Saturday, September 23, 2023

Dogecoin: The Power of Memes


One of the biggest challenges in finance right now is determining the fundamental economic value of cryptocurrencies. And last week, it made things even more complicated.

Numerous cryptocurrency investors believe that the value of Bitcoin establishes by the fact that it is artificially rare. A hard cap on what know as minting fresh coins also means that around 21 million Bitcoins will exist. It is also popular that Bitcoin’s rate has been dramatically slowing down over time. In this case, it is unlikely to be as national currencies like the Australian dollar.

Dogecoin is a cryptocurrency that gets its name and logo from a Shiba Inu meme that established popularity several years ago. Up to this point, there are now 100 billion Dogecoins in the present. In addition to the roughly five billion new coins that mints every year.

Speculators baffles by the sudden upsurge of almost 800 percent in just 24 hours that happened on January 29. On top of that, many doubted this currency’s having a value for the reason that it has an unlimited supply. 

At the time of writing, the meme coin was worth about $5.6 billion on the stock market.

Dogecoin gains popularity

After the pseudonymous Satoshi Nakamoto publicized Bitcoin, Dogecoin had already established its name as being one of the original altcoins.

Seeing things from a technical point of view, Dogecoin does not feature any new advanced methods. Like many existing altcoins, it is based on the original Bitcoin source code.

To add more, it is based on Litecoin, which is reversely based on Bitcoin, with small alterations like faster transactions and removing the supply cap. However, Dogecoin, when seen through a cultural lens, is much more interesting than the others.

Software engineers Billy Markus and Jackson Palmer were the ones who created cryptocurrency. Palmer, being an Australian, has exited the project. Most of all, they did it to disassociate themselves from Bitcoin’s tarnished reputation as money used for illegal activities.

Dogecoin now outlasts almost all early altcoin derivatives and has a thriving investor community. Dogecoin’s users funded the Jamaican bobsled team in 2014. Shortly thereafter, they sponsored NASCAR drivers.

Elon Musk, known for being the world’s richest man, posted a tweet in December last year quoting “One word: Doge.” This publication sent Dogecoin’s value soaring. He is one of the high-profile advocates of the cryptocurrency market.

Collectivism Fosters Innovation

On Reddit’s thread, they believed that Dogecoin’s value made it a new global currency. Musk said on the Clubhouse app that Dogecoin was established as a pun to tease cryptocurrency, but fate likes irony. One of the most intriguing outcomes is that Dogecoin may soon become the worldwide currency.

It is best to view Dogecoin as a cultural product rather than a financial asset. The reality is that cryptocurrency investors seldom see this as a serious investment or treat it as an ordinary trade. Instead, owning Dogecoin means participating in the culture. People buy it because it’s fun, essential, and provides a welcoming and enjoyable experience in the community.

If we actually adopt cryptocurrency as a cultural product, then last week’s high changes in Dogecoin’s price actually make sense. The gain came when the meme-centric community drove the share price of video game retailer GameStop from $20 to $360 in only a few days.

This is the first-time behavior, and it’s unlikely to be seen before, making the global financial markets nervous.

R/WallStreetBets was a particularly interesting aspect of the Reddit forum. This aligns with the assumptions on the hedge fund that use as a bet on GameStop’s dividend cut. This somehow makes its users have fun.

With the developers of Dogecoin originally creating it just to have fun, this activity is no surprise.

Dogecoin: The Internet Icon

Few people like to participate in financial markets as a form of consumption like what they are doing for investment. They do this for entertainment, leisure, and to involve in the community.  

There is no existing fundamental theorem for pricing art, resulting in having a hard time systematically valuing cultural assets such as Dogecoin compared to financial assets.

By definition, the demand for memecoins will likely change as internet culture shifts. This can transform into a financial bubble instead of a cultural bubble. RMIT professor and crypto-ethnographer, Ellie Rennie, called these “playful infrastructures”.

Studying Dogecoin closely leads us to understand its interplay of technology, culture, and economics.

Some cryptocurrencies make to produce small payments or to be flexible value holders, making them extraordinarily diverse. Some serve as internal tokens for protecting financial privacy or managing smart contracts, supply chains, or power grids.

Bitcoin and Doge coins almost mirror each other. They only differ from their codes for a few parameters, and their economic purpose is entirely different.

Bitcoin quotes as a kind of digital gold, distancing itself from political and economic doubt. On the other hand, Dogecoin adds to a user’s digital wallet for the sole reason that they think it’s funny. Considering that, memes create a big impact in an open digital economy.

Vincent Sanchez
Vincent Sanchez
Vincent Sanchez currently writes articles for Cryptoconstellation. He completed his Msc in finance and had a successful career as an accountant. Vincent enjoys travelling and working out.

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