Dogecoin is the second most popular crypto after Bitcoin though it’s not the second-largest altcoin in market cap.
Some cryptocurrencies are backed by the US dollar, such as Tether ( USDT). There are altcoins that are backed by Gold, such as Digix Gold Token (DGX).
However, Dogecoin is neither backed by the US dollar nor backed by Gold. It’s similar to all other cryptos such as Bitcoin or Ethereum. We also want to point out that Gold does not back Bitcoin Gold.
Like all other cryptocurrencies, Dogecoin’s value comes from its perceived value from the buyers, believers, and adopters.
Up until 1971, the US dollar was backed by Gold. However, on August 15, 1971, the US government abandoned the Gold standards. Before this, the US government was required to buy 1 ounce of Gold to print $35 paper dollars. However, after the abandonment of Gold standards, the US treasury can print as much money they want without any limitations or repercussion.
If we compare this US dollar printing spree compared to Dogecoin, we find that Doge provides superior functionality and stability over US dollars over the long term. Let’s explain.
There are currently 130 billion Dogecoin in circulation today. Unlike other cryptos, Doge has no cap. Every year, 5 billion Doge will be added to the Dogecoin network. Though it seems inflationary, however, if we look at the following table, we will see that the inflation reduces every year and eventually becomes zero.
|Year||Estimated Dogecoins||Inflation rate|
As you can see, though Dogecoin has an unlimited supply, the actual inflation rate goes down, making this coin deflationary. So, those who criticize Dogecoin for having an endless supply are wrong. They are missing the bigger picture.
We also want to point out that Tether and other Cryptocurrency that claim to be stable coins and backed by either US dollars or Gold are not actually backed by US dollars or Gold in reality.
Tether Limited, the issuer of Tether (USDT), no longer buys USD to back this cryptocurrency. They went full US government. They started the project claiming each Tether token is backed by US dollars. Later they changed the rules, which now allows them to create coins without US dollar purchase. So, they are not any different from other altcoins.
In short, no currency is backed by anything, whether it is USD, Bitcoin, Ethereum, or Dogecoin. Every one of these currencies has value because we believe these have values.
Moreover, take every altcoin claim with a grain of salt if they say they are backed by something such as USD, Gold, or Silver. There is no government oversight, rules, or anything over cryptocurrencies. There’s no governing body to ensure that these stable cryptos buy Gold or Silver to issue more coins.
Dogecoin is actually superior to Bitcoin, Ethereum, and Litecoin in several ways. So, even though it’s not backed by anything, it still has a bright potential.
Bitcoin is now considered digital Gold. A digital medium to grow our money. It’s an investment vehicle. It’s no longer a transactional currency. Moreover, transaction time and fees for Bitcoin and Ethereum are prohibitively high.
On the other hand, Dogecoin provides little incentives for very long-term hoarding, has minimal fees, and has fast transaction time. Therefore, there’s a high probability that Dogecoin could become a transactional currency of the internet.