Invest in Dogecoin?
Today we’re going to look at Dogecoin, crypto that got a second life after being mentioned by Elon Musk, which legitimized it and turned it into more than just a meme. We will go over cryptocurrencies as a whole and compare Dogecoin to it because some differences should be noted and understood before you invest in Doge.
Benefits of Crypto
One of the most significant benefits of cryptocurrencies is that there is a finite amount of them; hence at some point, you will no longer be able to acquire more of them. If you understand the basic principle of supply and demand, you can see how this is a big plus for crypto as a whole when considering its investing opportunity. For example, there can ever be a total of 21 million Bitcoins. After that, no more Bitcoin can ever be mined. This principle applies to a good amount of cryptos.
The other cryptos that do not follow this principle have a system regulating how much the token is in circulation. Burning has been discussed in the article where we compared cryptocurrencies and stocks as an investing opportunity. Burning is where the percentage of crypto is sent to a dead address (example) to decrease the number of tokens in circulation, reducing supply. This system is how tokens like ETH (Ethereum) and BNT (Bancor) keep their supply regulated.
A good amount of cryptos that are top 100 have a use. Apart from being just a decentralized currency like Bitcoin, there are coins like Ethereum. Ethereum provides the infrastructure for others to build on top of their network. Cryptocurrency usage is an overly complicated topic to explain in just a few words but understand this: decentralized exchanges, decentralized finance platforms, and many other “dapps” (decentralized applications) run because of Ethereum (and other projects like Ethereum).
There are many other projects like Ethereum. One of those is Polkadot. There are similarities between the two and differences which you find out more here. Long story short, these currencies have value because they have a purpose, a use. They get their value from other projects built on top of them, which allows the entire crypto train to keep moving forward and evolving.
What’s wrong with Dogecoin?
From what we’ve stated previously, you can assume where this is going. First off, we’ve discussed that some cryptos limit how many of them can ever exist, and the example was Bitcoin is capped at 21 million tokens. Next, we went into some cryptos having an automated system where the tokens are burned on a specific trigger. As an example, around 3 ETH is burned every minute on the Ethereum network that’s just from the transaction fees.
The biggest reason most cryptos nowadays have value is that a whole project is in the works, which gives them value. You are investing in the future, investing in the idea, but what are you investing in when you buy Dogecoin?
So the main problem with Dogecoin is that it has nothing going for it. There is an unlimited supply of it, you can check here. The coin also does not have any burning set to remove currency out of circulation, and this means that the coin has unlimited supply and the supply only grows. On top of all of that, the token does not have any technology behind it to give it any value. Dogecoin is essentially Bitcoin with an unlimited supply. Hence it should be worthless. Whenever you’re holding Dogecoin, it only becomes more and more inflated.
So should you invest in Dogecoin?
It’s up to you. We’re just providing you with information, and using that info, you should be able to make up your mind. You should not buy it because Elon Musk tweeted about it. You should buy it because you think it is a good investment that will bring you financial growth. If you wish to find out more about investing, we have an article comparing crypto vs stocks. Good luck investing!