Dogecoin is cheap because the total number of coins in circulation is astronomically high.
At this moment, there are a total number of 130 billion Dogecoin in circulation. Each minute, 10,000 more coins are added to the Doge network by the miners. At this rate, 5.256 billion coins are added to the Doge network per year.
Bitcoin has a total supply cap of 21 million, and so far, 18.5 million coins have been mined, and the last Bitcoin will be mined in 2140. Compared to Bitcoin, Doge has 7,000X more supply.
This chart shows the number of coins in the supply of the most popular cryptocurrencies.
If we assume that Dogecoin’s price would rise to $1/coin within the next two years (10 billion more coins), then the total market cap of Doge has to be (130 + 10 ) billion x $1/coin = $140 billion.
Bitcoin has a market cap of around $1000 billion ($1 trillion). Even if we assume that the Dogecoin would become the world’s largest crypto, its price will not cross $10/Doge.
If we disregard Dogecoin’s inflation, for Doge to reach a $1 trillion market cap, each coin will have a price of ($1000 billion market cap) / (130 billion coins) = $7.69/Doge.
However, if Dogecoin takes four years to reach the $1 trillion market cap, then each coin’s price would be $1000 billion / 150 billion coins = $6.66/Doge.
Therefore, even if Dogecoin becomes the world’s most popular cryptocurrency, Dogecoin’s price would not rise to $10/coin.
Therefore, Dogecoin is cheap and will remain cheap in the foreseeable future.
The question is, Can Doge overtake Bitcoin and Ethereum in market cap? Should you buy Dogecoin because it’s cheap?
Dogecoin is a copy of Litecoin, which is a copy of Bitcoin. Technically there are only two differences Between Doge and Bitcoin.
- Bitcoin’s block time is 10 minutes, but Doge has 1 minute block time.
- Bitcoin is deflationary, whereas Doge is inflationary.
Both coins have a 1 MB block size. Hence, theoretically, the Dogecoin transfer speed is 10 times faster than Bitcoin.
Most of the crypto enthusiasts and institutional investors are buying Bitcoin because it has limited supply. This crypto is now considered Digital Gold. As Doge is inflationary, it’s not considered as a store of value. Thus no institution is buying and hoarding Dogecoin. Without big banks and institutional investors, its price would go nowhere.
Even though the Dogecoin transfer speed is 10 times faster than Bitcoin, still, both coins will never become a viable alternative to USD as a digital currency. Technologically it’s impossible.
We can use USD both offline and online, whereas we can use Doge online only. There’s no offline use case.
For online use, we can transfer USD using various network mechanisms such as ACH and Wire transfer. We also have VISA, Master Card, Amex, Discover, Paypal that processes our online debit or credit card purchases.
VISA alone can process 65,000 transactions per second. Each transaction clears within seconds. Now, let’s compare it with Dogecoin transaction speed.
Doge’s block time is 1 minute. It means the network takes a minimum of 1 minute to clear a transaction. However, during network congestion, this time increases significantly, sometimes up to a few hours.
We can find the theoretical transaction number per unit time of Dogecoin using the following formula:
- (Block Size Limit) / ((Lowest Possible Transaction Size) x (Block Time In Seconds))
According to this formula, we see that the Dogecoin network can process 70 transactions per second:
- (1024x 1024) / (257 x 60) = 68 ( 1 MB block size, 1 minute block time)
However, due to network propagation and other reasons, practically, the Dogecoin network can process 40 transactions per second.
According to the US Census Bureau, 330 million people are living in the United States.
In a single day, Dogecoin can process 40 x 60 x 60x 24 = 3,456,000 transactions (practical 40 transfers per second).
So, if every American adopts Dogecoin, each person will be able to complete 1 transfer in every 330,000,000 / 3,456,000 = 95 day (3 months) on the Dogecoin network. It does not matter how many computers we add to this network; the transfer speed will not improve unless we change the Dogecoin core protocol.
Isn’t it absurd that we will be allowed to purchase something using Doge every 95 days?
So, Dogecoin is not a store of value cryptocurrency and can’t replace USD as a digital currency. We don’t see how it can become one of the top market cap cryptos. Thus, its price will remain cheap.
Furthermore, technologically Ethereum, Cardano, Polkadot, etc., cryptos are far superior to Dogecoin.
Nowadays, most decentralized finance apps are built on top of the Ethereum platform. Different isolated blockchain can communicate with each other using the Polkadot network. Cardano can process 1 million transactions per second. Moreover, All these crypto gives staking rewards.
Whereas, Doge has nothing. It has no staking reward and no smart-contract. Technically, it’s the worst crypto out there.
Because of all these reasons, serious investors are not buying Doge. Thus its price is not going up.
Because of the vast number of Doge supply, low investor interest, Dogecoin is cheap, and it will remain cheap in the future.