Dogecoin will fail because it is inflationary, it is the worst crypto to store value in, it is worse than the US dollar in every possible way, the transaction speed per second is slow, there is no institutional support, and real-world usage is limited.
Unlike Bitcoin, Dogecoin is inflationary and has no supply constraints. Every minute, 10,000 dojas are added to the network. At this rate, miners are adding more than 5 billion coins per year.
The creators of Dogecoin, Billy Marcus and Jackson Palmer, had good intentions by not capping this coin with shares. For example, if the total number of coins is limited, the miners will stop guarding the net when the number of winning blocks decreases. As the block reward decreases, transaction costs increase. This is what happens in the Bitcoin blockchain. To solve this problem, the creators of Dogecoin have created this mysterious inflation. But that created another problem.
Because of this inflationary model, the doge is not a store of value. In fact, it is the worst crypto as a store of value. Almost everyone in the crypto community, including institutional investors, is buying bitcoin because it is deflationary. On the contrary, investors are less interested in Doge because the network is devaluing by the minute.
When a company issues new shares to attract more funds, it is considered detrimental because it reduces the investment of existing investors. Almost everyone blames the government for printing money out of thin air, causing inflation. So why aren’t we criticizing Dogecoin when its inflation is higher than the US dollar?
If you use the U.S. dollar or your local currency to buy Dogecoin, your investment is negated on two fronts:
- Your Dogecoin is devalued every minute.
- The US dollar is also being devalued by our government.
If we buy the dosh and hold it, we can make a profit if the rate of appreciation exceeds the dosh and the rate of inflation in US dollars.
Dogecoin is not a good digital currency. Yes, as a currency it is better than bitcoin, but worse than the dollar.
We can use USD both offline and online, while we can only use Doge online. There is no argument for offline operation.
For online use, we can transfer USD through various network mechanisms such as ACH and bank transfer. We also have VISA, Master Card, Amex, Discover, Paypal that handles our online purchases with a debit or credit card.
VISA alone can process 65,000 transactions per second. Each operation is deleted in a few seconds. Let’s compare that to Dogecoin’s transaction speed.
The Dodge lockdown time is 1 minute. This means that the network takes at least one minute to clear the transaction. However, if the network is overloaded, this time increases significantly, sometimes to several hours.
We can determine the theoretical number of Dogecoin transactions per unit time using the following formula:
- (Block size limit) / ((minimum possible transaction size) x (block time in seconds))
Using this formula, we see that Dogecoin can process 70 transactions per second:
- (1024 x 1024) / (257 x 60) = 68 (block size 1 MB, block duration 1 minute)
However, due to network sprawl and other reasons, the Dogecoin network can actually handle 40 transactions per second.
According to the U.S. Census Bureau, 330 million people live in the United States.
In one day Dogecoin can process 40 x 60 x 24 = 3,456,000 transactions (in practice 40 transactions per second).
So, if all Americans adopt Dogecoin, each person will be able to make a transfer every 330,000,000 / 3,456,000 = 95 days (3 months) on the Dogecoin network. No matter how many computers we add to this network, the transfer rate will not improve unless we change the underlying Dogecoin protocol.
Isn’t it absurd that we can buy something with a doge every 95 days? How sustainable is it? Why do we even dream of the Doge ever replacing the Dollar?
No institutional support
Bitcoin now has a market capitalization of $1 trillion, Ethereum has a market capitalization of $200 billion. This is not due to individual investors, but to institutional support.
Investors invest to maximize their returns. Due to the inflationary model of dojas, institutional investors are not interested in this cryptocurrency. Therefore, the price will not increase.
Cogecoin is not a stock, it is a currency. When we buy an interest in a company, we get a fraction of the ownership in that company. The company has value. When a company grows and its sales increase, its share price also increases.
On the contrary, Dogecoin is not backed by anything. The price will go up if and only if more people buy domes. This way, early investors can walk away with a profit. Investors in later doyas may benefit if more investors buy the doyas and the price rises accordingly.
Some companies pay dividends, e.g. Ford, Walmart, Apple. When we buy and hold shares in these companies, we can benefit in two ways:
- Receive quarterly dividends.
- Sell when the price goes up.
There are proof crypto currencies like Polkadot, Ethereum 2.0 where we can earn (dividends) with our crypto currencies. Dogecoin also does not give rewards for betting.
For all these reasons, institutional investors are not interested in investing in this game.
Ethereum has smart contracts, Polkadot can be used to connect different and isolated blocks. Many cryptographers give awards. Bitcoin is deflationary. Cardano can process over a million transactions per second. But Dogecoin has no technological advantage over other blockchains.
Dogecoin is a copy of Litecoin, which in turn is a copy of Bitcoin. The main difference between Dogecoin and Bitcoin is that Dogecoin has a lock-in time of one minute and the stock is unlimited. The bitcoin blockchain, on the other hand, has a 10-minute maturity and a limit of 21 million deliveries.
Cryptocurrencies generally have minimal utility in the real world. Only a handful of stores accept donations. Volatile cryptos. Its price is highly variable. As a result, many business owners are unwilling to accept it as a means of payment.
The doge offers no additional advantage over the US dollar. It is slower than US dollar transactions, has higher inflation and is more technologically complex. Why should business owners take it?
A Dogecoin network without trust is worse than a trusted banking network with good security and FDIC and SIPC insurance.
Release of the mark:
Billy Marcus and Jackson Palmer founded Dogecoin to make fun of bitcoin and crypto in general. According to them, while blockchain is a fantastic technology, cryptocurrencies are an absurd idea. For this reason, many in the crypto community do not like Dogecoin. They believe Dogecoin was launched as a hoax and should be treated as such. Many members of the crypto community are actively avoiding this crypto.
Dogecoin has the second largest crypto community after Bitcoin. Weird cryptography. However, this Community support will not remove the technical difficulties associated with this component. Inflation due to technical problems is the main reason for Dogecoin’s failure.
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