Unlike other cryptocurrencies, Dogecoin is not capped. Each year, five billion new coins will be added to the Doge network. For this reason, many in the crypto community hate this coin. However, it’s not as bad as people claim it to be.
Everyone wants to make money in the crypto world. When Bitcoin started, however, profiting off Bitcoin was not the primary goal. Everyone in the crypto world believed that this virtual coin would one day change how we use money. It will free us from governments and banks’ control over our financial system. But that goal no longer exists in the crypto world.
Bitcoin has a 21 million token cap. Nowadays, Bitcoin is considered as an investment vehicle, not as a transactional currency. Since its inception, its price has been going up. As a result, people are buying and hoarding bitcoin, hoping that its price will further go up and they can make a nice profit.
Over the years, few problems emerged because of this.
It’s estimated that almost 20% of Bitcoin is already lost. As there’s no way to replace those lost coins, and people are hoarding them, there’s a minimal number of Bitcoins in circulation. In the US alone, we have more than 300 million people, and there is 21 million Bitcoin, including those which are lost. The circulation number is not enough. Furthermore, We have another problem.
Miners process all Bitcoin transactions. There are two ways these miners get rewarded — transaction fees and rewards in Bitcoin after successfully adding a transactional block in the blockchain network. Miners are nothing but powerful computers set up by individuals. These individuals spend tens of thousands of dollars to build and keep these computers running.
As Bitcoins and other capped crypto reach their limit, there will be no reward from the network. So, why in the future individuals spend tens of thousands of computers in the Bitcoin network if they can’t profit off the network?
At the time, their only revenue source would be the transaction fee. As of this moment, Bitcoin mining is not profitable anymore, including the Bitcoin rewards. So, what will happen after five years? The transaction fee would undoubtedly rise. Many worries that the transaction fee would become prohibitively expensive.
Miners are the backbone of the Bitcoin network. It’s nice that this coin has a cap, but this coin’s creators failed to realize that miners wouldn’t continue to support this network if there are no incentives for miners. So far, it grew because it had monetary incentives for miners. When we take that away in a few years, they will no longer support this network.
Dogecoin solves the problems mentioned above.
Dogecoin has an unlimited supply. However, it’s capped at 5 Billion coins/year. As a result, it’s inflationary. But don’t freak out. In the next few paragraphs, we will show you it’s not that bad people claim it to be.
As of writing this article, there are around 135 Billion Dogecoin in circulation. At the rate of 5 Billion coins/year, it would take another 27 years to double this amount; then, it would take another 54 years.
In the fiat currency world, inflation varies wildly. Here is a table that shows the inflation of USD.
|Year||USD inflation rate|
On the other hand, Dogecoin has a fixed currency creation rate of 5 Billion Dogecoin/year. Therefore, each year the inflation rate goes down. Here is a chart that shows the Dogecoin inflation rate over time.
|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.
Because of this 5 Billion coins/year supply, miners always have an incentive to keep the Dogecoin network secure and operational.
Historically, we have seen that Dogecoin transactions fees are far lower than Ethereum or Bitcoin transaction fees.
For the short term, the cap is good for crypto as the price would go up, and the initial investors would profit off of it. However, later the cap would become a headache. As the transaction cost would rise and the network would become insecure because of a lack of miners.
Moreover, Dogecoin transactions are 10 times faster than Bitcoin.
Doge has a higher probability of becoming a mainstream transactional currency than other cryptocurrencies in the long term. Therefore, don’t worry about Dogecoin not having a cap.