One night in November 2013, bored after a beer, Australian engineer Jackson Palmer created a new currency. He was on vacation at his parent’s home in Gosford, a suburb of Sydney. Palmer was intrigued by Bitcoin and was downloading the cryptocurrency’s blockchain, a database of its transactions, for running a node to mint the cryptocurrency on his home computer. But the internet connection was slow. Palmer’s frustration mounted after several beers.
After scrolling through multiple Twitter cryptocurrency threads, Palmer tweeted: I am going to invest in Dogecoin – that’s the next big thing. The coin’s name was no accident. It fused together two of Palmer’s interests at that time – the Shiba Inu Doge meme and cryptocurrencies. “I was kind of taking a jab at all these scam coins,” Palmer said.
As often happens in such cases, his random tweet had exploded in popularity by the next morning. He woke up to a fusillade of Twitter direct messages and retweets. “This is amazing,” one said. “Dogecoin is the future,” another said.
One of the messages caught Palmer’s eye. It was from Billy Markus, an engineer in Portland, Oregon. “You know we could change the font in the Bitcoin wallet to comic sans,” he suggested. The implication of this message was that a Bitcoin wallet could be rebranded as a Doge wallet simply by changing the font.
The actual creation of a new cryptocurrency took less than a day’s work of coding, according to Palmer. They cloned code from Litecoin – another cryptocurrency – and replaced all instances of Bitcoin and Litecoin with Dogecoin in the code.
Palmer, whose background is in technical product marketing, created an image for the Dogecoin logo and wrote a five-page documentation detailing its specs. “The only thing that required any intelligence (and serious thinking) was coin distribution,” Palmer told an interviewer on Youtube.
Bitcoin rewards its miners for every block created and the reward is halved every four years. The halving event is supposed to be a catalyst for a price increase since it reduces numbers for the cryptocurrency. But Palmer and Markus decided to take a different approach. “I said: Let’s make the block rewards random just to screw with people,” Palmer told an interviewer on YouTube. (According to its documentation, Dogecoin’s block rewards are fixed and halved every 100,000 blocks. Starting from the 600,000th block, a permanent reward of 10,000 Dogecoin per block is paid.)
Those technicalities apart, there is also a philosophical difference between the two coins.
Bitcoin was unveiled in the aftermath of a debilitating financial crisis and was meant to be a statement against the sort of centralized government and federal control that precipitated the crisis. Dogecoin is anything but. Its founders brazenly admit that it is a joke.
Almost eight years after Palmer’s beer-induced tweet, Dogecoin does not seem to be much of a joke. Its price movement generates headlines and has become the subject of analyses and news articles in important publications like the Wall Street Journal and New York Times.
On Twitter, the social media platform that started it all, the cryptocurrency has its own raucous band of cheerleaders whose sole job seems to be to crank out memes and viral tweets with slogans like “To the Moon”. They are led by Tesla CEO Elon Musk, who is supposedly helping out in its development. The coin has a market capitalization of more than $30 billion, making it a large cap stock in traditional stock markets. Between 2013 and 2021, Dogecoin’s market cap skyrocketed by more than 200,000 percent.
So, what changed during this time period?
Apparently not much.
The coin still has no recorded use case. It was used to raise cash in a few instances of charity but any digital coin could have been used for that purpose. Unlike Bitcoin and Ethereum, whose metrics like transaction times and their relation to price are diligently tracked, there are no recorded parameters for Dogecoin.
In fact, a perusal of the cryptocurrency’s codebase reveals that development work on it completely stopped between 2017 and 2021. That was not the first time. There were no developers working on Dogecoin between 2015 and 2017 as well. Prior to these time periods, the currency was subject to hacks and scams. Investors lost Dogecoin worth $3 million at Cryptsy, one of the earliest cryptocurrency exchanges.
The sum of these sentences is that, for almost all of its existence, Dogecoin has exhibited no tangible use cases or interest from developers. They have all gravitated towards either Bitcoin or Ethereum. (It is difficult to blame them for their choice considering that Dogecoin’s codebase is cloned from these cryptocurrencies).
Even then, Dogecoin seems to attract investors. Like all things cryptocurrency, it is impossible to determine their identity. According to bitinforcharts.com, 225 addresses hold Dogecoin worth more than $10 million. The address with the maximum Dogecoin first invested in it on Feb 5th 2019 and holds 28.22% of the total number of Dogecoins in circulation.
An Expensive Joke
But it is useless to evaluate Dogecoin holdings or its metrics or, for that matter, to take it seriously. Palmer freely admits that the cryptocurrency is a joke. “It started as a joke and it is really important that it stays that way,” he said in an interview with Bloomberg earlier this year.
The joke is an expensive one. At least notionally, because nothing in cryptocurrency is what it seems, Dogecoin has a market capitalization bigger than or comparable to even some of the most well-established companies like Ford Motors and Marriott International. Remember these are companies that manufacture actual products used by people.
Palmer himself has capitalized on Dogecoin’s success. He appeared on various Youtube channels as an “Australian entrepreneur” and even became a Youtuber himself to provide crypto education and inform users. Eventually, he tired of the stresses of dealing with cryptocurrency hackers and audiences. “It was getting a bit too much,” he told an online publication. (He also called Tesla CEO “a self-absorbed grifter” in a deleted tweet. Billy Markus, his co-founder, was quoted in the Wall Street Journal in April as saying that Dogecoin’s recent price surge was absurd.
Absurd or not, the cryptocurrency continues to make news. It is possibly a sign of our frothy times that investors are throwing money at a piece of cloned code that has served no utility. Or, it is a sign of the mix of boredom and recklessness induced in investors by a pandemic shutdown. Regardless of whether it makes it to the moon or is buried in the depths of the failed cryptos graveyard, Dogecoin – like initial coin offerings and various scams – will go down in history as a sign of the excesses of crypto mania.