When the cryptocurrency Dogecoin (DOGE 1.58%) emerged in late 2013, few thought it would last long, primarily because it was created as a joke. Over a decade later, Dogecoin has a market cap of roughly $22 billion and is the ninth-largest cryptocurrency in the world.
Dogecoin’s success came from its ability to tap into social media and virality in a way that few assets ever had before. People found the token and its Shiba Inu mascot to be a fun and fascinating financial experiment. Celebrity businessmen like Mark Cuban and Elon Musk were also fans of Dogecoin and even allowed their various businesses to accept it as a form of payment.
Given how long Dogecoin has been around, I suspect it has staying power for as long as crypto remains relevant, and the sector doesn’t seem as if it’s going away anytime soon. Still, there’s one thing about Dogecoin that is an absolute deal breaker for me.
The big deal breaker is that I still do not believe Dogecoin’s network has real-world utility. There are now thousands of cryptocurrencies, most of which can instantly send payments online through their own network, or a network they trade on.
Dogecoin has its own network, but it doesn’t stand out from a technical perspective, only processing about 30 transactions per second (TPS). Now, there are various reports that could one day change. The team behind MyDoge, a digital wallet specifically for Dogecoin, launched a new initiative called DogeOS that raised close to $7 million to build a new Layer-2 blockchain solution, according to a CoinDesk report from May.
Layer-2 solutions are blockchain layers built on top of a main network for the purpose of processing transactions off chain, which boosts throughput without significantly increasing fees. This layer could also provide Dogecoin with the smart contract functionality needed to build decentralized applications (dApps) that power non-fungible tokens (NFTs) and gaming apps, thereby boosting engagement on Dogecoin’s network.
After all, Dogecoin does have a fervent community, so this may be a new way to engage with its fans and drive demand for the token. Still, it remains unclear when this layer will be ready, and Dogecoin will still face significant competition from other networks that have been providing these services for years, and that will still be stronger from a technical perspective. Ultimately, I think Dogecoin faces an uphill battle to prove strong real-world utility, which is a deal breaker.
