Has DogeCoin Solved the Supply/Demand Problem?
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[url=http://www.businessinsider.com.au/dogecoin-just-solved-a-problem-bitcoin-will-face-2014-2]http://www.businessinsider.com.au/dogecoin-just-solved-a-problem-bitcoin-will-face-2014-2[/url]
Dogecoin Just Solved A Problem That Bitcoin Is Going To Face
The price of Dogecoin, the world’s third most traded cyrptocurrency, is down 9% this afternoon.
And that’s a great thing.
Because the update from Dogecoin’s creators causing the temporary price drop will ultimately ensure its longevity going forward.
In a message on Github this weekend, Sydney-based co-creator Jackson Palmer announced the amount of Dogecoin would not be fixed, meaning it’s possible for an infinite amount of Dogecoin to be created. (This was first spotted by Ars Technica’s Cyrus Favriar). Every new â€Å"block†of Dogecoin that gets mined will yield 10,000 units of the currency.
â€Å"This will help maintain mining and stabilise the number of coins in circulation (considering lost wallets and various other ways coins may be destroyed) at 100 billion,†Palmer wrote.
This is close to how a normal fiat currency like the U.S. dollar works. Like the greenback, Dogecoin will now better be able to respond to increasing demand, as well as potential damages like those outlined by Palmer. It also gives incentives for miners to keep operating, thus helping keep the network more secure  as in Bitcoin, â€Å"mining†Dogecoin also serves to confirm the transactions taking place on the digital currency’s master exchange ledger.
These all happen to be problems Bitcoin currently faces. Bitcoin has a early adoption and miner-arms-race regime. Those who got in earliest, or can mine the most, enjoy lopsided control over the Bitcoin market. We’ve discussed this elsewhere. The result is that they are crossing their fingers that Bitcoin adoption will become widespread, thus helping drive up value. It’s hard to tell what’s driving what, but the price has settled at $US800 for a couple months now. That’s a lot to pay for a single Bitcoin for someone just entering the market.
Ripple’s David Schwartz wrote about this online recently:
â€Å"A fixed supply that can’t respond to demand is a bad thing. Money, like every commodity, works best when the supply can adjust efficiently to the demand. (The people who don’t like this are primarily people who want to make other people act against their own interests just so that they personally can make a large profit by not doing anything but holding money.)â€Â
That description would apply to Bitcoin miners that are in ovedrive to acquire enough Bitcoin as possible. They are not generating any more demand  they are merely banking that demand will come in time, and thus increase the value of their holdings.
Others have tried to do this with Dogecoin. â€Å"I’m strictly in it for the money,†wrote GitHub user MadCold. â€Å"I bought in to massive amounts of DogeCoin when the price was cheap, expecting it to rise. So far it looks like the value of the currency is tanking. Nearly 10c per 1K over the past few hours. I still demand [Palmer] answer for what he’s doing to ruin the DogeCoin currency.â€Â
Secondly, Bitcoin is already approaching the point where mega-miners will have to begin charging fees to continue mining. As we discussed above, mining helps keep the network secure, so the cost of security is going to increase. By creating a steady rate of inflation, Dogecoin can keep security cheap.
As GitHub user Chkwok writes, the new decision will allow Dogecoin to reach a much wider audience:
â€Å"The ones making the most noise in the pro-deflation camp aren’t the ones we want to serve, if we’re to become the Internet’s currency, we’ll have to reach the mainstream users which don’t care about hoarding massive amounts of Ɖ for profit, the max 5% loss of value per year caused by inflation in the worst case or broken promises on a Bitcointalk thread. They care about having a currency where micropayments are properly implemented (without the insane fees and minimums PayPal & friends want) and tipping is effortless.â€Â
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Interesting read, ive always wondered about the limited supply issue and this does look like a sensible solution, even if its not the desire solution by some.
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Could turn this whole limited supply business on it’s head to be honest…
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If Dogecoin becomes adopted and in widespread use then do you think that they will naturally increase to a higher Doge/Dollar exchange rate ???
It just would not seem right to purchase a cup of coffee for 5 thousand doge or whatever …
My opinion is that even with a finite supply keeping the value under control, a worldwide, widely used currency would probably settle at a value closer to the $€£ …
Which would mean that early adopters would be quids in :D
But that’s just my naive opinion lol. Would be nice, although I would prefer that currency to be FTC of course ;)
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There wasn’t a supply problem to fix.
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[quote name=“wrapper” post=“57714” timestamp=“1391766865”]
There wasn’t a supply problem to fix.
[/quote]This x100. The only supply problem with currency is that governments can increase the supply of their fiat as often as they want and making everyone that has that fiat have less value. Infinite supply equals infinite inflation equals terrible long term currency.
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Thank you for the responses…
Looks like I’m going to mine Doge for profits then buy almost twice the amount of FTC I would have mined with the earnings…
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I was under the impression that a finite supply of coins was a touted feature of cryptocurrencies? Surely adding infinite supply devalues existing coins?
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[quote name=“Ignition75” post=“57732” timestamp=“1391774919”]
Thank you for the responses…Looks like I’m going to mine Doge for profits then buy almost twice the amount of FTC I would have mined with the earnings…
[/quote]Yes, it would simply be better to mine DOGE then convert to FTC.
