Although Dogecoin (DOGE) was initially created for the sake of a good laugh, this meme-currency has surely come a long way. While its creators never expected it to be taken seriously, powerful billionaires like Elon Musk and Mark Cuban have recognized its value — especially after seeing the outburst of people’s interest in it.
SpaceX’s CEO and Chief Engineer’s utmost support to Dogecoin is not new to many, but what’s surprising was Cuban’s statement saying that DOGE is the strongest digital currency medium of exchange.
Cuban’s expression of view has brought joy to some and frustration to others, causing him to be subjected to dispute against the Bitcoin community on Twitter. Other crypto communities claimed that he is “shilling” Dogecoin.
But Cuban made it clear that he never intended to say that DOGE is better than BTC.
Cuban clarified this issue at hand in his Twitter account with his statement, “I don’t shill Doge. I shill the prods & services of my company. Where we allow paying with ANY crypto, 95% of the sales are in DOGE. We can argue anything and everything regarding BTC, but right now, DOGE is people’s way to pay.”
DOGE as Crypto’s Stongest Medium of Exchange
Every crypto community should know that the fastest runner doesn’t always win the race when it comes to digital currencies. No matter how fast it processes transactions, no matter how budget-friendly, no matter how popular a cryptocurrency is, it loses if it doesn’t get adopted.
When it comes to cryptocurrencies, the one that gets adopted takes the prize. Basically, such crypto is the kind of crypto people are willing to spend regularly on daily transactions.
People nowadays can use many cryptocurrencies on transactions like Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Monero, and a lot more. Still, Dogecoin stays on top of them when it comes to regular purchases. As Cuban said, “DOGE is people’s way to pay.”
So, if you look at a cryptocurrency that you think is better than Dogecoin, its performance doesn’t matter if people are not using it for spending and if it’s not getting widely accepted.
Why Not Bitcoin or Ethereum?
Bitcoin and Ethereum have been on top for quite a long time, and no one can seem to grab their place in the cryptocurrency space. However, using these two as a medium of exchange is somehow burdensome.
If you have done in-depth research about these two, you must have heard why.
Huge transactions are piling up with these top networks, which causes the gas and network fee to skyrocket. Their network was also running slow because of this.
Aside from these facts, one of the reasons these two powerful crypto names haven’t been adopted was that people think of them as gold, an investment.
Bitcoin and Ethereum are GOLD
According to Gresham’s Law, “Bad money drives out good money.”Let me give you an example. For instance, you have a bar of gold and a dollar. You’re in a boutique, and the cashier said they accept either of the two. What will you use to pay?
Naturally, a person would cling to a gold bar and use the dollar for payment. A bar of gold is a more valuable asset compared to a dollar as it appreciates.
Let’s change the scenario. You have Bitcoins and dollars. You’re about to book a flight, and the travel agency accepts Bitcoins as a payment. Will you pay using Bitcoin or dollar?
Bitcoin has a limited supply, making it a store of value. This is why people aren’t using Bitcoin that much— it is a good investment, a valuable asset.
On the other hand, unlike Bitcoin, Ethereum is not limited in supply. However, the network’s new deflationary update called EIP 1559 could make ETH’s price explode.
Bitcoin and Ethereum aren’t widely used as a medium of exchange not because they are not “valuable” but rather because they are valuable enough to be hoarded long term.
Bitcoin is undoubtedly a good store of value, but it’s not good enough as a payment system. On the other hand, Dogecoin is a good payment medium but not a good store of value.
Dogecoin’s Unlimited Supply
DOGE’s unlimited supply is definitely a weak point considering the store of value. But if you would look at it as a mere currency, and just that, this supposed to be “weak point” could be its actual strength.
Instead of getting hoarded, Doge is a favorable digital currency because of its steady inflationary supply trait.
Though the word “inflation” might seem too bothering, you should not sweat too much about it. Inflation is normal because it boosts the demand and consumption of consumers, leading to economic growth.
What’s troublesome is “unsteady inflation,” which mostly happens when a central authority manages all the supplies. It’s hard to manage inflation when money can be created easily.
Now, Dogecoin is safe from this so-called unsteady inflation because it was set to increase its supply at an absolute rate. This contract is made on the blockchain, so this is irreversible.
It’s fully guaranteed that Dogecoin’s supply will inflate at a steady rate— with 5 billion new DOGE coins annual inflation. Currently, this is about 3.9% inflation, but its value will recline as years go by.
Inflation is not troublesome as long as it can be controlled. Due to cryptocurrencies’ high volatility and speculative nature, financial analysts and experts are still skeptical about them. Dogecoin, in particular, is the digital currency most experts are wary of. Since it’s created as a meme, it lacks the technological development Bitcoin has.
There are various factors to consider before considering a currency as a medium of exchange, including liquidity, scalability, and of course, adoption.
A medium of exchange is a go-between system that endeavors to process buying, trading, and selling of goods between various parties. This is why a currency should have a standard value before getting entirely accepted as a medium. Think of this carefully.
You are selling your service online, and you come into an agreement with your client that they will be paying you 400 DOGE for a day of work. At that time, the value of that 400 DOGE against dollars is $95.48.
Then a week later, DOGE’s value fell off dramatically, and the value of your 400 DOGE/day wage became $50. You will suffer a loss.
Businesses could also suffer a significant loss if the cryptocurrency they are accepting as a payment depreciates. The currency exchange rate is just an example, but there’s a possibility that it would happen.
Currently, Dogecoin is gaining momentum playing big as a payment option, but there is still no guarantee that this will carry on for a long time.
If the hype is the reason behind DOGE’s push, it would probably plunge in the coming months and years to come. On the other hand, if people were using it because they really think it is conventional and suitable for use, it is not impossible that Dogecoin may really be adopted as a medium of exchange.
Cryptocurrencies, in general, making their way as a widely accepted medium of exchange is still questionable. However, the world’s digitalization hints to us that it might truly happen somewhere in the near future.
