Will Dogecoin Catch Bitcoin?

Dogecoin will never catch Bitcoin because Dogecoin is inflationary, is not a store of value, has no institutional investment interest, has no developer support, has a limited use case, and worse than USD as a currency. 

Bitcoin now has a market cap of $1.1 trillion ($1100 billion), whereas Dogecoin has a market cap of $8 billion. Bitcoin’s current price is $60,000/coin, whereas Dogecoin is trading at $0.60/token.

We can confidently say that Dogecoin’s price would never rise more than $10/Doge. We also believe that Dogecoin’s market cap would ever reach $1 trillion. In short, Dogecoin will never catch Bitcoin.  Let’s examine why.

Technologically Bitcoin and Dogecoin are the same. Both cryptocurrencies have a 1 MB block size. The only difference between them is as follows:

  • Bitcoin block time is 10 minutes, but Doge has a 1-minute block time.
  • Bitcoin has a supply cap of 21 million. Dogecoin has no supply cap.
  • Bitcoin uses SHA-256, and Dogecoin uses a Scrypt based hash function. 

Total Coin Supply:

At this moment, there are a total number of 130 billion Dogecoin in circulation. Bitcoin has a supply cap of 21 million, and so far, 18.7 million coins have been mined, and the last Bitcoin will be mined in 2140. Compared to Bitcoin, Doge has 7,000X more supply. 

It is estimated that around 20% of Bitcoin is lost forever. So, Bitcoin is scarcer than we can imagine. 

The following table shows the number of coins in the supply and their respective market cap of the most popular cryptocurrencies.

CryptocurrencyCurrent SupplyMarket Cap
Bitcoin18.7 Million$1.1 Trillion
Ethereum115.1 Million$206 Billion
Cardano31.9 Billion$38.7 Billion
Polkadot922.3 Million$34.2 Billion
XRP45.4 Billion$23.1 Billion
Dogecoin128 Billion$7.4 Billion

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 $1100 billion ($1.1 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 $1.1 trillion market cap, each coin will have a price of ($1100 billion market cap) / (130 billion coins) = $8.46/Doge. 

However, if Dogecoin takes four years to reach the $1.1 trillion market cap, then each coin’s price would be $1100 billion / 150 billion coins = $7.33/Doge.

Therefore, even if Dogecoin becomes the world’s most popular cryptocurrency, Dogecoin’s price would not rise to $10/coin. 

Inflation:

Everyone sees USD inflation negatively. No one likes our federal reserve printing money. 

Unlike Bitcoin, Dogecoin is inflationary and has no supply limit. Each minute, 10,000 Doge is added into the network. At this rate, miners add more than 5 billion coins per year.  

The following table shows USD inflation from 2010 to 2021.

YearUSD inflation rate
20212.24%
20200.62%
20191.81%
20182.44%
20172.14%
20161.26%
20150.12%
20141.62%
20131.47%
20122.07%
20113.14%
20101.64%

Source: https://www.statista.com/statistics/244983/projected-inflation-rate-in-the-united-states/

The following table shows Dogecoin’s projected inflation until 2030.

YearEstimated DogecoinsInflation rate
2021130 Billion3.85%
2022135 Billion3.70%
2023140 Billion3.57%
2024145 Billion3.45%
2025150 Billion3.33%
2026155 Billion3.22%
2027160 Billion3.13%
2028165 Billion3.03%
2029170 Billion2.94%
2030175 Billion2.86%

USD has less inflation than Dogecoin. Because of this inflationary model, Dogecoin is not a store of value. Almost everyone in the crypto community, including institutional investors, is buying Bitcoin because it’s deflationary. 

In contrast, investors are less interested in Doge because the network devalues it each passing minute. If a company issues new shares to raise more money, it is seen as unfavorable because it cheapens current investors’ investments. 

If you use the US dollar or your local currency to purchase Dogecoin, your investment is destroyed on two fronts:

  • Your Dogecoin is getting devalued each passing minute.
  • The US dollar is also getting devalued by our government. 

So, when you sell your Doge for USD, it not only gets devalued by the Doge blockchain, our USD also gets devalued by the Federal Reserve, unless it’s a swing trade or short-term trade.

Transfer Speed:

As Dogecoin block time is 1 minute, technically, Doge blockchain can process 10 times more transactions than Bitcoin blockchain in a given unit time. So, Doge is faster than Bitcoin. However, it’s not the whole story.

Bitcoin was started to replace USD. People were fed up with the 2008 housing market crash and the government bailout of big banks. They wanted to create a decentralized financial system free of the federal reserve. The Bitcoin creator put a supply cap of 21 million on Bitcoin because he didn’t like the idea of unlimited supply. The Federal Reserve prints money and adds inflation to the economy.  

Initially, everyone treated Bitcoin as a digital currency. In 2010, Laszlo Hanyecz bought two pizzas using 10,000 Bitcoin. In today’s Bitcoin price, it’s $600 million for two pizzas. But soon, it became apparent that Bitcoin is better as a store of value than as a currency. Now, Bitcoin is considered digital Gold.  

Let’s compare USD, Bitcoin, and Dogecoin transfer speed.

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. Bitcoin is worse. In real life, it can process 4 transactions per second. But no one is treating Bitcoin as a currency anymore. 

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. In Bitcoin’s case, if everyone in America starts using Bitcoin, each person can make a transfer every 950 days.

It does not matter how many computers we add to the Dogecoin and Bitcoin network; the transfer speed will not improve unless we change the core protocol. 

However, Bitcoin is not trying to be a currency anymore. It’s now considered Digital Gold. Thus this slow transfer speed is not an issue. 

Dogecoin is not considered as a store of value. Its transfer speed is also very slow to be practical for real-world currency. 

Lighting Network:

There are only a handful of developers working part-time for Dogecoin. There’s no active development going on. In contrast, numerous developers and institutions are actively working for Bitcoin development.

Though Bitcoin is slower than Dogecoin, developers already created the lighting network, which improves Bitcoin transaction times and lowers fees. In comparison, even the creators of Dogecoin have left the project.

Lack of Institutional Backing:

According to the US Federal Reserve, the top 1% controls $36 trillion wealth or 31% of US wealth. The top 10% rich controls 70% of the wealth ($80 trillion). In contrast, the bottom 50% of people control 2% ($2.36 trillion) of US wealth. 

It’s the rich people, hedge funds, and institutions that move the market. Even a few years ago, Bitcoin had only a few billion dollars market cap. However, recently its market cap passed over 1 trillion because of institutional investment. Goldman Sachs, Tesla, JPMorgan, and various other companies have bought Bitcoin in billions of dollars.  

However, because of inflation, institutional investors are not interested in investing in Dogecoin. Without their support and money, Dogecoin’s price would never rise. 

Conclusion:

When we compare all the features between Bitcoin and Dogecoin, we see that Dogecoin is not good at anything. It’s not a store of value, and the transfer speed is not fast enough to be a functional digital currency. Ethereum, Cardano, and Polkadot have more use cases than Doge. It’s why Dogecoin will never catch Bitcoin.

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