 |
April 10, 2014, 04:25:52 PM |
|
The nature of cryptocurrency and resulting problems for Dogecoin
Cryptocurrencies are not currency (yet)
It is a mistake to think of cryptocurrencies as currency yet. Fiat's infrastructure, robustness, regulation and make using a dollar to buy something easier than to use Dogecoin or any other altcoin including bitcoin.
The infrastructure behind cryptos is strengthening everyday but building it out will take decades. Here is something I just did instantly with fiat that just isn't possible with crypto. I was in a small city in Bulgaria. I wanted to buy a candy bar. I had no Bulgarian money at the moment. I have a US ATM card. I went to an ATM on the corner, and took out 20 Bulgarian Lev. The machine/network did the exchange rate for me. I wasn't too bad. I then went to buy my candy bar. When you can do this same 5 minute transaction with crypto on a busy main street in a foreign country with nothing more than an ATM card then cryptocurrencies can be called "currencies".
Cryptocurrencies are akin to divisible corporate shares
Cryptocurrencies are more like corporate stock that is divisible and can be used to make direct purchases if the right infrastructure is available. Image if you could go to Panda Express and use some Google stock to buy lunch. The main purpose of Google stock, of course, is an investment that holds and hopefully gains value.
In reality a single share in a corporation is not divisible. However, bitcoins, dogecoins, etc. are. One can have a big investment portfolio of crypts, dream of them rising in worth and hope that they retain value. One can also with some hassle use them to buy a new car or to pay for a vacation.
Problems for Dogecoin
Dogecoin has the ideal of being a currency and the Dogecoin community trends against using the altcoin as an investment vehicle. The devs and the community have taken direct steps to slow/hinder Dogecoin's use for investment. They incorporated inflation into their coin meaning that the value of Dogecoins someone olds will trend down because the supply is infinite. They have resisted implementing various new technologies to stymie multipools. They have resisted dual mining with Litecoin. They have refused ideas re capping or reducing the amount of coins.
As a result, the value of Dogecoin has shown a progressive sapping of value over time despite the active passionate community, daily major media coverage, dedicated devs and strong positive mind share in that part of the general public aware of cryptos. They have managed to bring segments of the population (women, older people) into crypto who might not otherwise have paid attention. None of this helps their valuation.
Their worthy idealism doesn't mesh with the present realities of the financial system. There just isn't any reason for an individual to use Dogecoin over fiat money in any situation. People use it out of passion or to demonstrate that it can be used. The devs are ignoring the fact that the main benefit of cryptos is their ability serve as liquid a store of value that has the potential to increase in value over time. The fact that there are ways someone can use Dogecoin to buy computer cables is irrelevant at this point.
Furthermore, one of Dogecoin's main thrusts is to use Dogecoin to assist with charitable ventures. The devs are strangely blind to the fact that their Dogecoin Foundation could do much more to help the unfortunate if 1 Doge = 10 dollars instead of a fraction of a cent.
|
