By: Ethan Shervanick, 16yr old Intern
We have all heard of Dogecoin at some point, whether it was at the start of it’s strange bull run, or in memes directly after the Gamestop fiasco. But some people won’t understand why I’d be bearish on a token that looks so much like bitcoin from the outside. So, I will be comparing Bitcoin’s defining properties to Dogecoin, and you will (hopefully) see why this is just a bubble. Even though Dogecoin may be a pump and dump, we cannot deny that it has introduced many new people to the crypto community, and these people may stay for years to come. The characteristics that define Bitcoin: decentralization, market cap, scarcity, and use case.
One of the best qualities of Bitcoin. It is ultimately the reason Bitcoin has a future. Other assets such as the gold and silver of the past have proven that. How does Dogecoin compare? Well… it compares exactly. Dogecoin is also decentralized, very similarly to how Bitcoin is. So, I am at least happy with this fact. Much wow? Decentralization is an easy enough feature to implement into a cryptocurrency. However, while decentralization is an amazing quality, it is extremely common. Most cryptocurrencies are decentralized. Bitcoin is decentralized, Dogecoin is decentralized, Etherium is decentralized, Algorand is decentralized… Almost all major coins are decentralized. Heck, even Basic Attention Tokens are decentralized.
Something that cannot be copied over so easily is market capitalization. At time of writing, Bitcoin has a market capitalization of 1.13 trillion dollars. Doge has a market capitalization of 46.4 billion. While this is certainly a high market cap, it only a fraction of what bitcoin is. So far, Dogecoin just seems like Bitcoin with a lower market cap. So if Dogecoin is just like Bitcoin but with half the market cap, why am I bearish on it?
This is where things begin to differ. Bitcoin is not infinite; in fact only 21 million Bitcoin will ever be produced. However, the key difference with Dogecoin is that it has no limit to how many can be produced, meaning inflation is an imminent danger. A common currency with a similar problem is the US dollar, and every other fiat currency. Printing more money has always led to bad things, such as Venezuela’s economic situation. Not implementing scarcity throws the usefulness of decentralization out the window, because the main concern of centralized currency is inflation.
That is a pretty bad side to Doge, but we are just getting started. Not only does Doge have the capacity to be inflated and devalued to all hell, but it also lacks an actual use case. Every good coin and token has a use case. Bitcoin’s use case is being the best decentralized digital asset. Other coins and tokens have more different interesting uses, such as Basic Attention Token, which is a token that is used for paying people to view advertisements. The problem with Dogecoin is it has no such use case, which will very quickly lead it to be obsolete.
Let’s Pop the Bubble
Even though Dogecoin has all of these terrible qualities, it still has been successful. An internet meme turned into a coin, which in turn made many people plenty of money. The catch to this, however, is it will not last long. It needs better qualities like a use case and some degree, ANY degree of scarcity. However, as an extremely volatile memecoin that will tank within months, it has its place in the cryptospace, for now.