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Is Dogecoin Set to Become A Serious Cryptocurrency with New Upgrades?

Dogecoin has long been considered a ‘joke’ cryptocurrency. Launched in December 2013, it adopted the then-popular Doge meme for its name and logo. It remained something of an in-joke for much of its life since then, but more recently shot to prominence after Elon Musk became its most vocal supporter, catapulting the altcoin to an all-time high of $0.731578 on May 8, 2021.

Despite having attained a market cap of $93 billion (making it bigger than General Motors), Dogecoin still remains something of a ridiculed cryptocurrency, particularly among Bitcoiners. However, even if it is basically a twice-removed fork of Bitcoin with an inflationary supply and some vaguely humorous branding, it has begun upping its game in recent weeks.

Is Dogecoin set to get serious?

In particular, it has two upgrades due for implementation in the imminent future, upgrades which will enhance its usability and capacity. At the same time, none other than Elon Musk is helping to spur an increase in Dogecoin development. Nonetheless, while this may end up making Dogecoin more viable as a means of payment, it’s inflationary supply means it’s unlikely it will ever become ‘serious’ in the sense of offering a rival store of value to Bitcoin.

Dogecoin’s Two Upgrades

Dogecoin’s two biggest updates are aimed at making it a more capable and attractive cryptocurrency.

The first upgrade, introduced by Patrick Lodder, proposes the introduction of SegWit and Check Sequence Verify (CSV). It will be implemented as part of Dogecoin’s next major release, 1.21.

Also known as Segregated Witness, SegWit increases the number of transactions each Dogecoin block can accommodate, doing so by separating signature data from blocks. This will help the cryptocurrency to scale better.

As for CSV, it permits consensus-enforced holding of an output (e.g. a transaction) for a predetermined period and also allows for more complicated redeem scripts. Basically, it’s a necessary step if Dogecoin wants to introduce a layer-two scaling solution such as the Lightning Network.

Source: Twitter

Yes, if you ever wanted a sign that Dogecoin developers are genuinely serious about making Dogecoin a widely used cryptocurrency, it’s this introduction of CSV. Because CSV is pretty inconsequential unless you want to build a layer-two scaling solution that will enable Dogecoin to handle an indefinite number of transactions at once.

Secondly, Patrick Lodder has also proposed an update to Dogecoin’s fee policy, which would be rolled out over several releases. This proposes to lower the default fee rate from 1 to 0.01 DOGE, while also proposing to reduce a number of other fees and limits (e.g. lowering minimal relay fee to 0.001 DOGE and the dust limit to 0.01 DOGE, while also introducing space for free transactions.

This is another potentially big upgrade, since as Lodder explains in his GitHub post, the recommended fee of 1 DOGE has become too “steep for the perceived value of transacting Dogecoin on-chain, and is, together with the dust limit (also 1 DOGE), disincentivizing on-chain transactions unnecessarily.”

Lodder also claims that, with recent price rises making DOGE (relatively) more expensive, the current situation “causes people to keep their DOGE in custody of centralized platforms longer, because the perceived value loss of transferring DOGE to a secure wallet is (too) high.”

Assuming that such a change is accepted and implemented, it could encourage people to not only use Dogecoin more, but to be more willing to withdraw DOGE from exchanges to their own wallets. This could further increase holding behavior among DOGE traders, which in turn could boost DOGE’s value over the long-term.

Increased Developer Activity

If that weren’t encouraging enough, it seems that DOGE’s surge in the first half of the year has motivated a general increase in development activity.

Data from GitHub shows that contributions to Dogecoin’s repository increased in the beginning of the year, having all-but dried up for most of 2020.

Source: CryptoMiso/GitHub

Admittedly, this is a very modest increase in development activity, with Bitcoin seeing nearly 3,000 commits over the same period. Still, the uptick in January and February — when DOGE made the jump from about $0.008 to $0.079 — indicates that development has been resuscitated to some degree.

In fact, Dogecoin’s biggest cheerleader — Elon Musk — has been actively trying to encourage more developers to contribute to the cryptocurrency’s development. On May 24, he posted a tweeted inviting coders to submit ideas to GitHub.

Source: Twitter

Musk has also reportedly been consulting with Dogecoin’s core development with regards to making the cryptocurrency more usable and scalable.

Source: Twitter

At the same time, the Dogecoin development fund currently has nearly $5 million in DOGE sitting in it, an amount capable of supporting developers as they continue to enhance the cryptocurrency.

What this all suggests is that, rather than being a flash-in-the-pan that’s going to quickly disappear, Dogecoin may be around for quite some time to come. And if Elon Musk and Dogecoin developers are to be believed, it will be a much more scalable and usable cryptocurrency in the not-too distant future.

Source: Twitter

Yes, But…

However, while Dogecoin may end up having a higher capacity than Bitcoin as far as its base layer is concerned, a slight increase in development is probably unlikely to make it more valuable.

For one, it really needs to be emphasized that the recent increase in development is very, very modest. Compared to Bitcoin, Ethereum and other major coins, Dogecoin still benefits from a very low number of commits and pull requests. As such, its updates will be few and far between, and it’s likely to grow only very steadily in usability and functionality.

Moreover, even if Dogecoin does see upgrades which make it a little more scalable, this doesn’t mean it will ever rival Bitcoin as a store of value and as deflationary money. Since 2014, the currency has pursued a policy of minting 5 billion new DOGE per year. This policy is ostensibly to counter the possibility of coins being lost and locked up forever, yet it will also likely make dogecoin inflationary.

Put differently, its value may decline over the long-term. Or at the very least, it won’t appreciate in the way Bitcoin’s supporters think BTC will. This may be a problem for the thousands of traders and investors who have flocked to Dogecoin in recent months. But then again, inflation (or non-deflation) may be what guarantees its future success as an actual medium of exchange.

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CryptoVantage Author Simon Chandler

About the Author

Simon Chandler

Simon Chandler is a journalist based in London. He writes about technology, markets and politics, and has bylines for Forbes, Digital Trends, CCN, Wired, TechCrunch, the Verge, the Sun, the New Internationalist, and TruthOut, among many others. His Twitter handle is @_simonchandler_

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