When Australia’s Jackson Palmer accidentally invented Dogecoin in early December, he had no idea that before the end of the next month his cryptocurrency would be responsible for raising the $30,000 needed to send Jamaica’s bobsled team to the Sochi Olympics. I imagine the only reason he doesn’t describe this achievement as “Much whirlwind. Such cool. Very runnings. Wow,” is because he’s kinda gotten over speaking with a Comic Sans accent, after that goofy Shiba Inu meme-king of 2013 officially took over his life.
If you’ve been paying any attention to the internet and its memes over recent weeks, you’ll probably have heard something about Dogecoin (and you surely can’t have missed that feel-good story of the summer when it came out yesterday). Then again, some people prefer to spend their holidays (lives, even) at the beach or at least interacting directly with other humans. If that’s you, here’s what a Dogecoin is and how it came about:
Such Coin! Much Lucky! Very Timing!
On November 27, Palmer — a Sydney-based marketing geek who daylights for Adobe — sent out this fateful tweet, intended purely as a joke:
Investing in Dogecoin, pretty sure it’s the next big thing. http://t.co/yHR4bNv6OD
— Jackson Palmer (@jacksonpalmer) November 28, 2013
The joke captured the interest of Billy Markus, a Portland-based software engineer who now goes by the name of Shibetoshi Nakamoto (a Doge-style play on Satoshi Nakamoto, the pioneering Bitcoin inventor’s nom de guerre). Markus contacted Palmer, and the rest is history: within ten days of Palmer’s Tweet, anyone on the internet could officially begin mining and trading in Dogecoin.
The internet went kinda crazy for it, and within the first 30 days there were over a million visitors to Dogecoin.com. In hindsight, the hype makes sense. The whole Dogecoin concept put together a killer combination of LOLs, low-risk investment,
gambling buzz money-making potential, and — what particularly sets it apart from Bitcoin and other altcoins — a friendly community of users that doesn’t take itself, or said money-making potential, too seriously.
It also helped that the coin launched a couple of weeks before Christmas, so a lot of people jumped on the bandwagon to buy their friends a few DOGE as virtual stocking-fillers. Thanks to Buzzfeed, here’s what I just said set out in a convenient, gif-laden listicle.
If you already know all about cryptocurrency, and the rapid rise of Dogecoin, scroll down to read our Q&A with its inventor. Otherwise, read on.
STAHP. Pls explain this cryptocurrency. Such confusion!
If you’re anything like I was a couple of weeks ago, you’ve heard people throw words around like ‘Bitcoin’ and ‘altcoin’ and ‘cryptocurrency’ and ‘mining’, and you get that people are making digital currencies on their computers somehow. You may have heard about how Bitcoin is an anonymous, untraceable currencies, which people use to buy illegal stuff off black market sites, like Silk Road. You’ve probably gathered that trading Bitcoin is big business now, with the price of a single Bitcoin soaring (and crashing), and investors who are happy to gamble their money lining up for a slice of the pie. And about how there are now a bunch of other currencies being invented by those keen to cash in on the trend. You maybe even watched the 7:30 Report’s story on Bitcoin the other night (hello mainstream attention!).
I’m not an economist or a mathematician or a tech-geek, and I’m still very much getting my head around it. But here’s what I understand:
Bitcoin, the world’s first peer to peer cryptocurrency, was invented in 2008 by someone (or a group of people) going by the pseudonym of Satoshi Nakamoto. Although there had been some precursors, Bitcoin was the first to solve the problem of duplication (people spending the money twice) without the need for a central regulator. It does this through its blockchain system, which makes a permanent, public, identity-protected record of each transaction via a network of files called ‘blocks’.
Bitcoin’s popularity has grown steadily since it was introduced, at a time when the fallout from the GFC had lost much of the world’s confidence in the banking system — and ongoing financial crises in Europe have cemented that interest. People like the fact that they don’t need to trust banks or governments — or any third party for that matter — with their money. People also like to use it because it’s virtually anonymous: as long as Bitcoin is traded on the internet, your identity can only be revealed during the peer-to-peer transaction process, or if you cash your money out to a traditional currency.
The process of ‘mining’ bitcoins was created to mimic gold mining, except the prospecting and sifting work is done by your computer in the form of solving an encryption code. Like gold deposits in the ground, there’s a finite number of Bitcoins to be found, and this rarity, in conjunction with the currency’s perceived tradeability, is what gives Bitcoins their value. The number of Bitcoins that exist in the world is called the “market cap”, and it’s set in the original code (Bitcoin’s market cap is set at 21 million).
To compare, Dogecoin’s market cap is set at 100 billion. Although all cryptocurrencies are based on Bitcoin, which was the first and remains the most valuable cryptocurrency, Dogecoin’s mining process is nearer to that of Litecoin (Bitcoin’s closest competitor) — and it’s easier for people to mine from their home computer.
So what makes Dogecoin different from all the other Bitcoin alternatives?
Just over one month in, the Dogecoin subreddit community is over 35,000 people. The number of Dogecoin transactions has now eclipsed those of all other virtual currencies combined. As I write, the volume of Dogecoin has actually overtaken Bitcoin in terms of US dollar value (Palmer puts this down to all the recent attention grabbed by their Cool Runnings story, plus an explosion of interest from China, where Bitcoin has been banned and people like cute dogs as much as they do anywhere).
Dogecoin’s popularity and use is rising pretty steadily since its pre-Christmas viral honeymoon, despite people no longer seeking out a hilarious gift to buy their mates, despite a Christmas grinch hack that saw 21 million DOGE (around $13,000) stolen, and despite memes having a tendency to get annoying and passe if they’re overworked.
What began as a throwaway joke tweet and gained momentum through the power of LOLs seems to have secured its place, in all seriousness, as one of the more viable digital currencies out there. Ironically, perhaps, it’s the community’s generosity and its “not taking ourselves too seriously” attitude that Jackson Palmer points to as Dogecoin’s secret weapon in this cyber-space race.
Because of its low value (one DOGE is currently worth about $0.002USD, but it’s been as low as $0.0003 recently; keep track of it here), its low barrier to access, and its nice doggy face, the internet has adopted Dogecoin for use as a tipping currency — which means that instead of just clicking “like”, you can actually throw a few cents at someone’s hilarious or particularly on-point status update. There are now tipping bots on Reddit and Twitter (with bots for Facebook and Imgur in the works) that allow users to give each other kudos with a monetary value — and they’re doing it with gusto.
There’s currently a petition circulating to make Dogecoin the official currency of Reddit. And, after a rallying effort, the Dogecoin subreddit community has almost raised the 12 million DOGE needed to reimburse all those who had money stolen from Dogewallet.com in the Christmas Day hack. The latest project is the Dogecoin Foundation, which enables Shibes to donate their DOGE to charities and other goodwill endeavours — it was through this organisation that the cash was raised to send the Jamaican bobsled team to Sochi.
It’s all part of Palmer’s vision to keep Dogecoin small, friendly, and circulating around the internet — not hoarded and cashed in for greenbacks — which is quite a different approach to digital currency than we’ve seen up to now.
I had a chat with him about the explosion of alternative cryptocurrencies, the politics and motivations behind people getting involved with mining and trading the currencies, and what makes Dogecoin “such different”.
Junkee: Since Bitcoin, a bunch of new cryptocurrencies have popped up — many of which have been discredited as ponzi schemes. How does Dogecoin fit in?
Jackson Palmer: A lot of people have jumped on this, and a lot of the coins that have popped up — and this is kind of why I created Dogecoin in the first place — [were made] purely so people could create a bunch of hype around it, and do what’s called “pump and dump”. That means to create something that can be a store of worth or value, and then hoard a lot of it yourself and build hype around how valuable that thing is with a large group of people which creates demand for it, [and] then sell it for a higher price than you paid initially (in this case nothing, because you just pre-mined all these coins).
It is a ponzi scheme, and it’s sad that cryptocurrency is being used for that purpose — but ponzi schemes have existed since the beginning of economies. The thing with all these cryptocurrencies is that there’s a large number of people that want to get rich. They want to get in on the ground floor and they hope that in six months it’ll be worth something.
If you look at a lot of the stuff that’s been posted, people are actually actively discouraging that with Dogecoin — and I think the hundred billion [market cap] naturally discourages it. I’m getting emails from people saying that the market cap should be set lower so that the value goes up, and I say that’s not the point. It’s actually working as a currency if the value stays low.
I read an article that cited a survey in which nearly half of Bitcoin users identified as libertarian or anarcho-capitalist. Do you count yourself among them? Why do you think Bitcoin or cryptocurrency in general is favoured by people with those sorts of political leanings?
JP: I try not to politicise anything that I do — after all, it is just a dog on a coin. I think it would be ridiculous to try and build some sort of political argument around that — but it’s pretty obvious why these anarcho-capitalists are in there. They believe in the free market, they believe in not having a regulator standing over them — and I think another big part of it is anonymity, which is something that Bitcoin and cryptocurrency can provide.
“I try not to politicise anything that I do — after all, it is just a dog on a coin.”
Obviously there’s tax benefits as well, as it’s not regulated, but my theory with Bitcoin is that within the next 12 months digital currency will start being regulated. China is already doing it. Most governments haven’t had a chance to keep up yet, but before too long they will, and unfortunately I think that the Bitcoin bubble is going to burst. That might actually be a good thing, because it might bring the price down to something that’s actually reasonable, and not just targeted to these investor types that are looking at it as an investment opportunity rather than an actual currency.
I hope the Bitcoin bubble bursts so they get a wake up call, and then maybe out of the ashes a new digital currency will emerge.
What do you see as the main role of Dogecoin, now, and into the future?
JP: I think it will become a kind of complement to Bitcoin; it’s fun, and it’s kind of like a gateway into it. It’s a learning experience. People who have never ever played with cryptocurrency are starting to think about it now. I think it’s actually a way for people to start learning about economic theory, because a lot of people don’t really know about that; they see the news and say, “Oh crap the economy’s going bad after the GFC”, but they don’t really know what’s happening there, and they haven’t considered what an alternative might be.
If Dogecoin can become known as this fun tipping currency, people will go and read about it, and cryptocurrency generally. I think it’s a really good seed, it kind of informs people a little bit.
There are more and more shops now accepting Bitcoin as tender. Have you ever thought about taking Dogecoin offline?
JP: We don’t really want there to be a DOGE to USD transaction exchange; as a digital currency, I think it’s important for it to remain in its own kind of internet bubble. I think as soon as you start placing a real-world value on it, people will become less generous. People are hoarding Bitcoin now and just sitting on it, hoping that the price will go up. Dogecoin isn’t a get-rich-quick scheme or anything like that.
“We don’t really want there to be a DOGE to USD transaction exchange; as a digital currency, I think it’s important for it to remain in its own kind of internet bubble.”
It is one of the few digital currencies that is predominantly being traded as a currency, rather than being bought up as a speculative investment. It’s being traded and tipped, rather than people holding it and waiting for a market fluctuation to sell it — which is awesome, because that’s what digital currencies should exist for.
So do you think there are inherent issues with Bitcoin?
JP: Bitcoin is one of the greatest economic experiments ever conducted, and I think it has a lot of worth and proves a lot of traditional economic theory wrong. The problem is that it is still existing as a complementary currency and a local currency. The main reason people are using it is because it’s a way to convert between local currencies; they’re not using it to buy or pay for a service with it. In my perfect world, Bitcoin would have never gotten an exchange, and people would have started using it as a store of value. But that’s not what happened.
This is the other problem with digital currency at the moment: the second you want to cash out, or convert your Bitcoin to USD, there goes your anonymity, because USD is regulated. I don’t think that anybody into Bitcoin now is remaining in that bubble; they are all buying and selling and converting.
What about the environmental impact of the energy used during the virtual mining of cryptocurrencies? It’s been described as a “real-world environmental disaster“.
JP: If I have to put my serious hat on and talk about cryptocurrencies, I think this is a big problem. The mining process is an empty waste of energy. And in a way it’s kind of like this first world privilege: there are people in developing nations that don’t have the processing power or the electricity to do it, so it does put currency only in our hands and not in theirs, and that kind of gets the whole thing wrong.
Is there another option for ‘proof of work’?
JP: It could totally be something else. It’s just: how does the system know that your computer spent some time doing something? The best way of doing that is solving hashes — and thats where the ‘crypto’ part of the word comes in. But it could be anything else: it could be decoding radio broadcasts from SETI, it could be mapping parts of the human genome — so maybe a block gets awarded to you when you finally crack that — it could be all sorts of stuff.
It seems Dogecoin has inspired other altcoins to cash in on the LOLs… what are your thoughts on Coinye West? Is it in competition with Dogecoin?
JP: There have been a bunch of altcoins who have forked out code base and gone live in the past few weeks. A few of them have died off, unfortunately, as they just didn’t have the community support of the “original” Dogecoin. Coinye West saw a lot of press coverage, but from what I’ve heard, the developers actually pre-mined the coin, and that upset their community.
How do you reconcile the pisstaking element of Dogecoin? To me it seems like you were taking the piss out of digital currency, but as the weeks have gone by you’ve grown pretty serious about actually making this happen.
JP: The reason I’ve gone from that pisstake stance to where I am now, wanting to make something work, is purely because of the community that has grown around it. Dogecoin has got the most active community I’ve seen out of any cryptocurrency, including Bitcoin. They’re a group that don’t take themselves too seriously, and they want to use this for online tipping specifically. It’s convinced me that it’s not just another ponzi scheme.
I also want to dedicate some time and effort to it, because I think it’s something the internet needs. At the moment you have this kind of hollow kudos — “I’ll like this, I’ll like that” — but to actually place a very tiny fraction of value behind that means something more. And if that can be traded for small things, if say they integrated this into some online games and you can buy some more credits within them, I think it’s the perfect spot for Dogecoin to slot in. It’s social, it’s friendly, it’s not challenging huge worldwide currencies (and that’s not what it exists for).
As long as the community never takes itself too seriously, I’ll always be behind it. The second that some people say “let’s make this thing worth a hundred bucks and let’s cash out”, I’ll just say “peace out”, because I don’t want to associate myself or be involved with another of those crazy ponzi schemes. That’s why I did the pisstake in the first place.
Find out more about Dogecoin here.