A Cryptocurrency Based On a Dog Meme Is Now Worth Over $1 Billion (vice.com)

Earlier today, the market capitlization of dogecoin, a cryptocurrency based on a meme about a Shiba Inu dog, passed the $1 billion mark for the first time. VICE News reports: Dogecoin was created back in the early days of the cryptocurrency craze. Launched in December 2013 as somewhat of a joke, the meme-inspired coin was dubbed "the internet currency" and designed to promote a sense of community and generosity rather than simply looking to make money. It gained fame during 2014 when it was used to send the Jamaican bobsled team to the Winter Olympics in Sochi and it even sponsored a Nascar team. The currency has been in relative stasis since, and despite no software updates being released in over two years, the cryptocurrency has risen more than 400 percent in the last month -- though one dogecoin is still worth just over 1 cent.

Even Jackson Palmer, one of the founders of the coin, expressed concern about the hyperinflation of dogecoin. "It says a lot about the state of the cryptocurrency space in general that a currency with a dog on it which hasn't released a software update in over 2 years has a $1 billion+ market cap," Jackson told Coindesk.

Comments

Commodity "currency" makes no sense

[Anonymous Coward]

It only works because people have convinced enough other people that it makes sense to invest in it. When that stops being the case it's gone overnight.

The value is completely artificial from start to finish, there's nothing backing it, there's no massive value behind it to stabilize a run. But it exists, and people love new cons.

Re:Commodity "currency" makes no sense

[NicknameUnavailable]

Honestly the commodity regulations make less sense in some cases. Bitcoin is definitely a commodity - it has a planned limit, with deflation thereafter because of lost coins. Ethereum on the other hand is a currency with a planned inflation rate to make up for the lost coins and to grow with the user base. What we need for cryptocurrencies to actually take off are different regulations for different things (Bitcoin under the current commodity based taxation, Ethereum and the like under currency regulation, ICO/crowdfunding coins under securities/stock regulation, charities like Curecoin probably as currencies, maybe with some extra incentives tax-wise to get people to focus on computing projects with tangible value behind them, other donation coins meant to fund things like planting trees, etc.) Cryptocurrencies cover a very wide range of different things and should be evaluated independently if they are large enough to be taxed because lumping them all in one category damages their use, in the case of charities and public works projects it actually defies the nature of the tax codes meant to support projects in the public good to consider them commodities.

Re:Commodity "currency" makes no sense

[CrankyOldEngineer]

No, NicknameUnavailable. Cryptocurrencies are not commodities. Commodities are physical goods or services that are largely fungible. Like wheat, copper, or oil. Cryptocurrencies are designed to be media of exchange. Their value is only in facilitating trade. (And not even very good at that, in my opinion.) They are not investment vehicles (despite what the US Treasury Dept says) and certainly not goods in the economic sense (ie, they have no instrinsic value).

Re:Commodity "currency" makes no sense

[serviscope_minor]

It only works because people have convinced enough other people that it makes sense to invest in it. When that stops being the case it's gone overnight. The value is completely artificial from start to finish, there's nothing backing it, there's no massive value behind it to stabilize a run. But it exists, and people love new cons.

That's more or less money in a nutshell.

Money is abstract and it's only valuable because people believe it's valuable.

Once people stop believeing it's valuable, it stops being valuable and that's when hyperinflation happens. At that point being backed by a state or not makes little difference.

That applies as much to "normal" money as it does to cryptocurrencies.

Re:Commodity "currency" makes no sense

[Actually, I do RTFA]

Except of course if you have no USD in the US, you cannot own real estate (Give us USD each year or it is taken away), drive a car (Give us USD each year or no license plate), or get a passport.

Other countries also insist on being paid in your local currency.

Re:Commodity "currency" makes no sense

[sound vision]

No, intrinsic value means "I can burn these dollar bills to kindle a fire" or "I can melt these coins down and make nails out of them". The exchange value is extrinsic - it comes from outside the currency itself. It comes from the other man who is willing to trade for them.

Re:Commodity "currency" makes no sense

[HiThere]

No. One intrinsic value is "the government has promised that if I pay them enough of this they won't steal my stuff".

It may not be a very nice intrinsic value, and you may not really trust that the government won't change their mind, but it's still an intrinsic value, and it's *the* intrinsic value that fiat currencies are based on.

Pronuncification

[bestweasel]

Is it pronounced doggycoin, Dogecoin (as in the onetime rulers of Venice) or something else? I have to know before i invest.

Re:Pronuncification

[Anonymous Coward]

Is it pronounced doggycoin, Dogecoin (as in the onetime rulers of Venice) or something else? I have to know before i invest.

Do-ge-coin: "Do" as in dog, "ge" as in gene so sounds like gee which is also the dgy sound in kludgy, "coin" as in coin.

Put it all together and its "dodgycoin". And that's also all you need to know before investing in it.

NetJ

[gbjbaanb]

I will just remind our younger readers of the dotcom boom, where tech stocks were seen as the new big thing and pumped up a bubble that eventually crashed. You can tell the top of this by looking at a tech company that was registered on the NASDAQ called NETJ.COM,

This had all the right words in the name, "net", "J" (for Java, hot at the time) and ".com" but its description of what the company did was:

The company is not currently engaged in any substantial activity and has no plans to engage in such activities in the foreseeable future

and this raised several $110 million in IPO funding from ordinary investors when it floated.

So a dog coin cryptocurrency "worth" $1bn... just same shit, different day.

Re:NetJ

[geekmux]

I will just remind our younger readers of the dotcom boom, where tech stocks were seen as the new big thing and pumped up a bubble that eventually crashed. You can tell the top of this by looking at a tech company that was registered on the NASDAQ called NETJ.COM,

This had all the right words in the name, "net", "J" (for Java, hot at the time) and ".com" but its description of what the company did was:

The company is not currently engaged in any substantial activity and has no plans to engage in such activities in the foreseeable future

and this raised several $110 million in IPO funding from ordinary investors when it floated.

So a dog coin cryptocurrency "worth" $1bn... just same shit, different day.

Some odd shapes painted on a canvas, by some guy named Picasso. A used baseball, that some guy named Babe scribbled on. A beat-up old guitar strung upside-down that some weird guy named Jimi used to play with his teeth. An old book of notes by a guy named da Vinci. Old bottles of rotten grapes. Shiny rocks and yellow rocks we mine out of the ground that we melt and polish.

The formula for value (1% subjective and 99% bullshit) was established long before the .bomb or cryptocurrency came around.

Snapchats "substantial activity" was losing hundreds of millions of dollars every year before their IPO and valuation of $20 billion. Makes you wonder how far we really are from the .bomb era of valuation.

Re:NetJ

[Zontar_Thing_From_Ve]

My personal favorite from the time was a company I really wish I could remember the name of. USA Today profiled them along with 5 or 6 other start ups at the time. I can't find info on these guys on the internet, but basically 2 MBA grads from Harvard who knew almost nothing about PCs got this idea - the user would have a space type desktop with planets on it and the planets were like bookmarks where if you clicked on, say, Mars, you would go to the Amazon website. I thought it was the dumbest thing I'd ever heard of, but they opened an office in San Francisco, snagged multi-millions in VC funding, and threw some company stock at Patrick Stewart to get him to be their official spokesperson. For the year or so they were in business, you called these guys and Captain Picard's voice greeted you on their phone system.

I'm reminded of something I read around the time the housing bubble burst in the past decade. A finance writer said his dad told him years ago "Son, when stupid money starts to enter a market, it's time to get out of it." He talked about how a waitress at his favorite restaurant told him that she had just gotten her realtor's license and he said that at that moment he knew that the housing market was going to crash. Stupid money has clearly entered cryptocurrency.

Re:NetJ

[gbjbaanb]

Same if you watch The Big Short where one chap interviewed a stripper about her real estate deals, and she revealed (fnarr!) that she had leveraged up tot he eyeballs on property as "it only goes up". He figured that was the time it was all going to crash. And then she told him she didn't have 1 property but half a dozen condos she was basically buying through debt and speculation.

Hyperinflation

[Anonymous Coward]

That's not hyperinflation. Hyperinflation is when the currency loses value so quickly you can't print new bills with high enough numbers in time to keep up. It's the opposite to what is happening here. Dogecoin is inflationary (it doesn't have a coin cap like Bitcoin), but its value per unit growing is the opposite of inflation.

It really bugs me when people mix this up.

That's called deflation, not inflation

[johannesg]

Inflation is where your coin gets worth less and less. In this case the coin gets worth more and more. That's called "deflation", and economists and politicians want you to believe that it is incredibly bad for you if you can buy more stuff with the same money.

Their reasoning is as follows: "if your money is going to be worth more, you'll wait before buying anything, and that's bad for the economy." Let's investigate that strange claim. Which of the following statements is true?

"I will wait with buying food, because next year it is cheaper."
"I will wait with paying my mortgage, because next year it is cheaper."
"I will wait with buying a car, because next year it is cheaper."
"I will wait paying for a holiday, because next year it is cheaper."

The only category of product that might be affected in some way is replacements for luxury products, i.e. the following statement might actually be true:

"I will wait buying a new mobile, because next year it is cheaper, and my current one still works fine."

The real reason they want you to believe that deflation is bad is this: when new money gets created, it typically ends up in the hands of the richest individuals first. Then it "trickles" down to poorer individuals. However, the speed of price increases is not the same as the speed of trickling down money, and the people at the bottom of the pyramid get the disadvantage of price increases long before they get extra money. In this way, inflation is basically a wealth transfer from the poor to the rich.

Deflation must therefore be the opposite: a wealth transfer from the rich to the poor. And that's why so many economists and politicians are fighting it.

If I had invested in (say) a couple thousand bitcoin when I first heard about it, for a price that was pretty much peanuts, I would now be a very rich man. That's the power of deflation at work.

Re:That's called deflation, not inflation

[smallfries]

Woot! Free money! Oh, wait... that one doesn't happen does it?

You are missing the effect on wage rises - that they become wage drops. This is where the system breaks. If everything is 5% cheaper next year then that includes the value of your labor. Your company is getting 5% less income because the price of its products is dropping. That filters through to you...

But people don't really believe in symmetry - so they refuse wage drops in a deflationary economy. Companies go bust. Banks break. The economy implodes.

Inflation has a soft mode of failure - value leaks out of the system. Deflation has a hard mode of failure - it works up to the point that a systemic shock destroys everything. YMMV.

Re:That's called deflation, not inflation

[LordKronos]

You are missing the effect on wage rises - that they become wage drops. This is where the system breaks. If everything is 5% cheaper next year then that includes the value of your labor. Your company is getting 5% less income because the price of its products is dropping. That filters through to you...

Yes, all these people hyping deflationary currencies miss this. And they miss the next important consequence of that. Most people have more debt than they do savings. Deflation is good for you if you have lots of savings, but not lots of debt. Most people owe $100k or more on a mortgage, but have only a few $k (if that) in savings. Deflation is a benefit for your meager savings, but is a huge hindrance for your much more sizable debt.

When you buy a mortgage, you owe a fixed amount of currency. With inflation, over time your income tends to increase slightly year to year, and over the years the mortgage becomes a smaller and smaller part of your income, making it more and more affordable. This is great because if you buy something you can afford, you can generally count on being able to afford it until it's paid off (job loss and severe employment cut being the exception, but that will hold true for deflation also, so lets not consider that). But with deflation, it's the opposite. You get your mortgage, and the payment amount stays the same, but every year your income drops slightly, and thus every year your mortgage payment becomes a bigger and bigger portion of your income. A mortgage that is affordable when you buy it will one day become unaffordable for you.

I don't think that's what people intend, but that is the natural consequence of a deflationary currency.

Re:That's called deflation, not inflation

[LordKronos]

Maybe you should take a look at wage increases vs. inflation for the past 70 years or so.

In the current system, it 'appears' as if your wage is going up, but it is in fact shrinking.

But in a system built on lies... who wants to hear the truth?

You are actually wrong. It is not shrinking. Over the long run it in increasing very slightly. Over the last few decades it has mostly been stagnant. Any (slight) decrease is only in the shorter term. When we are talking about mortgage affordability we are generally talking about 30 year spans.
https://fred.stlouisfed.org/se...

But you completely miss the point of my post. Yes inflation adjusted income only changes slightly over time (which is to be expected...cost of all good adjusts to what people are making, otherwise we'd all be living in mansions and driving ferraris). But look at that graphs above and notice the slope of that nominal income line. Now realize that the slope of your nominal mortgage payment over 30 years is zero. Your mortgage payment stays the same every year, while your income grows and grows. Even if that larger income doesn't give you more buying power, it makes your large mortgage debt easier and easier to afford every year.

Now try switching to a deflationary currency. To do that, you just flip the graph upside down. Your real (inflation adjusted) income/buying power stays more or less flat over time, but your nominal income would be sloping down. Buy your mortgage payment would stay flat, and every year get just a little more difficult to afford.

Re:That's called deflation, not inflation

[LordKronos]

And how many of them have debt because the currency is inflationary? For them, it's better to invest in a house and take on that debt than to have the money sitting around.

Uhhh, considering the average person's "financial intelligence" (there's probably a better term for it that's escaping me right now), I'm pretty sure their level of debt is not a strategic decision. People are in debt because they are careless with spending, don't plan for the future, don't foresee unexpected expenses. And that's WITHOUT having to foresee the effects of decades of deflation on their spending decisions.

When you buy a mortgage, you owe a fixed amount of currency. With inflation, over time your income tends to increase slightly year to year, and over the years the mortgage becomes a smaller and smaller part of your income, making it more and more affordable.

The banks are not morons. They know money is worth less in the future, and their interest rate takes that into account. You're not getting a free ride because your currency is constantly being devalued.

Of course they aren't moron. Of course they figure inflation into it. On the other hand, by comparison, the average person is fairly stupid when it comes to finances. They often can't look 1 or 2 years down the road, much less 10, 20, or 30 years. They can't think about the other things that are going to happen in life, and whether they will continue to be able to afford that payment that seems reasonable today. Having a kid or 2 (possibly by accident), unexpected health complications, having to care for an elderly parent. These are not things most people will take into account when committing to buying a house.

Inflation provides the vast majority of people with a safety net. Without inflation, a decision you make today that seems financially sound might not be such a good idea when you factor in some future unknown expenses. With inflation, the commitment you make today on buying a house isn't such a large factor in 10+ years when that new expense comes up. On the other hand, deflation is the exact opposite. A seemingly financially sound decision today does not remain financially sound 10 years from now even if no new expenses come up. So now, not only does the average person have to prepare for the unexpected, they are required to look 20-30 years down the road and plan for the expected. They have to take 20-30 years of deflation into account and realize what their income is likely to be that far away to decide if they are likely to be able to afford a house. For the vast majority of people, that's asking a hell of a lot.

Re: That's called deflation, not inflation

[c6gunner]

If you had a negative rate nobody would lend you the money in the first place. I mean really, you come into my bank, and tell me you want to borrow $1,000 at a -2% interest rate so that, in a year, you can pay me back $980? What kind of moron do you take me for?

That's part of the problem with deflationary economies right there; even without a negative rate, people are unlikely to lend you money.

If an economy is inflationary, at 2% that means my $1,000 sitting under my mattress will be worth $980 next year. So if I don't want to lose that $20 it makes sense for me to lend it to you, at say a 3% interest rate, so that I will retain the value of my money and even make a small profit.

With a 2% deflationary economy, on the other hand, the $1,000 sitting under my mattress will be worth $1,020 next year. I don't need to lend it to you, and take the chance that you won't pay me back; I can just leave it sitting there and it will still be worth more the next year. I would have to be a total moron to risk having you run off with it AND also give you a "negative rate" which guarantees that you pay me back less than you borrowed.

Re:That's called deflation, not inflation

[ShamblerBishop]

Deflation must therefore be the opposite: a wealth transfer from the rich to the poor. And that's why so many economists and politicians are fighting it.

Jesus christ where do these crypto-fetishists get their ideas from...Deflation gives existing holders of money, a greater share of societies wealth, while not having to do anything to earn it - the people who benefit the most from this transfer, are those who already hold a lot of money - i.e. the wealthy.

If the dollar or any other major national currency switched to accepting deflation, it is a transfer of wealth to those who are already wealthy, at the expense of those who have to go out and actually earn money (whose wages will be growing smaller and smaller over time).

These crypto-fetishists seem to have invented their own batshit version of economic theory, for hyping Bitcoin and the like - and they get away with it because the economics profession has very little legitimacy these days, as it's mostly batshit itself - just an economic theory warped for justifying political/economic status quo's, rather than trying to define how economies actually work...

Re: Please explain cryptocurrency

[Anonymous Coward]

Bank tellers tell you what you can do with your money?

What African shithole do you live in mate?? USAmerica?

Re:Please explain cryptocurrency

[JaredOfEuropa]

1) So?
2) Anyone can follow your transactions, not just the bank guys
3) Counterparty risk lies with the buyer. No fraud protection
Fiat money is hardly a scam. Central banks can and do manipulate the value of money, and generally they do so to keep inflation at healthy levels. They do not always succeed, but in general the value of your money is pretty stable when it's managed by a decent central bank.

Re: Please explain cryptocurrency

[Anonymous Coward]

Thats what you get living in a third-world police state.

That doesnt happen Australia. or Canada. or the UK.

Move or shut up.

Re:Cryptocurrency value is processing power

[Anonymous Coward]

While it is possible to make a cryptocurrency with a useful proof of work*, most don't do this. Bitcoin wants a SHA256(SHA256(x)) result where a certain amount of LSBs are 0. Some other cryptocurrencies use other hash algorithms. In almost all cases this work has negligible value other than securing the coin.

*) The algorithms needs to calculate something that is computationally hard as this is what a mining farm will do, but it needs to be computationally cheap to verify whether the results is correct as this is what every full node needs to do. One example is searching prime numbers, eg. PrimeCoin. Another may be protein folding, although verification is more challenging here: it is actually NP-Complete, but you can relatively easily say the result is little removed from the optimum with a desired confidence.

Re:"Shiba dog dog"

[DontBeAMoran]

Such grammar nazi. Much passion. Wow.

Re:Please explain cryptocurrency

[DontBeAMoran]

Let's say I start a project. I can easily put a Dogecoin or any other crypto-currency wallet address on the website so people can make donations.

There wouldn't be a PayPal blocking the withdrawal of funds because of "reason X", no credit card company taking their cut and no bank freezing my account.

Re: Please explain cryptocurrency

[Kiuas]

Thats what you get living in a third-world police state.

That doesnt happen Australia. or Canada. or the UK.

Move or shut up.

Eh... What? I'm presuming you're a fellow westerner and as such you're doing a fucking poor job in defending western values and people's right to govern themselves.

A police state is one in which the citizens have no means of changing the way they're ruled and policed. North-Korea being the most blatant example but there are plenty of others, like China, which is not a third world country (anymore) but is certainly totalitarian in its policing and the citizens don't have a say in this. Now for such countries I think as a European that the 'move or shut up' -card may actually be valid. That is, if I put myself into the shoes of a North-Korean who realises the state of things, I'd almost certainly attempt escape rather than try to change the regime because the only realistic way of doing so would be to have an uprising against a large army and a populace most of whom worships the leader as a demi-god because they don't know any better.

The US however is a quasi-democracy. In that the people have a say in who rules them, although currently the electoral collage makes it so that votes from people in some states are worth more than others which makes it possible to get elected as the leader of the country with a minority vote as has now happened twice in the 2000s, so it's not a strict democracy. Whether you consider this a feature or a bug is another thing but the point is they can change the system if they want to so telling them to 'move or shut up' is possibly the dumbest thing to do, especially since it's not trivial to move in and settle to another country.

The whole reason democracies are deemed superior is that they allow for people to change systems they find unjust. And the Americans have shown themselves to be quite capable of this on many social issues: gay marriage, the legalisation of weed and so on, which by itself destroys the argument of a 'police state'. However it's true based on what I've read here and elsewhere that the doctrine of actual policing is broken in the US in many places. The use of force has gone out of hand (the resent swatting incident for example) and the seizures of money are a problem and so on. So the US isn't a police state, it's a state with bad policing. The difference between the 2 is huge. And the important thing is that the bad policing can be changed by the people via voting.