Dogecoin’s Top 3 Problems For New Investors
Inflation is Not Dogecoin’s Biggest Hurdle
Many investors and speculators point to Dogecoin’s inflationary nature as its biggest hurdle. Inflation is a problem, but it’s not as bad as most people think.
Let’s look at the math.
1. Dogecoin Mints $2.1B Every Year
From Dogecoin’s GitHub, we see that since 2015, Dogecoin issues a fixed 10k Dogecoin per block mined.
On average each block takes one minute to mine with an average price of $0.40 as of this writing.
This means that $172M worth of Dogecoin is minted every month.
$2.1B worth of Dogecoin is minted every year.
This makes Dogecoin a poor investment because an inflow of $172M is needed to counteract new Dogecoins minted every month.
Although Dogecoin’s inflationary nature makes it a poor investment, the problem is not as bad as most people think because Dogecoin has a decreasing inflation rate. As seen below, Dogecoin’s inflation rate will drop to 2.3% by 2040.
For reference, the inflation rate for the US dollar today (2021) is roughly 2.4%. By 2060, Dogecoin’s inflation rate will be 1.6%, making it deflationary relative to the US dollar today (2021). For this reason, Dogecoin’s inflation problem is not as bad as most people think.
Depending on the school of economics you subscribe to, inflation is not necessarily bad. Compared to Bitcoin, Dogecoin’s inflationary nature encourages people to spend as opposed to hoard. This makes Dogecoin a good currency for spending. In fact Ether, the second-largest cryptocurrency, is also inflationary.
As long as the rate of inflation is slower than the rate of demand, inflation will not be Dogecoin’s biggest problem
2. Dogecoin Lacks Developer Support
Dogecoin’s lack of developer support is a much larger problem than its inflationary nature. As evidenced by Dogecoin’s GitHub account, there were limited commit activities since mid-2017.
The last update to Dogecoin prior to Dogecoin Core 1.14.3 on Feb 28, 2021 was three years ago on November 8, 2019.
For comparison, Bitcoin’s codebase is updated daily as seen below.
As the crypto space continues to evolve, support from developers is paramount to a cryptocurrency’s success. Dogecoin’s limited developer support is probably the greatest limiting factor to its future success.
3. Dogecoin Whales Control 47% of all Dogecoin Supply
From BitInfoCharts, we see that 12 wallets control nearly half of all Dogecoin supply with one wallet controlling 28% of all Dogecoin supply.
This is a problem because it allows for price manipulation.
If Dogecoin whales decide to exit their positions, this would crater the price of Dogecoin.
