The biggest problem a currency has to overcome is the network effect. It's damned hard to bootstrap a currency, to get people to start -- and continue -- to use it instead of some other currency. With conventional currencies, that's typically done by governments requiring taxes to be paid in it. This has the effect of basically guaranteeing that everyone also receives their income in it as well and makes it difficult for another currency to sneak in. Taxes basically anchor the national economy onto the national currency.
With crypto-currencies, that's not an option since there's no government to levy taxes. But Bitcoin did something similar through vices: the Silk Road and Satoshi Dice got people using Bitcoin and money into the economy because they wanted to use it for drug trafficking and gambling. Because both of those sites only accepted Bitcoin, and they're either illegal or highly restricted in the normal economy, they acted as an anchor to convince people to adopt Bitcoin and move money into and out of its economy. Once bootstrapped, it's now being used for other, more legitimate, purposes.
Dogecoin is bootstrapping itself in a different way, through indiscriminate tipping and charity. It's using this kind of frivolous spending as a way of getting its transaction volume up and bootstrapping exchanges between Dogecoin and Bitcoin and USD. I could see it moving up to micro-transactions of some kind -- something small, perhaps still a joke of some kind, but for transactions (i.e, receiving something in return) rather than donation. Who knows, maybe one day we all woke up, and without realizing it Dogecoin has gone from a joke, to a joke people use for real stuff around the edges, to a real currency with a joke around the edges?
If you look at the actual data, Dogecoin is at 101.2% of it's daily volume, and if you go in $USD value, it is slightly over triple Bitcoins daily $USD trading.
Well.. kind of.
Mining is really thousands if not tens or hundreds of thousands of people competing to try to solve the same block. The one machine to solve it first gets the reward. (or if in a pool, it's given to the pool.) Over and over again- in the case of dogecoin, once every minute or so. The GP's statement about it being a massive waste of resources is unfortunately true - that's a lot of electricity for any popular coin.
> But over time, a secure network becomes valuable for itself, and the reward isn't necessary anymore.
Has this actually happened in any case? Logically if there is no value to be gained from maintaining the secure network (eg, 'mining' new transactions into blocks for confirmation), then many fewer people will do so. The fact that it's a secure network is great - but it doesn't seem enough to entice a critical mass of people to maintain it at a cost to themselves.
In fact, Dogecoin's model is a real world implementation of Milton Friedman's proposal:
“We don’t need a Fed,” Milton Friedman says, twirling a letter opener
as he speaks. “I have, for many years, been in favor of replacing the
Fed with a computer,” he adds. Each year, it “would print out a specified
number of paper dollars” to augment the money supply. “Same number, month
after month, week after week, year after year.”Here's a post from yesterday that includes some statistics about how much volume in USD is actually distributed on Reddit via the Dogecoin vs. Bitcoin tipbots respectively: http://www.reddit.com/r/Bitcoin/comments/20ms1i/if_we_want_a...
The larger cost is the ecological toll underlying the production of the hardware.
Proof of stake has been proposed as an efficient alternative to mining but it's not clear whether it will work.
EDIT: Ah. $99/mo in exchange for zero trade fees. That's actually an interesting dynamic.
Go to CoinedUp and convert dogecoin -> bitcoin. Send bitcoin to coinbase. Sell bitcoin on coinbase.
Kraken isn't open to USD transactions in my area yet.
Also - selling doge to private parties for USD, possibly in person.
https://github.com/dogecoin/dogecoin/issues/23#issuecomment-...
the actual % inflation is comparable to bitcoin's and less than litecoin's.
Phrased another way: define 'artificially' in this context.
Also - they apparently fixed it by making the block reward fixed. http://www.cryptocoinsnews.com/2014/03/13/dogecoin-forks-aga...
With so many Dogecoins flooding the market, it is likely that Doge will remain near worthless forever. Which means it will always be an easy coin to experiment with.
Dogecoin – Bitcoin’s goofy little brother – has just made history. A member of the Dogecoin community donated 14 million Dogecoins (worth about US$11,000 on the exchanges) to a charity with one single message on Twitter. That tweet, to an automated Twitter-bot, is the most money ever donated or sent directly via a tweet.
The Dogecoins were for Doge4Water, a charity set up to help people in Kenya get clean drinking water. The Dogecoins will be converted to real money, and that money will be used to build new wells. The tweet, by an anonymous person who goes by @savethemhood, helped to push the Doge4Water to well past its 40 million Dogecoin (US$30,000) goal. The charity had hoped to reach it by March 22nd, which is World Water Day, and it met that target with a week to spare.
This isn’t the first time the Dogecoin community showed its charitable nature. Last month it raised enough money to help get the broke Jamaican Bobsled Team (yes, that one) to the Sochi Winter Olympics. The generosity makes sense, as Dogecoin is positioned to be the “tipping currency” of the Internet.
For a crypto-currency that was started as something of a joke, Dogecoin is doing some good, and part of that is through the sheer number of Dogecoin users. By volume, it’s the most-traded crypto-currency in the world. Part of that is because it’s so easy and cheap to get into. A person can buy-in for as little as a dollar (US$1 is worth about 1300 Dogecoins at the time this post went live), and the tipping culture is rife within the community. For example, on the Dogecoin sub-reddit, users are encouraged to tip one another small amounts of Dogecoin for insightful or positive comments along with “upvotes” (the quasi-currency of Reddit).
The Dogecoin community has the aim of expanding that “tipping” culture to the rest of the internet by keeping the price of Dogecoin artificially low. Unlike Bitcoin, Dogecoin is not meant to be an investment currency, so much of the shiftiness that Bitcoin users have had to endure likely won’t make its way to the Dogecoin world (though that’s not to say it’s immune).
Still, there’s always going to be some controversy with crypto-currencies, and besides being used as a force for good for bobsledders and Kenyan villagers, Dogecoin, with its catch phrases, such as “wow” and “such currency” and “so crypto”, could be a great way to explore what these new virtual currencies can and can’t do, all while maintaining a sense of humor.