So much wow. When Billy created Markus Dogecoin (CCC:DOGE-USD) in 2013 he did this as a joke. DOGE’s mining reward system was so ridiculously structured that no one could take it seriously. Initially, miners could earn anywhere from zero to 1 billion coins for completing a single block.
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But Dogecoin holders had the last laugh. Today the cryptocurrency is worth almost $ 10 billion and has one of the most dedicated supporters of tradable securities. Lucky investors could have turned an initial $ 1,000 stake into nearly $ 1 million.
Crucial to this success was a 2014 technical change that the developers made quietly, although celebrities helped. At the Block 145,000 – The coin switched from its random mining reward to a constant payout. Miners now only earn 10,000 DOGE per reward. That move limited today’s inflation to 5.256 billion coins per year and removed the joke that originally made the cryptocurrency unusable.
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The renewed interest in the development of Dogecoin could trigger further changes. If the course of inflation changes again, DOGE could become a reality at USD 10.
Why are the DOGE prices at 6 cents?
Cryptocurrencies usually fall into three groups:
Inflationary: an offer that increases indefinitely (i.e. Dogecoin)
Deflationary: a limited supply (i.e. bitcoin)
Pegged: an offering that changes to match the USD or other underlying asset (i.e., tether)
Today Dogecoin lives life as an inflation coin. Similar to fiat currencies, more is minted every day. And just like its government-backed counterparts, Doge’s benefit remains limited as buyers know they can always purchase more later. (As a real-world example, consider that the EUR / USD exchange rate of 1.2 is practically the same as it was in 1999). In other words, if your currency adds 4% supply every year, it will eventually find price equilibrium with other 4% growth currencies.
The story goes on
Meanwhile, Bitcoin (CCC:BTC-USD) and other coins with limited stocks can often see astronomical increases in value. Similar to picassos, vintage wines and 1868 collectable stampsDue to their limited availability, each minted piece becomes more valuable every day.
DOGE price to $ 1? Or $ 10?
Even without inflationary changes, the price could still reach $ 1. There are 130 billion coins outstanding in the cryptocurrency. At a price of $ 1 per coin, the coin still stays 55% as big as ether (CCC:ETH-USD), the second largest crypto in the world. And because only marginal trading plays a role in asset pricing a couple of great account holders could theoretically send increasing values.
With a bit of luck, the coin could even stay at $ 1. With renewed interest At the Shiba-Inu front coin, developers have since jumped back into their code repository and made crucial suggestions Ease of use and speed improvements. Developers have driven major changes – DigiByte and Litecoin (CCC:LTC-USD) Snippets play a prominent role in the Dogecoin source code. More could be on the way.
Inflation also becomes a minor problem over time – the result of a blanket reward divided by a growing capital base. By 2040, Dogecoin inflation would have dropped to just 2.4%, or roughly the same as US dollars today. By 2060 it would be 1.6%, which makes it deflationary relative to the dollar.
Dogecoin supply and inflation
Source: author calculations
However, sending Dogecoin to $ 10 requires an even more significant change: moving to a deflationary system before 2060.
Dogecoin’s 10,000 rule
Currently, miners earn 10,000 DOGE per block, which happens about once a minute. This means that a target price of USD 10 is no longer within reach. No matter how many people buy Dogecoin, its ever-growing supply makes winning prizes an uphill battle. A price of USD 10 means that Dogecoin must outperform Bitcoin’s market cap and stay there.
In open source cryptocurrencies, however, no rule is permanent. With enough key players voting for change, even projects as big as Ethereum can change their building blocks to keep up with newer coins.
Today, Dogecoin is at the same crossroads. Its code base is aging quickly and like newer coins Cardano (CCC:ADA-USD) and Speckle (CCC:DOT-USD) nibble on their heels. Even Bitcoin appears to be vulnerable to third generation coins, which can execute transactions much faster and cheaper.
So far, the basic Dogecoin approach has helped the cryptocurrency avoid obsolescence. People buy the coin for fun and profit, not for ease of use. But unless larger stakeholders also become active, these efforts can only go so far.
The Dogecoin whale
Usually, prominent crypto stakeholders help fund code and business development. For example, the Cardano network has three official organizations that manage standardization, technology, and developer support. Together they share Billions in funding. Ripple Labs has a similarly large advertising budget XRP (CCC:XRP-USD).
In the meantime, DOGE relies on 200 part-time programmers and a legion of online fans for support. Many look like the main culprit Ross Nicoll – work for free maintain an ever-expanding system. Because of this, much of the code is being removed from other coins: there simply aren’t enough resources to develop proprietary code. Others are like the thousands of social media followers on Dogecoin; Many are constantly following the developers limit the supply of currency.
If investors want to send Dogecoin prices down to $ 10, it takes a lot more than buying the coin and posting tweets. It takes a benefactor to fund improvements.
The coin already has some well-known supporters. On Thursday, Elon Musk literally promised it Send the coin to the moon with a SpaceX rocket. He could make an even bigger impact by setting up a Dogecoin Foundation to fund development and encourage adoption among startups and companies. So far he has avoided that and the “Dogecoin whale“. Regular investors can help by making contributions rather than following developers.
Dogecoin on $ 10 is more than a dream – it’s an opportunity that is just around the corner when the community unites one day.
At the time of this writing, Tom Yeung held positions (neither directly nor indirectly) in the securities identified in this article.
Tom Yeung, CFA, is a Registered Investment Advisor committed to making the world of investing easier.
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