yourself can choose to decide how important this factor is.

The Evidence

Every good rationalist and epistemologist will propound the importance of testing your predictions against the real world observations that should arise if they are true. I have made these predictions in late 2013. It is currently the 5th of February.

So far, I’ve had about a month of time to observe whether my theories are correct. I believe these observations is good evidence for my observations. Consider the following:

  • The dogecoin subreddit has grown at a completely astounding pace with remarkable consistency.
  • In the last two weeks, it has hit the fastest-growing non-default subreddit five times. It is the second fastest growing subreddit this year. As of right now, it has 55k subscribers. Litecoin only has 18k. If trends continue, it is set to overtake /r/bitcoin in number of subscribers within two months.
  • Even in terms of sheer volume (volume exchanged in USD), Dogecoin has overtaken Litecoin, and is already more than half as popular as Bitcoin. Now remember that dogecoin has merely a market capitalization 1/12th that of litecoin, and two hundred times less than bitcoin.
  • Dogecoin has more active addresses than all other cryptocurrencies combined. This means that whilst other coins may be hoarded, dogecoin users are actually actively sending transactions back and forth to each other.
  • As of the 22nd of January, dogecoin has overtaken litecoin in Hashrate. There are now more miners mining dogecoin than litecoin.
  • As of February, Dogecoin is more widely searched in Google than litecoin.
  • Dogecoin has a staggering 9,731 nodes, more than any other cryptocurrency, including bitcoin.
  • Dogecoin now has four times as many news articles as litecoin, according to Google News.
  • Dogecoin’s market cap has increased from the 14th position from the time this prediction was made to the 4th position.marketcap

Not bad for a cryptocurrency only two months old. No other coin has ever experienced this level of growth in such a short amount of time. This is a huge testimony to dogecoin’s effectiveness.

Who has the superior protocol? Really.

Despite all this evidence of dogecoin’s incredible growth rate and memetic appeal, there are skeptics everywhere. The most frequent criticism is that Dogecoin’s code is simply a copy of Litecoin’s. As a result, dogecoin is doomed to fail because it offers nothing special over currently existing cryptocurrencies. Therefore even if in the short term dogecoin is beating litecoin, it’s probably a fad. Dogecoin is overvalued, and in the long run everyone in dogecoin will soon join litecoin.

This is an awful argument.

Firstly, the argument that software is the only factor contributing to the success of a coin is incredibly short-sighted and narrow. There have been plenty of examples of coins that had really neat or good protocol, but failed due to lack of community support. Blakecoin (really fast algorithmic hashrate) is a low hanging fruit examples.

Haven’t heard of it before? Exactly.

Software is not the only factor that distinguishes coins from each other. It is not even the most important, especially for low levels of novelty. Instead, it is really the culture of dogecoin that separates it from any other coin, and that is something much more difficult to imitate, unlike code where copy and paste would suffice.

The failure to take into consideration sociological and psychological factors that drive the success of an innovation is a temptation. After all, it is far more difficult to quantify and objectively access. However, it is no less important, because it is a far better predictor of adoption than any slightly superior hashing function. Nobody is going to join a cryptocurrency if nobody spreads it in the first place.

Secondly, this argument is wrong because dogecoin’s protocol does offer something that no other major cryptocurrency has.

The power of Large Numbers

Dogecoin will have 45 billion coins by the time this document is written. By the end of this year, it will have 100 billion. Bitcoin, in comparison, only has 21 million. This matters more than you think.

Humans run on corrupted hardware. Due to the anchoring effect, people enjoy owning larger numbers of things than small numbers. It is more pleasant and desirable to own 100 Blerghcoins than 0.001 Urdcoins, even if they are worth the same monetary value.

The mainstream public is discouraged from buying bitcoin if they realize it has a price tag of a thousand USD per coin. Even if it is possible to own fractions of that coin. Even if it’s possible to own a cent worth of bitcoin.

In theory, it should not matter. Perfectly rational beings would perform a utilitarian cost-benefit analysis and simply do whatever maximizes utility. However, homo economicus do not exist. People do care about irrelevant numbers, and this is called Psychological pricing.

Ever noticed that stores tend to end their prices in denominations of 9? 99 tacThis is because people buy more of the good when they do.  Stores than try to get rid of such pricing often find their sales dropping by up to 80%. The solution is not to criticize such people as ‘irrational’ but to plan your product around them to maximize appeal. Dogecoin does that.

For the same reasons, people find it more pleasant to own exact integers of an item. People will be less reluctant to pick up a currency where each coin is worth cents, rather than hundreds of dollars, since they have already been anchored by regular denominations of money.

Furthermore it’s difficult to calculate transactions in very small orders of magnitude. The majority of everyday transactions are around a few dollars. This translates to something like 0.00237 bitcoin. Such fractions are annoying and difficult to calculate – even more so to mathematically illiterate people. And although litecoin suffers from this problem less, this is because it has a lower market cap divided by only 25 million coins, rather than because it is a permanent solution.

Only Dogecoin solves this problem by anticipating this and significantly increasing the number of coins in supply.

Some people say that all these problems can be solved by forking bitcoin and multiplying the number of coins by a thousand.

This won’t happen. This is a solution that requires massive coordination from a huge majority of its participants to safely be done. For the last 3 months, many have repeatedly requested to switch to the mBTC system instead, with multiple threads on /r/bitcoin pleading for admins and higher-ups to support this effort. Including me.

This has been for naught. Once again, this is because what works in theory often does not work in practice. This is the same reason why bitcoin has not switched to a superior scrypt protocol, or faster difficult adjustments, or confirmation times, and is unlikely to do so in the future.

Big organizations are highly bureaucratic and inflexible. What were you expecting?

The Fastest Hare

Bitcoin requires ten minutes, on average, for each confirmation. This means that each transaction takes twenty minutes to safely validate. Even Litecoin takes 2 minutes.

Dogecoin takes only one.

For obvious reasons, quick transaction times are very useful. Buying and selling things became easier. You can actually use doges in brick and mortar stores now, rather than waiting an impractical 20 minutes. This makes point-of-sale transactions possible.

Yes, there are third parties that help to expedite this, such as coinbase. But wasn’t one of the purposes of cryptocurrency to leave as little power as possible to big organizations, and instead put that power into the hands of the people? If we were going to entrust all our currencies with third party organizations to do transactions for us, then why not use ActualMoney ™ and banks in the first place?

Furthermore, there are major security advantages to faster block discovery, since more confirmations are now possible in the same amount of time, greatly increasing the hash power necessary to perform a gambler’s ruin double-spending attack.

Bitcoin and Litecoin will never fork for faster transaction times. If they could, they would have done it ages ago, as with the mBTC fiasco. Only a new, competing coin can offer a solution. Dogecoin does that.

Survival of the most Adaptable

Bitcoin has a difficulty retargeting time of 2 weeks. Litecoin? 3.5 days. Dogecoin – every 4 hours.

This not only gives greater security from mining-attacks, but also reduces the volatility of monetary supply. For those of you who mine bitcoin, you’ll understand exactly why this is so important. The ASIC arms race causes spikes in bitcoin’s supply at the start of every two weeks, only to dwindle down to nearly none. This is horrible for currency stability. Not to mention the sudden reduction in supply after crashes — when miners drop out.

retarget

Once again, Dogecoin solves this problem where bitcoin does not.

Inflation – The Austrian’s nightmare?

Dogecoin’s inflation rate and block reward schedule is superior to all other major cryptocurrencies. That’s right. You heard it here first.

For the sake of reference, here’s dogecoin’s expected money supply.

Dogecoin supply

Here is bitcoin’s .

Bitcoin supply

There’s been a lot of misunderstanding and confusion going around dogecoin’s inflation rate recently. For some reason, people don’t understand it very well. Some people will notice that dogecoin  increases by 5 billion coins every year after 2014. Forever. That is when they start to freak out. Then they panic and declare dogecoin a sinking ship and cash out all their doges. They are idiots, and here’s why:

Firstly, Monetary inflation does not mean price inflation. It is possible for a currency to increase in supply and value at the same time. For instance, bitcoin grew 10000% in price the same year when its monetary base also increased by 13%.

Secondly, consider that in the second year of dogecoin’s existence, we will have a 5% increase in total money supply. Do you know what bitcoin and litecoin had? Here’s a convenient table for you.

Year Dogecoin Inflation Litecoin Inflation Bitcoin Inflation
1 100% 100% 100%
2 5.26% 50% 50%
3 5% 33% 33%
4 4.76% 12.5% 12.5%
5 4.54% 11.1% 11.11%
6 4.35% 10% 10%
7 4.2% 9.09% 9.09%

Of course, the difference is that dogecoin continues adding to its supply by 5 Billion coins each year, whilst bitcoin and litecoin will continue to halve to zero.

Do you want to take a guess at which year dogecoin will catch up to bitcoin in total monetary supply added?

The year 2174.

You won’t even live that long. *1

This is the misleading part about Dogecoin’s monetary supply. People see the scary “5 billion coins added each year!!!” statement and they start pissing their pants at vivid imagery of Weimar’s hyperinflation. They forget that Dogecoin is way ahead of the curve, because instead of halving every 4 years as bitcoin or litecoin does, it halves every 1.5 months. This gives it a lot of room to catch up, even if the total monetary supply increases by 5 Billion coins indefinitely.

Here’s the thing. Imagine you wanted to create the best, most profit-maximizing coin possible. What specifications would you want? Obviously, you’d want a coin that halves in rewards as quickly as possible. The faster it halves, the more coins you get (because you mined it since the beginning), and the less coins others get. This also makes the coin rarer, so as supply drops, demand goes up.

But on the other hand, you can’t have the coin halve too quickly. If you did that, there would be accusations of the coin being an instamine scamcoin. One halving every 2~ months sounds about right.

What happens when it stops halving? After that, you want a static, minimal, eternal block reward to support and encourage miners. Miners not only secure the network, but it makes up for lost, destroyed, or stolen coins, which leads to lower levels of volatility and a more secure infrastructure. They also help generate interest in the coin. This is paradoxically good for the value of the coin in the long run. This is where you get the profits.

Dogecoin has all of these traits. Dogecoin’s block rewards are perfectly optimized to be worth as much as possible. Not even bitcoin or litecoin accomplishes that. Why halve in four years, when you can do it in two months?

This should be obvious. And yet people on all sides of the inflation argument appear confused and needlessly agitated. It’s not just the anti-inflation sides of dogecoin that are angry and tout falsehoods. Even the dogeflation proponents on my side argue completely awfully.

For instance, there’s a popular rhetoric about “dogecoin having inflation is good because it incentivizes people to spend money, thus promoting dogecoin”. idiot

This is wrong on so many levels.

That logic will only apply if you are only allowed to use one currency. In the case of Government mandated fiat currency, this applies, because you only have one currency to choose from. Therefore you want to spend your dollars as soon as possible. In cryptocurrency, where there are over nine thousand possible competing alternatives, if dogecoin loses value in the long run, everyone would go buy a non-dogecoin cryptocurrency instead.

This is the kind of pseudo-Keynesianism that gives Keynes a bad name. But I digress. This argument is further invalid because Dogecoin will not have inflation. Dogecoin is going to increase in value. Massively. This entire essay is dedicated to arguing that.

 Dogecoin is a deflationary currency. It is NOT inflationary.

If you catch anyone who says that kind of thing, please slap them. Hard. And then refer them to this document. Thanks.

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[1]* Those who know me well will know that I am a Transhumanist. This statement is intended to get my point across, not an assertion of fact.

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Conclusions

Throughout the document, I hope to have demonstrated very good reasons why dogecoin will succeed. I think after all this, it’s safe to say that dogecoin is at least a superior product to litecoin, due to the significant advantages it holds.

Litecoiners are probably going to protest: “But Dogecoin is still just a litecoin clone! Why should anyone actually invest in dogecoin rather than litecoin? We should be the default option because of network effects!”

Network effect

Silly litecoiners. Network effects no longer apply when there is hard evidence that huge masses of people are switching to an alternative despite an already existing competitor. Network effects are  invalid when we have evidence that dogecoin is used more frequently than Litecoin using every metric conceivable. Furthermore, network effects are not an all-encompassing property that forever prevents the rise of new competition. Litecoin may pretend to be the Silver to Bitcoin’s gold, but we all really know that Dogecoin is the Facebook to Litecoin’s myspace. In the long run, it is inevitable that dogecoin will win.

For the aforementioned reasons, I have put all my bitcoins into dogecoin, and I’ve broken the fundamental rules of investing. You shouldn’t break the rules like I did, but if you haven’t yet bought dogecoin, I highly recommend you think about it.

If you enjoyed reading this, please share. Or perhaps you shouldn’t. After all, dogecoin isn’t about the profits, it’s about love and caring, and this document ruins the spirit of that community. I’m not supposed to care about profits, and I’m not supposed to diss other cryptocurrencies. I’m very sorry that I did — I just couldn’t resist. So let this be our little secret.

Tl;dr Dogecoin much wow. Many profits. Such amaze. 1 doge = 1 doge 5ever. also http://www.tuxedagedrinkspiss.tk/

- Tuxedage

____

DJdfqzczd8gmG6sHTYBmwj6xbjL4GmNnwe if you want to tip me. If I get serious amounts of tips, I’ll start writing more dogecoin articles.

dogereal

Various Begrudging Acknowledgements:

I thank DarkriftX “Editor in Chief” for having helped proofread this.
Filips & Yorick, who have, for reasons I cannot understand, trusted my bouts of insanity on dogecoin…
Moolah_, who has been very kind to me so far and gave me my second largest tip.
Last but not least, Shibe_Tabsa, and TeamDoge, who got me into dogecoin and gave me my largest tip yet
 
 

71 Comments on “A serious Analysis of Dogecoin — Or: Why I am all-in on dogecoin.”

  1. Anonymous says:

    Nice article I might have to get some doge

  2. Excellent! Wow! Much Information!
    I hope your message spreads far and wide. (tweeting it now)
    We too are Dogecoin believers.
    Thanks for an excellent article.

  3. […] (See also Tuxedage’s post - A serious Analysis of Dogecoin — Or: Why I am all-in on dogecoin) […]

  4. […] capacity has moved from LTC to Doge. If you’re interested further, I encourage you to read Tuxedage in depth analysis of the coin-  this guy moonlights as a […]

  5. Excellent article. I also think the same as you, I honestly think dogecoin is going to surprise alot of people, much the same as bitcoin did, and the people who didn’t invest early, and just took it as the “joke currency” will laugh on the other side of their cheek ^^ It’s simple, the price per coin costs fractions of a penny, there is still plenty of doge to mine, when it gets harder to mine the price will go up for sure. Even the added amount of doge per year will not make a huge difference imho.

  6. Anonymous says:

    Thanks for an excellent writeup. Not just this one either, I am reading your other entries too. Such analysis, very wisdom, much open minded!

  7. Zeb C. says:

    Dogecoin is nothing more than a welfare economy, a bunch of poor people begging for a handout from the rich. Bitcoin is actually productive. Tipping was never common in the Bitcoin community even in the early days because nobody wanted to be tipped. People preferred to mine their money, buy it, or earn it. How is an economy where every new guy expects a handout going to survive?

  8. […] A serious Analysis of Dogecoin – Essays and other Musings […]

  9. […] A serious Analysis of Dogecoin – Essays and other Musings […]

  10. QiteLi says:

    Hi, I’m a Chinese shibe, your essay is so good and impressive. Can I translate it into Chinese? I think it will transform some speculators into shibes.

  11. […] a few “articles” written by “knowledgeable people” about the future of this […]

  12. Mad_Doge says:

    In case you’re wondering why DOGE price is falling… it’s because everyone is selling DOGE and buying Maxcoin

  13. One large error, is PeerCoin is not aimed at the retail market, it does not compete with doge.

    PeerCoin is aimed at high value, backbone currency. Sure Dogecould win out in retail, bit its has little hope in high value market, interbank , forex, etc. So DogeCoin will go up alot but it will cap out much lower than you think. PeerCoin is takeing the lions share of the whole crypto market.

  14. Anonymous says:

    One large error, is PeerCoin is not aimed at the retail market, it does not compete with doge.

    PeerCoin is aimed at high value, backbone currency. Sure Dogecould win out in retail, bit its has little hope in high value market, interbank , forex, etc. So DogeCoin will go up alot but it will cap out much lower than you think

  15. Anonymous says:

    The Dogecoin community sucks. It’s just a haughty circlejerk about how much better they are than every other cryptocurrency despite not doing much of anything. Pride comes before the fall. Dogefags won’t see it coming though because criticism of anything is immediately rejected there because dogefags so easily get butthurt. People will eventually get sick of the smugness and faux niceness and soon admitting that you’re a Dogecoiner will be like claiming to be a My Little Pony fan or a fedora-wearing atheist. It was alright when it was a joke but now they act like they’re God’s chosen people.

    “Altruism is the deepest impulse in human nature which has been masked by the necessities of the human condition. Dogecoin is allowing us a gateway back to the world of the child that all humans long to return to. For those who are interested here is the explanation of human condition: http://www.worldtransformation.com

    You can’t make this shit up! Dogecoin is leading to some spiritual revolution? Get over yourself dogefags. You are not good people because you gave a few satoshis to some Jamaicans or some people who probably register dozens of reddit accounts to scam you. Do some real charity that doesn’t require sitting at a computer and then talk. The creators of the coin and their friends are fucking up you the ass holding most of the coins waiting to run off with their millions of shekels and you’re stupid to realize it because they put le epic meme on it and give you a few cents. Dogecoin is stupidity at its finest. No wonder people keep electing talking heads like Obama and Bush.

    • Anonymous says:

      You seem upset. Are you from /r/Bitcoin? Because you give off the impression of a typical Bitcoin loving, government hating, fedora wearing, neckbeard athiest keyboard warrior.

      • Anonymous says:

        Do you realize who I am? I am the dude who will fuck you up! I have more BTC, LTC, and NMC than you EVER will hold in DOGE! I have contacts throughout the federal government, and they will track you down, steal all your precious MEMECOINS, and leave you to rot in prison for the rest of your miserable life under charges of money laundering using your precious crypto!
        Dogecoin is nothing but a GIANT CIRCLEJERK! Just go there and you see people upvoting stupid reposted memes ALL DAY LONG with NO intellectual value whatsoever! Dogecoin is nothing but babbys first crypto-it is truly the coin with the least intelligent community I have ever witnessed. I posted constructive criticism there once (this was before it got super mainstream and even more circlejerky, and I was deciding if I would invest in it or not), and I was immediately downvoted to hell. If that isn’t a circlejerkl, I don’t know what is,
        You also regurallly invade other subreddits and should be banned for it! You are the SRS of the crypto community-you blatantly downvote brigade other subreddits, but always deny it and pay up your shekels to the admins for immunity.
        People on 4chan, the place that created you, got so fed up with you that they made /biz/ just to get your “General DOGE Thread”s out of the most intelligent communities on 4chan, /g/ and /b/.
        Yes, I do regurally visit /r/Bitcoin. That is because I enjoy intellectual debate and non-circlejerky behavior. All posts are upvoted equally on /r/Bitcoin unless they are obvious trolls. We accept good AND bad news, and are proud of it. I also regurally browser /r/atheism, though it is being increasingly invaded by rule breaking tippers such as yourselves. There’s a reason your stupid tip bot keeps getting banned, and that is because you idiots wont keep your stupid coins to yourselves. You regurally harass media outlets, exchanges, businesses, etc. into accepting you as if you are a legitimate currency! I know a pizza place owner in my town that did not stop getting calls from you douchebags to accept dogecoins for over 4 hours. And during that time, you regurally yelled at him and his employees for a polite refusal, blew whistles into the mic to try and make him go deaf, and gave him death threats to him and his entire family.
        I do not have a neckbeard, though I do sport a fedora every now and again, as they are truly the most stylish hat available today (thanks for that compliment, by the way). I would consider myself a democratic anarchist, but unlike you, I do not sit around all day, harassing people over the phone to generate a false illusion of self importance and starting arguments across the internet in the name of “2troll4doge”
        I hoped to see something intelligent or even intellecually stimulating in here that would convince me that dogecoins were not just a giant fad that continued to suck in victims to this scamcoin. I was wrong. Even a specialized cryptocurrency trader could not help but fall to your “cute” MAYMAYS. Your currency is deflationary-it’s literally bound to fail, and nothing can stop that. Bitcoin is clearly the better coin for that reason alone-the value will never stop increasing, even after all the coins have been mined. I hope you’re happy with yourselves, having scammed yet another innocent victim into buying your stupid coin. But just remember that you will never fool the intelligent miners such as myself. One day, people will realize how awful the dogecoin community has become. They will flock back to their roots at Btcoin, and they will never look back.

      • Anonymous says:

        C’mon, I AM the real anonymous!

    • Z says:

      You need a hug, and looking at your angry post on February 14 you probably need a girlfriend too. The link to worldtransformations cult explains your state of mind.

  16. Anonymous says:

    I found your analysis very interesting. I think Doge got the formula of success.

    I made an analysis of the future pricing of BTC LTC and other criptos. I found BTC / LTC had the same price ratio as gold / silver. In the beginning I though Doge was the cooper, so I think the real price of Doge should be around $0.003 – $0.005. (In that moment, the currency value was $0.0002654025).

    But now, I think Doge is in a serious race, of course the currency will have bumps and dumps… But if Doge get the same market cap of LTC it should worth around $0.008 – $0.01 (per unity), and if becomes as strong as BTC it would worth $0.10 – $0.13.

    At this time, the virtual currencies market has not been developed enough. We don’t know the real commercial power of cryptos, then, Doge = 1 USD is an understandable dream… xD

    I think Doge supporters are mind open to topics as regulation, at least more than bitcoin miners. We must realize that -we like it or not-, legal framework is really important for the development of a healthy market.

    In the beginning, I also thought that Doge was a joke. Now I have 80 % of my portfolio in Doges and I’m mining it 100 % :D

  17. Dent says:

    Awesome post, thanks for writing, tip is on the way. I would add to your section about the number and fiat value of all Doge transactions being impressive. No cryptocurrency is functioning, yet, as a ‘currency’ in any strict sense of the word. Money (to paraphrase Marx) is something that, within a cultural or geographic boundary, is universally equivalent to all other goods and services being exchanged, and whose quantity measures the relative values of all the articles being exchanged. Currency is the real and immediate symbol or counter or form of money. In the case of money that it itself neatly divisible and exchangeable then it becomes currency in the form of its definite units, which is how the cryptos work.

    My point in laying that out is that the more of a particular currency that actually changes hands, the more likely it is to become money, or to expand the cultural context in which it acts as money. On this point Doge has a huge advantage over other cryptos. Where Doge is very weak at the moment is its ability to purchase goods and services directly on a market. I don’t think Doge’s growth in this area has been as fast-paced as its growth in others. But on the other hand, we have to look at how much Bitcoin and Litecoin is actually spent on goods and services currently offered and priced in crypto.

    There is another way to measure the value of a currency rather than Market Cap, which if I understand it right is the total amount in existence converted to its exchange value on a fiat exchange. It is more interesting to look at the total value, in whatever other unit you’re interested in, of the goods and services that are actually exchanged for a particular currency. In this context, a currency that is exchanged frequently for goods and services is far more valuable, because the same units of currency can be exchanged many times over each day or month (this is the velocity of money). Doge has potential to achieve a much higher velocity and we could easily see it make #1 in terms of the total value of goods and services paid for in crypto.

  18. durp says:

    Debunking this doge propaganda:

    >The biggest and foremost reason is that dogecoin has an insanely high reproduction number (R-factor). I first identified this phenomenon during 20 Jan, and so far, the evidence heavily confirms it.

    >The very aggressive, widespread, frequent tipping that goes on within dogecoin.

    Comparing Dogecoin to a virus as is done in this section is flawed. Unlike a virus, when it “infects” people (makes them aware of Dogecoin), it cannot compel them toward any behavior or circumstance. If I get AIDS then I have to do something or it will kill me. If I get tipped Dogecoin then I don’t have to do anything. That a person has been tipped some Dogecoin does not guarantee that they’ve done or will do anything else that will actually benefit the community beyond being aware of its existence. There is no measurement of actual engagement with the currency.

    By comparison, because Bitcoin actually requires a significant investment to gain any reasonable amount of it, its users and holders are encouraged to take a proportionate interest in its success. That dogecoin holders are actually expecting lost dogecoins caused by lost private keys to help offset the implemented inflation shows how carelessly most Dogecoin users treat their dogecoins.

    To address your “evidence”, it’s worth noting that in the art appreciation experiment the assistant asked for some raffle tickets, not a new car or something obviously more expensive. The principle of scope insensitivity that you’ve demonstrated shows that the people buying the tickets likely did not perceive very acutely the price difference between the tickets and the soft drink. Your scope insensitivity experiment as it applies to Dogecoin isn’t really a good example either since its participants were proposing to pay imaginary money that in real life would probably come out of a large reservoir of public funds and not their own pocket. You will not get a dedicated army of evangelists for the price of less than a cent’s worth of doge.

    It is the difference (https://en.wikipedia.org/wiki/R/K_selection) between r-selection (many low quality reproductions) and K-selection (few high quality reproductions). The only thing you’ve managed to convince me here is that Bitcoin is oriented toward K-selection and Dogecoin toward r-selection. For the record, humans are the most K-selected species and bacteria are a good example of r-selection. From an evolutionary perspective both could be said to be very successful but from a subjective viewpoint I’d give humans the victory.

    >For example, the “I can Haz Cheezburger” site, based on user-uploaded pictures of cats with funny captions, has been valued at a minimum of $30 million dollars. Their book, “How to Take Over Teh Wurld”, has entered the number one spot of the New York times bestseller list. Humor is a fundamental part of the human experience, and it’s a contributing factor to memetic appeal, not a handicap. There is no reason why dogecoin is somehow an exception.

    The book that you’re speaking of was published 5 years ago and there is no date on the 30 million dollar valuation (which is much lower than even Litecoin’s market cap of 500 million). ICHC’s Alexa rating has consistently fallen since then as can be easily verified. Everything in this section points to Dogecoin having an ephemeral and quickly-waning popularity.

    >At great risk of jinxing cryptocurrencies to the same fate, I will also note that at their peak, soft stuffed toys called Beanie Babies were also worth ridiculous sums of money — hundreds of millions of dollars.

    The beginning of this sentence means that you understand why this is a horrible example, unless you’re trying to warn us that Dogecoin is a pump-and-dump (which is probably the truth).

    >Like it or not, the dogecoin community is cute and funny in a way that no other cryptocurrency has managed to be.

    That’s why people stopped using gold. It just wasn’t cute and funny like that hilarious fiat money.

    >Even if you might find it uncute and unfunny, it’s difficult to deny that the Shibe Inu meme appeals to many others. Good investors don’t buy or sell instruments based on what they personally enjoy. That is irrelevant. It is more important to predict what others are likely to enjoy. The same concept applies here. The Shibe Inu meme appeals to people, so even if I don’t personally like it, I buy based on the expectation that others will.

    People thought Gangnam Style, “I’m Rick James, bitch!”, and the Harlem Shake were hilarious and entertaining too. Try bringing up any one of them now without a groan. People are inherently fickle about memes because they have no utility beyond their popularity. They are the information equivalents of Paris Hilton.

    >Bitcoin appeals to libertarians and anarcho-capitalists. /r/bitcoin even lists /r/anarcho_capitalism on its sidebar! While this ideological association was beneficial in attracting fanatics during the early days of bitcoin, as we move towards mainstream adoption, the same advantage can become a disadvantage — subsequently driving away many others who aren’t radically right wing.

    What percentage of Bitcoin users do you think use /r/bitcoin? It is not promoted beyond one inconspicuous link on the official Bitcoin site. The Bitcoin Foundation has sent representatives to the US Senate. The community is hardly acting as a bastion of hardcore anarchists. Characterizing a community by the fact that a peripheral forum about it has a link to a few ideological subreddits is ridiculous.

    >The other thing that struck me about dogecoin is that it has fanatics in the way that bitcoin had during its early days.

    The difference is that Dogecoin fanatics make funny videos and pictures whereas Bitcoin fanatics made the entire cryptocurrency infrastructure that Dogecoin and every other cryptocurrency relies on. Bitcoin still leads in this regard. I don’t see Dogecoin developers stepping up to help work on the payment protocol. It’s easy for altcoin communities to have fun since the Bitcoin community is doing all of the real work.

    >The fundamental reason bitcoin succeeded was not because of its superior protocol.

    The reason that people became Bitcoin fanatics is because of its superior protocol. Any early Bitcoin investor had to be investing because of the fundamentals.

    >and that it’s still the case that a very small number of bitcoin owners hold a disproportionate number of bitcoins.

    This is impossible to measure due to the pseudonymous nature of Bitcoin. And what about Dogecoin? Do you have any proof that the gini coefficient of Dogecoin is lower than Bitcoin?

    >The two founders of Dogecoin, Jackson Palmer, and Billy Marcus, are very active. They openly discuss any issues that Dogecoin might face in the future, as well as work with the community to find the best way to resolve them. They reply quickly and concisely to proposed changes to dogecoin’s protocol.

    You mean that time they decided not to fix a bug that they weren’t even aware they had introduced for like a year, the one that completely changes the distribution of the currency from what it was advertised as? That’s so industrious of them. What real development has Dogecoin done besides changing the font to Comic Sans?

    >This immediately gives Dogecoin an advantage that many other cryptocurrencies do not have — Bitcoin being a major example. Satoshi Nakamoto, the main person responsible for bitcoin, disappeared in 2010, never to be seen again.

    In his place, Satoshi Nakamoto left Bitcoin in the hands of a dozen or so individuals who are actually more talented in programming than he is. The idea that any cryptocurrency’s developers are more talented than Bitcoin’s is laughable. Did Dogecoin make the payment protocol? Will the Dogecoin developers fix the recent transaction malleability issues? No, they will simply wait for the Bitcoin developers to do it, merge the code, and then claim victory because they funded an amateur sumo wrestling tournament or something. It’s easy for developers to seem competent when 90% of the work is being done for them. This is your silliest point by far.

    >A substantial portion of 4chan supports dogecoin.

    4chan started the whole lolcat thing. Try posting one now. Furthermore, a substantial portion of 4chan does not support Dogecoin. 4chan is far too polarized of a community to imply that it’s going to help Dogecoin out.

    >Dogecoin has a higher number of unique transactions per day than both bitcoin and litecoin combined. (Unique means that you can’t send transactions back and forth between addresses you own and have that count. So this cannot be faked).

    Anyone can generate an infinite number of addresses and keep sending coins down the line. There is no way to completely eliminate the possibility of faking transaction statistics. Even if they are true, how much of these transactions are actually useful commerce and not just bribes (also known as “tipping”) to new users?

    >There have been plenty of examples of coins that had really neat or good protocol, but failed due to lack of community support – blakecoin (really fast protocol) or FckBanksCoin (a lot of funding) are low hanging fruit examples.

    “A lot of funding” is not a technical issue, and blakecoin promotes itself on the fastness of its hashing algorithm, not its network protocol. These are two very different things. You have a lot of learning to do before you are fit to analyze cryptocurrencies. Any coin from Peercoin to Primecoin or NXT would have been better examples (though ultimately flawed).

    >Due to the anchoring effect, people enjoy owning larger numbers of things than small numbers. It is more pleasant and desirable to own 100 Blerghcoins than 0.001 Urdcoins, even if they are worth the same monetary value.

    So you’re saying that Dogecoin is appealing to the lowest common denominator by drawing them in with a lot of shiny zeroes? These are the kind of people you want in your market? What’s going to happen when the first slightly believable piece of FUD about Dogecoin comes out? They will panic sell and the price will crash.

    >Some people say that all these problems can be solved by forking bitcoin and multiplying the number of coins by a thousand.

    Is there any proof that forward stock splits have a positive effect on the price of an asset?

    >This won’t happen. This is a solution that requires massive coordination from a huge majority of its participants to safely be done.

    Any entity can list Bitcoin prices in terms of mBTC and some already do.

    >This is the same reason why bitcoin has not switched to a superior scrypt protocol, or faster difficult adjustments, or confirmation times, and is unlikely to do so in the future.

    The fact that you think that scrypt is objectively “superior” as opposed to a trade-off among various factors or that smaller confirmation times are always better once again proves that you don’t know enough about what you’re talking about.

    >Big organizations are highly bureaucratic and inflexible. What were you expecting?

    Bitcoin is not an organization. It is a community.

    >For obvious reasons, quick transaction times are very useful. Buying and selling things became easier. You can actually use doges in brick and mortar stores now

    Nobody is going to wait one minute at a cash register to process a transaction any more than they would wait ten. This issue cannot be solved simply by decreasing the time between blocks, because any reasonable amount of time for PoS solutions would dramatically increase the amount of orphans and chain splits. That you did not address this issue at all once again proves that you are not fit to be giving a serious analysis of this technology.

    >If we were going to entrust all our currencies with third party organizations to do transactions for us, then why not use ActualMoney ™ and banks in the first place?

    Under the Federal Reserve system, banks are a mandatory part of how the currency is distributed. Businesses like Coinbase provide an optional convenience. This is a completely false equivalence.

    >Furthermore, there are major security advantages to faster block discovery, since more confirmations are now possible in the same amount of time

    All confirmations are not equal. One Dogecoin confirmation is not equal, security-wise, to one Bitcoin confirmation. A confirmation is only as good as the amount of hash power that it takes to undo it (that is, replace the block confirming the transaction). In two networks with equal hashing power, a confirmation that takes a shorter amount of time will provide less assurance than one that takes a longer amount of time. Dogecoin has much less hash power overall than Bitcoin, so one Dogecoin confirmation is even more insecure by comparison to a Bitcoin confirmation. I feel like a broken record, but that you don’t understand this is more proof that you are out of your depth here.

    >The ASIC arms race causes spikes in bitcoin’s supply at the start of every two weeks, only to dwindle down to nearly none. This is horrible for currency stability

    Do you have any proof that this significantly affects the price? Unlike altcoins, Bitcoin has never had any significant network slowdowns or shutdowns due to difficulty changes.

    >I have no idea why Satoshi thought 2 weeks was acceptable, but perhaps I’m saying this with the benefit of hindsight.

    You’re faulting him for not being able to predict the result of something that had literally never been done before? That’s altcoin arrogance at its finest.

    >Secondly, consider that in the second year of dogecoin’s existence, we will have a 5% increase in total money supply. Do you know what bitcoin and litecoin had? Here’s a convenient table for you.

    I’m so glad that you made a nice table to accurately sum up why Dogecoin is a scam. If you look, you’ll see that while Litecoin and Bitcoin go from 100% inflation in year one to half that in year two, Dogecoin goes from 100% inflation in year one to a twentieth of that in year two. That means that if you didn’t discover Dogecoin in its first year, you are mining for scraps that equal only 1/20th of what the first year early adopters got, and it only goes lower from there. In Bitcoin and Litecoin you still were able to get one half of what the first year early adopters got in the second year. To put it simply, Dogecoin is ten times more skewed toward early adopters than Bitcoin and Litecoin. What happened to fairness and spreading the wealth? Don’t you really just mean bribing gullible people with “tips” worth less than a cent?

    “Shhhh! We’re not in this to be greedy shibes! Have a tip! It’s got like two or three zeroes so you know it’s worth something.”

    >One halving every 2~ months sounds about right.

    According to what research or verifiable mathematical formula?

    >That logic will only apply if you are only allowed to use one currency. In the case of Government mandated fiat currency, this applies, because you only have one currency to choose from. Therefore you want to spend your dollars as soon as possible. In cryptocurrency, where there are over nine thousand possible competing alternatives, if dogecoin loses value in the long run, everyone would go buy a non-dogecoin cryptocurrency instead.

    You did not address the real reason why inflation incentivizes spending in the slightest. Inflation incentivizes spending because it reduces the future expected value of the currency. This makes a person want to spend it earlier in order to extract the maximum value out of it, which includes converting it to another currency.

    I think that addresses most of your arguments that had any real appearance of substance. Dogecoin is a scam. Its distribution is not better or more fair than any other cryptocurrency (and is less fair than many heavily criticized ones) and no amount of pittances bequeathed upon poor shibes will change that. Its only strength is using cuteness to deceive people, just like that virus from the 90s that exhorted kids to click on a picture of Pikachu. But no pump lasts forever. Once the dump begins, the irrational exuberance will end and we will see some very disappointed shibes. We can only hope they understand that the problem was their own lack of research and not cryptocurrency as a whole.

    • Omglol says:

      Cool story bro

    • tuxedage says:

      durp, I highly enjoyed your criticism of my essay. It is the best one I have seen so far.

      Although I think that most of your concerns are either wrong, inconsequential, or misplaced, I can tell from your essay that you are a highly intelligent and eloquent person. For this reason, I’m going to reject the temptation to respond over wordpress, because complex debates with days of delays in between responses can become annoying.

      For this reason, I would highly enjoy carrying out a conversation/debate with you over skype or IRC. If for any reason you’re still around, could you please add me to skype: Tuxedage.

      Cheers.

  19. Kittehcoin has the same R “meme” number and much lower price today, : )

    • tuxedage says:

      Prove that it has the same R number as dogecoin has. Go on. Show me statistics on Kittehcoin the way I showed evidence of dogecoin’s high R factor.

  20. durp says:

    So basically we should support Dogecoin because it will be the most popular among irrational people who like things for superficial reasons? Sounds legit

  21. D5hyJQwTFQoTeWQ9u1MZrpgFyThiUoP4rF says:

    Nice article, lets all hope for the best.

    oh and congratulations to around 10 million coins. wow!

  22. As someone with a math degree I tremendously enjoy participating in the non-technical aspects of Dogecoin which is to say giving away money on the internet to strangers (despite not being wealthy myself) and speaking like an idiot. Thank you for writing this and framing up Dogecoins current success on sound technical reasons other than ‘such wow’.

    If it hasn’t already proven itself more viral than all the other coins put together it soon will I believe. The question is, is it viral enough in relation to how quickly it is being mined? I don’t have any way of answering this but I suspect only a few percent of all computer owning people possess cryptocoins of any kind. Thus by the time the majority of computer users decide to get into any cryptocurrency the ‘halvening’ will have happened and more than half of all the dogecoins will have been mined. My concern for the coin is that the 2 month halving might have been too hasty in relation to it’s intended target: computer owners. It may thus appear to them as an ‘instamine scam’ since it will be all mined out before they were able to get in, dogecoin tipping giveaways notwithstanding.

    That being said I believe the next great cryptocurrency revolution will of course have to be a smartphone app. in my estimation of things ‘mining’ on these devices, which will give access to a crypto to an obviously huge percentage of humans on earth, should consist of nothing more than a ping to detect whether the device is online and connected to the crypto network.
    One of the main flaws of all cryptos is of course how differences in computing power lets some users get great quantities while others get almost none. Such a system of distribution must inevitably fail in the human quest for a more just monetary system.

    I hope the benefits of such a ‘pingcoin’ are made apparent by my brief explanation. Coins should be distributed equally to all online miners regardless of computing power. Perhaps the smartphone app could be more of a thinclient and the full version on computer would handle more of the hashing for which it could garner a slightly larger reward. Mining software should be small and light enough to run on a smartphone or computer while consuming very little power or data usage. If such requirements can be met it is easy to see that the market for such a cryptocurrency could reach billions of people worldwide.

    For the record I am ‘all in’ on dogecoin also.

    Dogecoin like all currencies is going to suffer from the free-ride problem since some who got in early intend to hold until the price balloons without participating in the community in any way.
    The only argument I can offer to counter this flaw is that giving them away to strangers on the internet is one of the most compelling and enjoyable online activities I have ever participated in. I find it often more enjoyable than ‘spending’ it. My observation is that some of the very rich within dogecoin understand that giving away dogecoin is essential to it’s growth and have been doing accordingly.

    • Anonymous says:

      Your ping coin system can be easily abused by increasing the number of “old” and cheap computers to get disproportionally more pingcoins (where as right now you need to invest in serious computer to get disproportionally more than anyone else)

      quantity alone? Or

      quantity and quality both?

      • Nietrol says:

        Your right sir. Some solution of this problem is covered by “proof of stake” but I do not like this, since this does not have any “spirit” of mining. At least scrypt asic are not that powerful comparing to bitcoin’s asics.

  23. Xavier L says:

    Thanks for the read, you’re are confirming why I put my thrust on instinct in dogecoin :-)

  24. SparrowGreen says:

    I am 100% into dogecoins too!!

    Pity i didn’t find this article then. I wasted a lot of time searching and reading and thinking.
    Congrats!! you put all that at one place

    Such reasoning! Much thanks!

    TO THE MOON

  25. Mathias C says:

    Dedicated fiat exchange : litebit.eu has doge. or I misunderstood your sentence ?

  26. Yibbiy says:

    Well said. I got into BTC late 2012. I am 100% out of BTC as well.

  27. snoop doge says:

    What is you prediction for doge value in 2014?

  28. Joe says:

    >Unique means that you can’t send transactions back and forth between addresses you own and have that count. So this cannot be faked

    Incorrect. Transactions can easily be faked by passing coins through chains of addresses that you own, and given the fact that dogecoin has 0 fees and a fast confirmation time it would be free to fake thousands of transactions with only a small number of coins.

    • Anonymous says:

      Dogecoin does have transaction fees, usually 1 doge per transaction, however you can group transactions to get more than one out of a single fee.

  29. Nietrol says:

    Great lecture indeed! Few days ago I sold all my various crypto’s to buy more doge. Dont care for rules of investment. There is war of alt coins out there, and most of them serve as a way to get bitcoins. Except one. Dogecoin.
    I put a lot of hopes for Litecoin, but people behind it do nothing to promote it. It will fail soon. Even Lee, the creator has different project on his mind, and ltc feels orphaned.

    • Litecoin is hilarious. It solved the two major problems of bitcoin, slow transaction times and small number of coins by marginally improving both thus giving people almost no reason to leave bitcoin. Only by detaching from reality because it was a joke did Billy Markus get the freedom to make 100 billion.

  30. ian says:

    Much profoundness!

  31. Anonymous says:

    I have been following the number of addresses for each coin at http://bitinfocharts.com/ it seems the number of address has not increase much.. Could this mean there is not many new users signing up.

    • Anonymous says:

      I suggest you go back and check again. As of 12 Feb 2014 Dogecoin network has more active nodes than any other network and growing in size at roughly 10% per week.

  32. […] digital cryptocurrency. For that reason, Dogecoin has already proven it matters, though people who mistake why are doing so at their own peril. […]

  33. MsD says:

    Thank you for the nice explanations. I’ve learned something and have really enjoyed reading the article. It is good to be reminded to fasten our seat belts. :) Also, it seems that we are witnessing a new economy being born, perhaps the ‘gift economy,’ the one Charles Eisenstein most commonly talks about. All is super exciting. To the moon!

  34. Anonymous says:

    Great article, minor error for you to fix (“due to all the incredibly advantages it holds.”)

  35. Anonymous says:

    I initially invested in other coins including Megacoin but now all my holdings is in Dogecoin. So I am just like you, breaking some of the basic rules of investing. Hope we all succeed in Dogecoin

  36. Anonymous says:

    Iam all in on dogecoin just like you. To the moon.


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