Cryptocurrency / Blockchain

The 3 Problems That Make Dogecoin Such a Poor Cryptocurrency

It’s still not a good investment

I am still not a friend of Dogecoin. Yes, the bubble might be fun, but it’s actually not. In a previous article, I described how it could have devastating effects on the entire crypto space. I argued Dogecoin is not a good project, but a shitcoin — but why really?

If it wasn’t clear to you yet, here are all the essential reasons Dogecoin is not a good crypto project.

1. Who Is Developing Dogecoin?

Most cryptocurrencies have huge teams working on them. Besides the permanent employees, fans also contribute to the open-source code of the projects.

Seeing who is working full-time on Ethereum, Cardano, Polkadot, and Algorand are impressive. Many intelligent people who enjoy a lot of respect in the industry contribute to the blockchains.

There is a long-term plan for most crypto projects; if ever a problem arises, someone is immediately there to solve it. This is the reality in most large crypto projects.

Dogecoin is also at the top of the market capitalization rankings right now. So what about the team behind the meme coin?

Well, there is no actual team. If you look at the official source code of Bitcoin, you can see that the latest changes were usually only a few minutes ago. In Dogecoin’s official GitHub repository you can see that the last commit was a few months ago. Most of the source code files have not been changed for months or even years.

In case of problems, it is to be expected that there will be no solution anytime soon — there is simply no real team behind the coin. And speaking of problems, we come to the next point.

2. The Technical Problems of Dogecoin

The fact that Dogecoin is so rarely updated scares me. It is not because the project is not very complex. Due to the close relationship with Bitcoin and Litecoin, Dogecoin also consists of thousands of lines of code that need a lot of attention — anything else would be negligent.

In the past, there have been repeated problems in the Dogecoin world. In 2013 and 2014, the two wallets Dogewallet² and Dogevalut³ were hacked — both resulted in many investors losing their coins.

But the Dogecoin network itself also has a huge problem.

To protect the blockchain from manipulation, it needs a lot of computing power. However, the Dogecoin network does not have this computing power. In the picture, you can see a comparison to the Bitcoin network, but beware: the graph is logarithmized. You can see the gigantic difference on the Y-axis.

If the Y-axis is displayed linearly, the Dogecoin graph is no longer recognizable — the computing power is tiny compared to Bitcoin.

The lack of computers protecting the blockchain is a huge problem. In the event of a 51% attack, the blockchain could be manipulated, causing many investors to lose their coins.

It’s theoretically easy (compared to Bitcoin or Ethereum) to 51% attack Dogecoin to cheat its network to steal coins from others. Some back-of-the-napkin figures crunched by CoinDesk suggest that it would cost roughly $8 million to attack the Dogecoin network for a week (using Antminer L3+ ASICs). - Coindesk

3. The Flawed Tokenomics

Tokenomics is the topic of understanding the supply and demand characteristics of cryptocurrency.

- CoinMarketCap

Investors want to know how much their coins will be worth in a few years. Tokenomics is a critical topic in this context — also because it is one of the few things the cryptocurrency itself influences.

For example, a maximum supply of coins can be coded into the project. Bitcoin has such a limit. More than 21 million BTC will never exist, which makes the coin a good store-of-value. Other cryptocurrencies, which are more eager to provide useful features like smart contracts, often don’t have a maximum supply.

Dogecoin has neither.

The coin is just a means of payment, with no other functions. On top of that, Dogecoin is very inflationary since there is no maximum supply and more and more coins are distributed.

Originally there was a maximum supply of 100 billion coins, but since a change in 2014, the supply is now growing by about 5 billion coins a year¹. Of course, this fact alone does not make a coin worthless — but for a coin like Dogecoin that offers no other features, this is very unattractive. Overall, Dogecoin lacks a plan. In contrast to the competition, there is not even a whitepaper.

Final Thought

In recent days, Dogecoin has received a lot of attention, especially on Twitter. The coin has a bit of a “safe investment to fill your pockets in the short term” status. Admittedly, I have done the same and sold my Dogecoin at high profits.

But just because so many say they will hold the coin doesn’t make it true. In the worst case, the hype is only fed by selfish investors who want to make a lot of money. Once the whales sell, a chain reaction could start, and the value drops drastically.

Dogecoin is a bubble driven by investors who find it funny. We may have to live with the consequences for the entire crypto space and individual investors for a very long time.

Thank you for reading!

In case you want to read more about Dogecoin, make sure to check out the following article: