Dogecoin, the meme-inspired cryptocurrency developed last month, is a joke. It’s named after a joke, it uses a joke as it’s logo, and it’s worth is a joke (1 DOGE is currently worth $0.000388). So why is it the single most traded Internet currency, bypassing the more established Bitcoin and Litecoin?
Dogecoin, at least for now, is making no one rich. The “limited” supply model that makes every Bitcoin worth (currently) $822.77 is having the opposite effect on Dogecoin. Whereas Bitcoin is limited to 21 million units (that get harder and harder to “mine” as the supply goes down), Dogecoin is limited to a hefty 100 billion units. As we’ve seen with ink-and-paper currencies in places like Zimbabwe circa 2006 or the Weimar Republic circa 1927, hyperinflation of this sort not only drags the worth down to abysmal levels but effectively renders the currency useless.
However, this small worth is responsible for it’s high trade frequency. Bitcoin’s high exchange rate means people are less likely to trade it for goods, services, or even real-world dollars. In fact, 64 percent of Bitcoin have never been spent (PDF), traded, or done anything but sit in their owner’s digital wallets. This has prompted organizations like Bitcoin Black Friday, an attempt to get these Scrooge McDuck-esque hoarders to open their coffers. This gives Bitcoin the opposite problem of Dogecoin: Deflation.
Dogecoin, on the other hand, isn’t worth the 1s and 0s it inhabits. Trading it requires roughly the same level of commitment as hitting “Like” or “Retweet,” and that’s sort of the point.
The story of the actual Doge meme (which is pronounced with the same “g” sound as“luge”) can actually tell us quite a bit about Dogecoin’s potential. Based on a Homestar Runner joke, Doge was picked up by 4chan, spammed onto Reddit, transferred to Tumblr and reappropriated for Twitter. It effectively is the Charlie Bucket of the Internet’s chocolate factory, surviving every standard of adaptability a starry-eyed young meme can hope to.
That’s because, like nearly every Internet meme, the individual act of sharing it provides no real cost to each of us. We can trade videos and pictures and Vines and whatever else with little effort and absolutely no cost to us, and Dogecoin owners can largely do the same thing.
The “DogeChain”—Dogecoin’s version of Bitcoin’s public ledger called the Block Chain—shows transactions of infinitesimal amounts. Over $518 million worth of Bitcoin is traded per day, whereas Dogecoin trades amount to only a hair under $10 million. So even though Dogecoin is has more than 200,000 times more coins in circulation than Bitcoin, Dogecoin’s low worth means even viral popularity can’t raise it above it’s more “serious” contenders.
But surviving purely on popularity and novelty does not render Dogecoin into the basement of the currency market. Those transaction numbers show no sign of stopping and, as it proves its own steadiness, its worth will climb as scarcity becomes a factor. For now, however, it seems the best use of Dogecoin is as a “micro-tip.” Bots on Reddit and Twitter enable you to give Dogecoin to anyone—even those who don’t have a Dogecoin Wallet—for supplying a link, making a funny comment, or even just being honest and open. Dogecoin is like Reddit karma except it can actually be turned in for something (not many things but things all the same). And if the hunt for those imaginary Internet points tells us anything, Dogecoin could have a long, fruitful future of being almost, but not quite, worthless.
Photo by darwin bell/Flickr, remix by Fernando Alfonso III