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Author Topic: Serious Question: Bitcoin Monetary Policy vs Dogecoin Monetary Policy  (Read 95 times)
Nomadic_Presence
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April 28, 2021, 05:13:31 PM
 #1

So I know that this might sounds crazy, but it’s something that I have been thinking about and can’t fully wrap my head around.

Bitcoin - 50 coins issued every 10 minutes initially and being cut in half every 4 years.

Dogecoin - 100 Billion coins issued initially and 10,000 coins issued every minute thereafter (assuming that the network is secure enough to not allow changes to this).

So my question is... Dogecoin seems to have a stock to flow that is very similar to gold (assuming it doesn’t change). The stock goes up but the flow stays the same (maybe even a little harder than gold - since with gold you can allocate more mining resources as the price goes up). Bitcoin is much harder than gold since the flow actually exponentially goes down over time (and personally think this is better). That being said we in history have never had a base money layer harder than gold (gold stock is expanded by mining), and what is to say harder base layer would be effective in economic expansion? I can see that Dogecoin would be a return to a “goldish” standard (better than the government controlled fiat standard that we are on now) and Bitcoin would take it a step further.

I guess my biggest concern being a Bitcoin advocate is that Dogecoin might be hard enough (to be better than the fiat crap that we have now) and with such a “meme” culture around it, it could actually supplant Bitcoin as the base layer of the crypto economy. Not to say this is something that I want to happen as I feel that Bitcoin is better (the hardest money is the best money), but with people not knowing much about crypto and following the internet fad it might push Dogecoin into being a bigger thing than it should be.

I know that I might get responses back saying that the Dogecoin protocol is insecure and it prone to hacks, monetary policy changes, etc., but wouldn’t that improve as more people adopted it just like how Bitcoin has improved over time?

Just looking for a rational discussion on this as I haven’t seen anyone that has tackled this question (any resources that you have in this would be greatly appreciated)

P.S. I hold no Dogecoin and am a long time frame believer in Bitcoin.
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April 28, 2021, 05:24:40 PM
 #2

Eventually, 10000 coins per minute will be so small compared to the money supply, that it might as well be 0. So, it might take longer, but in the end it will be just as hard as Bitcoin

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April 28, 2021, 05:30:29 PM
 #3

dogecoin supply policy was a copy of bitcoin because it is a copy of bitcoin. but because doge is a jokecoin not a real cryptocurrency and it doesn't have any utilities it started dumping and over the years lost its value.

in proof of work coins when the coin dumps the miners also leave and it leaves the coin vulnerable. so the devs decided to remove the cap and introduce a bigger reward to "pay" the miners to stay. of course with the pump and dumps and the meme-community it gained some traction that has kept this jokecoin alive for the time being.

but in long term as the unlimited supply and the huge inflation in addition to uselessness of Doge will start killing its price by taking it all the way down to zero.

for that reason doge has no similarity whatsoever to gold.

There is a FOMO brewing...
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April 28, 2021, 05:31:56 PM
 #4

Exactly... so when cryptocurrency takes mainstage and DOGE is in the spotlight, it might be possible for DOGE to overtake Bitcoin based on sheer volume of uninformed retail buyers.  Does anybody else see this coming?  With Elon pumping DOGE to all his followers and so many social media people getting "rich" off the pumps I could see this not ending very well for the Bitcoin holders.  It seems strange to me that Elon hold's Bitcoin on the TELSA balance sheet but then pumps DOGE.  It seems like you have to be in one camp or the other, I don't see these two cryptocurrencies surviving together in mass adoption.
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April 28, 2021, 05:38:36 PM
 #5

but in long term as the unlimited supply and the huge inflation in addition to uselessness of Doge will start killing its price by taking it all the way down to zero.

for that reason doge has no similarity whatsoever to gold.

As the first replier stated, inflation is relative and with such a huge current stock of Dogecoin (now or in the future), the flow (inflation) is relatively small.  This is the same way that gold operates, there is a large stock of gold (that has been mined for thousands of years) but there is a continual flow (inflation) from new miners putting gold into the market.

Isn't this exactly what Dogecoin is doing?  Bitcoin is actually harder than gold because the flow (inflation) goes down over time.
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April 28, 2021, 05:44:59 PM
 #6

As the first replier stated, inflation is relative and with such a huge current stock of Dogecoin (now or in the future), the flow (inflation) is relatively small. 

you can't predict the future. all you can talk about is now. unlike gold that has an actual cap and bitcoin that also has an actual cap that nobody in its decentralized world would agree to change, the DOGE supply can change.
since in the past they have made significant changes to "bail it out" in the future as its price gets dumped more it is possible to do the same. for example if the reward per block is X DOGE today it could be come 100,000,000*X DOGE in the future.

There is a FOMO brewing...
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April 28, 2021, 05:50:08 PM
 #7

DOGE has a descending distribution based on the difficulty of the algorithm and it is a copy of Bitcoin. DOGE has an infinite supply but that's not the point I'm worried about. DOGE is not as decentralized as Bitcoin. Demand for DOGE is not as great as Bitcoin.
There are too many DOGEs held by a few addresses. I don't understand why that happened, but I'm not interested in crypto like DOGE.

https://en.wikipedia.org/wiki/Dogecoin

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April 28, 2021, 05:58:17 PM
 #8

As the first replier stated, inflation is relative and with such a huge current stock of Dogecoin (now or in the future), the flow (inflation) is relatively small. 

you can't predict the future. all you can talk about is now. unlike gold that has an actual cap and bitcoin that also has an actual cap that nobody in its decentralized world would agree to change, the DOGE supply can change.
since in the past they have made significant changes to "bail it out" in the future as its price gets dumped more it is possible to do the same. for example if the reward per block is X DOGE today it could be come 100,000,000*X DOGE in the future.

Not sure on this one, but in order to change the block reward in Bitcoin there needs to be mass decentralized consensus to update the code.  I'm not as well versed with Dogecoin, does that same principle apply to Dogecoin?  Maybe today the nodes/miners are highly centralized but could that change in the future with more adoption?
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April 28, 2021, 06:47:17 PM
 #9

Not sure on this one, but in order to change the block reward in Bitcoin there needs to be mass decentralized consensus to update the code.  I'm not as well versed with Dogecoin, does that same principle apply to Dogecoin?  Maybe today the nodes/miners are highly centralized but could that change in the future with more adoption?
Bitcoin block reward do change in every 210,000 blocks mined, it is an automatical process or algorithm, bitcoin is so decentralized in a way nothing can be able to change the block reward, anyone that tries to change the block reward may only lead to nothing or hard fork in a way new a coin will be created, but bitcoin will remain being bitcoin as it has been happening before.

Doge is not decentralized like bitcoin, but I am not sure the control the creator has over doge, but Satoshi Nakamoto created bitcoin in a more decentralized way. There are many coins that can even been burned or more created in which there supply can be altered, but I am not sure if such can be applied to doge, depending on how decentralized it is.

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April 28, 2021, 07:11:07 PM
 #10

it could actually supplant Bitcoin as the base layer of the crypto economy. Not to say this is something that I want to happen as I feel that Bitcoin is better (the hardest money is the best money), but with people not knowing much about crypto and following the internet fad it might push Dogecoin into being a bigger thing than it should be.

I've thought for quite some time that Dogecoin, with its infinite supply and also cheap, it's much better suited for the job of being a coin.
Just then some many years have shown that the number of new coins every day is still too big, and we don't really want to switch from fiat inflation to another one.
And since we already discussing altcoins... right now imho Monero's tail emission looks better, and Monero is also fast and so on.
Still, unlike Dogecoin, it's not present at all exchanges, so Dogecoin still has its advantage.

But I think that after all, neither will replace Bitcoin. Maybe a bit late and frustrating, but I think that Bitcoin will evolve and still remain "the one". Don't forget that although Bitcoin has finite supply, the 8 digits after the decimal point can do wonders.

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April 28, 2021, 07:19:11 PM
 #11

dogecoin supply policy was a copy of bitcoin because it is a copy of bitcoin. but because doge is a jokecoin not a real cryptocurrency and it doesn't have any utilities it started dumping and over the years lost its value.

in proof of work coins when the coin dumps the miners also leave and it leaves the coin vulnerable. so the devs decided to remove the cap and introduce a bigger reward to "pay" the miners to stay. of course with the pump and dumps and the meme-community it gained some traction that has kept this jokecoin alive for the time being.

but in long term as the unlimited supply and the huge inflation in addition to uselessness of Doge will start killing its price by taking it all the way down to zero.

for that reason doge has no similarity whatsoever to gold.

I have read the history of your narrative, and you are right that it is very difficult to compare DogeCoin with Gold. and the early emergence of DogeCoin is an allusion to the emergence of crypto. but get an unexpected karmic law. after being abandoned DogeCoin was actually adopted by Shiba dog lovers in Japan.
2020 is the beginning of Doge's revival after being caught in the dump and pump prices which we already know are not as big as now.
so I agree that your conclusion is difficult to compare from the similarity of gold.

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Nomadic_Presence
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April 28, 2021, 08:00:42 PM
 #12

it could actually supplant Bitcoin as the base layer of the crypto economy. Not to say this is something that I want to happen as I feel that Bitcoin is better (the hardest money is the best money), but with people not knowing much about crypto and following the internet fad it might push Dogecoin into being a bigger thing than it should be.

I've thought for quite some time that Dogecoin, with its infinite supply and also cheap, it's much better suited for the job of being a coin.
Just then some many years have shown that the number of new coins every day is still too big, and we don't really want to switch from fiat inflation to another one.
And since we already discussing altcoins... right now imho Monero's tail emission looks better, and Monero is also fast and so on.
Still, unlike Dogecoin, it's not present at all exchanges, so Dogecoin still has its advantage.

But I think that after all, neither will replace Bitcoin. Maybe a bit late and frustrating, but I think that Bitcoin will evolve and still remain "the one". Don't forget that although Bitcoin has finite supply, the 8 digits after the decimal point can do wonders.

I think the point of my original post was to point out that Dogecoin really doesn't have that much inflation (the new supply (flow) is constant) since the stock (current amount available) is so high.

Bitcoin currently has 18.7 million coins and 900 are put into circulation every day (328,500 a year).  Current inflation equals roughly 1.75% a year at the current rate and current stock.  This will decrease as the stock grows and at the next halving in 2024 and so forth.

Dogecoin currently has 129 billion coins and 14.4 million are put into circulation every day (5.256 billion a year).  Current inflation equals roughly 4% a year at current stock.  This would decrease as the stock grows, but would not have the benefit of supply halvenings like bitcoin.

With this said, in roughly 13 years (2034) Dogecoin will have a "stock" of about 200 billion but the flow will have remained the same (assuming nobody messes with the issuance code).  At this time the inflation rate would be roughly 2.6%.

I think it's a common misconception that dogecoin is highly inflationary.  It has more inflation than bitcoin (not arguing this), but it would be much less than USD and I feel would mimic a gold stock/flow model. 

Being "cheap" is a relative term.  Yes the coin is cheap but there is also a much large supply.  Bitcoin could be considered cheap is measured in Satoshi's by this measure, but cheap should be reference in terms of marketcap not in terms of price per unit.

Also, all the calculation above are not precise and were done with napkin math.

Interested to know everyone's thoughts on this.
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April 28, 2021, 08:36:44 PM
 #13

Dogecoin has a soft total supply [1] of 500 Billion DOGE, reached after 81 years.
At that point it has a yearly supply inflation rate of 1%, which Bitcoin achieves in only 16 years.

It thus has a very slow emission, almost as slow as Grin with its purely linear emission of 1 GRIN per second forever.
But while GRIN will take 20 years to get the yearly inflation rate down to 5%, Dogecoin achieved that in only 1 year
by making the tail reward 20x smaller than the first year reward.

Dogecoin certainly has an interesting emission, that's more Gold-like than Bitcoin's in our lifetimes.
But is otherwise devoid of any innovation (unless you count inspiring Elon to tweet about it:-)

[1] https://john-tromp.medium.com/a-case-for-using-soft-total-supply-1169a188d153
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April 28, 2021, 09:04:09 PM
 #14

You forget a few things,with first of all, Dogecoin has just a couple of people holding an overwhelming majority of the coins. Secondly, the network hashrate is very low and while I haven't done technical research, I am sure it won't be safe with prices we have today. A risk of 51% attack and reorg of blocks imo is too high. However, if I am wrong, I am willing to get all the heat of passionate Dogecoin supporters.
I don't follow Doge, as I don't see this coin to be able to survive. I'm sad however I didn't accumulate and disregarded the power of memes. And the power of Twitter shills like Musk.
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April 28, 2021, 09:11:19 PM
 #15

Dogecoin has a soft total supply [1] of 500 Billion DOGE, reached after 81 years.
At that point it has a yearly supply inflation rate of 1%, which Bitcoin achieves in only 16 years.

It thus has a very slow emission, almost as slow as Grin with its purely linear emission of 1 GRIN per second forever.
But while GRIN will take 20 years to get the yearly inflation rate down to 5%, Dogecoin achieved that in only 1 year
by making the tail reward 20x smaller than the first year reward.

Dogecoin certainly has an interesting emission, that's more Gold-like than Bitcoin's in our lifetimes.
But is otherwise devoid of any innovation (unless you count inspiring Elon to tweet about it:-)

[1] https://john-tromp.medium.com/a-case-for-using-soft-total-supply-1169a188d153

Great article!  Thanks for sharing.  Yes, the emission rate and monetary policy of coins is interesting to ponder.  What is the best emission rate for stable economic growth?  Who decides this (at the moment it's the FED)?  It seems to me that have a predicable emission rate is key to sound economic and monetary decisions within a civilization, but this really could be anything as long as it's unchangeable and not governed by a centralized entity.  

What worries me about Dogecoin is that it might be a dark horse and because meme's spread like wildfire on the internet, I could see that Dogecoin gains more adoption and therefor more developers innovate with the protocol.  I'm not saying that either Bitcoins or Dogecoins monetary policy (emission rate) is correct (because who knows what correct is), but that Dogecoin could possibly end up flipping Bitcoin.  I'm not sure that this would be a bad thing, other than the fact that a ton of Bitcoin advocates and investors would be caught completely sideways.

The only thing that worries me about Dogecoin is that is it really decentralized, or can the code be changed more easily than Bitcoin?  Also the fact that there seems to be whales that control a vast supply of the coins (not that Bitcoin is perfect in this area).

Another thing that I feel about Dogecoin is that there are probably a ton of wallet addresses that are lost.  Given that it has been a joke coin for so long, there really could be a lot less coin in circulation than really thought.

Just some more thoughts.  Thanks for all the input.      
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April 29, 2021, 06:37:24 AM
Last edit: April 29, 2021, 06:47:49 AM by tromp
 #16

I'm not saying that either Bitcoins or Dogecoins monetary policy (emission rate) is correct (because who knows what correct is)

If there is such a thing as a "correct" monetary policy, then it should be a completely non-arbitrary one, such as Grin's 1 per second forever. I expect that after a few decades, when its yearly inflation rate has dropped to a few percent, it will be seen as having the best, i.e. most even, distribution of coins, avoiding the wealth concentration that we see in Bitcoin and Dogecoin, not to mention all the coins with premines.
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April 29, 2021, 03:26:50 PM
 #17

I'm not saying that either Bitcoins or Dogecoins monetary policy (emission rate) is correct (because who knows what correct is)

If there is such a thing as a "correct" monetary policy, then it should be a completely non-arbitrary one, such as Grin's 1 per second forever. I expect that after a few decades, when its yearly inflation rate has dropped to a few percent, it will be seen as having the best, i.e. most even, distribution of coins, avoiding the wealth concentration that we see in Bitcoin and Dogecoin, not to mention all the coins with premines.

I agree, I'm not sure there is something as a "correct" monetary policy but I'm not sure that Grin's differ that much than Bitcoin or Dogecoin, just a different emission rate.  As long as the policy stays the same (people can make correct and just economic decision based on know the value of the money they hold) it really doesn't matter what the emission rate is.  Just like Bitcoin or Dogecoin, the people that get in first on Grin would profit the most from it.  I do agree that any centralized coin that has pre-mines is completely useless in this regard regardless of the monetary policy going forward because it give unfair advantage to the founders and people close to development of the coin.

 
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