A significant portion of the commenters in this thread are asking why Dogecoin has any value at all, as if for the first time grappling with the abstraction of value. Dogecoin has value, like any currency, because a number of people believe it does. Cryptocurrency will have been worth its short-term weight in carbon dioxide and money laundering if, at a minimum, it illuminates the minds of a good number of people to the fundamental arbitrariness of economics and all the philosophical consequences it entails.
I think you are mischaracterizing many of the comments. The abstract value concept is not new to people. What is confusing however, is what the uses are.
In the case of Bitcoin this is easily explained: Silk Road, "laundering" (for good or bad) and speculation. Since this is the first time many people have heard of this currency a natural question is: who is using this and why?
In the case of this specific currency, it seems like it's mainly used on social networks like Reddit for small transactions (tip), and due to its origins as a cheap joke currency it managed to get early traction. With this explanation in hand, the concrete uses becomes more clear.
Abstract values don't exist in a vacuum. There's always a concrete use of it, even if it's just speculation (Tulips) or gestures of goodwill (~ tip).
Dogecoin's cheap/jokey nature means that what I call the barrier to experimentation is practically non-existent.
Let's say you're interested in cryptocurrencies. The hassle and expense you have to go through to get your hands on some Bitcoin is significant enough to put most people off.
By contrast, to get your hands on some Dogecoin, just post to /r/dogecoinbeg and you've got a pretty good chance of being tipped some.
Credit card companies almost unconditionally insure their customers against fraudulent transactions. Bitcoin does not. Banks will actively monitor accounts for suspicious transactions and lock the account if necessary. Bitcoin does not. Banks provide a friendly, easy to use and traceable list of your previous transactions. Bitcoin does not. Banks provide a mechanism to reverse transactions. Bitcoin does not.
Perhaps baddox meant Fraud protection for the vendor - chargebacks are impossible with Bitcoin, so once the vendor has the money/bitcoin, it's theirs.
As a consumer though, I much prefer the fraud protection that the credit card companies provide. And as a vendor, the 1% or less of chargebacks is probably outweighed by the number of customers who do buy because they feel safer using their credit card online.
Fraud protection in the sense that, if you protect your private key no one can steal your bitcoins. With credit cards you are constantly giving away your secret to third parties when you transact with them.
Bitcoin/cash shifts protection from third parties, like stores, to the user. This dramatically changes the nature of security in both good and bad ways.
Right, except it isn't a physical object like cash is, it can't be stolen from your person like cash can, and most people keep nearly all of their 'cash' in electronic accounts anyway.
It's not just theft protection though. Bitcoin provides protection from forms of fraud which specifically use mechanisms in a currency or transaction system, like chargebacks on PayPal (a ubiquitous form of fraud), or fake Western Union payments.
I prefer a user-securable account (like Bitcoin) over a laughably insecure account (like credit cards, where your "authentication" details are just a handful of numbers that you have to share with everyone you transact with) with a dispute resolution team.
If you know someones address then you can go back and check all the transactions.
As for refunds, merchants selling using bitcoin still have to follow law of the land, in most civilised countries there is a "Supply of Goods and Services Act" or equivalent legislation where a customer is entitled to a repair, replacement or refund if the good/service is bad.
Buying with bitcoin is no different to buying in cash
You obviously do not understand bitcoin or are confused about some aspects of it.
If you and I trust each other a great deal, we can do a transaction by exchanging a private key.
Groups of people that trust a third party can also do bitcoin denominated private transactions (the only visible transactions would be with the trusted third party). You see this at most bitcoin exchanges.
Credit card companies need to spend vast resources on fraud protection because their underlying protocol offers virtually none. Credit cards, after all, don't even have a basic "password." It's like the difference between an online bank account with no password but with a team of "fraud protectors," and a bank account with good two factor authentication. You can argue that both are forms of "fraud protection," but I vastly prefer the latter.
I like Bitcoin. It's odd that I even have to say that to be read correctly.
None of the things you mention are uses, they are features. Great features, sure, but it's not something that you actually do with a currency. It's like saying dollars are used by paper, or for central bank. Bitcoin - right now - is not used much for commerce, aside from black market type stuff.
> "It's odd that I even have to say that to be read correctly."
This is IMO a sign that a discussion has jumped the shark and is no longer worth participating in. Once you get to the "you're either with us or against us" point people have picked their sides and you're arguing against brick walls.
You were talking specifically about possible explanations for people placing subjective value in Bitcoin. The fact that some of these explanations are "uses" and some are "features" isn't relevant.
Actually, that's precisely the opposite of my point. To have value, an abstraction need not have "uses" in a pragmatic sense. It's easy to list some more common things of ascribed value that have no clear use: hobby collectables, keepsakes, Steam badges and other virtual commodities in video games, Xbox experience points, Ph.D. diplomas, etc. One simply needs to nucleate a community with some irrational desire for an abstraction of value to manifest extant value.
Because doge will make it to the moon. Such value. So wow.
In all seriousness, it's like a post-modern take on cryptocurrency. It's hilarious and thought provoking and stupid and intelligent, all at the same time. And it's so doge.
And you can actually purchase stuff with it. Cheap translation services, pictures, haikus, you name it.
I purchased 2 nonsensical stories, 1 completely useless and yet awesome doodle and a re-sizing service for a picture.
However the best part in Dogecoin is that it makes certain kind of cryptocurrency evangelists have a twitch in their eye. The amount of "Dogecoin ruins the reputation of serious cryptocurrencies!" posts makes it rather awesome.
The best quote "Dogecoin? Are you kidding me? I'm all for altcoins, but this is just making a mockery of what we're all trying so hard to turn into a respectable enterprise." This quote was actually the one that made me play around with Dogecoin a bit.
I have a hunch that this is part of the reason why dogecoin is somewhat popular. People use dogecoin because they can. And they intentionally ignore any cries on how it's not going to hold value etc. It's not supposed to. It works fine for what it already is. Tipping and nonsensical internet services.
That's not quite it - people hold these currencies based in part on what they think about other participants, so you end up with a situation resembling the blue eyes puzzle described at https://en.wikipedia.org/wiki/Common_knowledge_(logic).
That's a much more rational position. I mean, you'd have to be an incredible idiot to think that Dogecoin was worth something eo ipso, but slightly less of an idiot to think that there were other people who thought so, and even less of an idiot to think that other people thought that there were idiots who believed that Dogecoin was valuable, and so on.
A few weeks ago, my mom heard about Bitcoin on the news, gave me a call. She wanted to mine BTC. When I explained that mining would not be a viable process considering the inherent difficulty and the age and type of her computer, she was disappointed. I showed her how to buy Bitcoins, how to make an offline paper wallet, and she spent a little money and now holds one BTC.
Once Doge popped up, I called my mom and told her she could mine! I set up her machine, and for a while she was pulling in a few thousand a day. Even with growing difficulty she's mining a few hundred a day. She's excited, and she's learned an absolute ton about cryptocurrencies because of Doge. She thinks the meme is cute, and she's been tipping people on Reddit, and giving away Doge in "real life" as well.
Bitcoin feels unaccessible to people like my mom. Most of the discussions that happen in the various Bitcoin communities occurs at a technological level that limits the kinds of participants involved. Since there are 100 BILLION Doge, it will always be affordable, joke or not, and with the kind community developing around it, it allows people like my mom to get involved and to learn some interesting things that will most likely impact her future.
My mom will hold on to her 1 BTC, sure, but she's using her Doge. She bought a cool trilobite fossil on the dogemarket subreddit, and is thinking of putting up her hand knit scarves for sale.
When 60 year old folks who have never been interested in the intersections of technology and economy start using Reddit and mining and using cryptocurrency, there is something special happening.
The short answer is yes. The longer answer is that you also need virality. There are multiple coins released every day [1]. Most of these coins go nowhere.
Why are so many coins released? Quite simply, most coins are forks of Bitcoin/Litecoin/etc with minor tweaks. Occasionally, you get a truly new coin based on something new, but most simply tweak the coins per block, the difficulty re-targeting rate, the starting difficulty, the block time, etc. Coingen.io exemplifies how simple this is. Of course, there are exceptions, such as the upcoming Etherium [2], the first Turing complete cryptocurrency (as far as I know, at least).
Despite that, most coins basically fail. Sure, they receive hashing power, and some even get onto exchanges. Most of them, however, don't really go anywhere.
So, yes, it is relatively easy to create and launch a coin. It is a bit harder to launch a coin that makes it to an exchange. It is harder still to make one that also sticks around and stays in the public consciousness (such as dogecoin).
Finally, let's say you have a great idea for a new coin. The way some people previously got rich by creating a new coin was to premine the coin. Basically, one would mine the first x number of blocks, before releasing it. This still happens, but is now much more often frowned upon. So, to get rich off of creating a coin, you basically would need to premine a coin, and convince others that you had a good reason to premine it [3]. This absolutely still happens, but is becoming tougher to pull off.
So yes, you could create aarondfcoin. Yes, you could probably release it and get hashing power thrown at it. But, would you make money doing so? Well, that requires a bit more effort. Keep in mind that there are hundreds of attempted alt currencies for every dogecoin success.
That said, yes, there is still room for success here, but it usually requires more than just creating aarondfcoin. The virality aspect is the more important aspect, at the moment.
[3] Yes, there are a still a number of ways to make money off of releasing a coin that doesn't involve premining (or appears not to involve premining), but that is a topic worthy of its own thread.
What is funny about premining critique for the altcoins is that Bitcoin is the most egregious example of premining, Satoshi in effect having premined 5 to 10 % of current coins. Sure, you may say at the time there was no choice but to keep hashing until others joined the party. Still the end effect is still the same - a large amount of BTC is controlled by an unknown entity.
Litecoin apparently was one of few altcoins to avoid premining that is everyone (who followed BTC forums that is) got off on equal footing.
To me the funny thing is there is enough consternation over this to have an official term for it.
Satoshi, whether a group or individual, invented Bitcoin and planted the seeds for its success against all odds. Now that it's huge everyone is regretting not getting in early, but I see no reason why the creators and early adopters don't deserve their spoils.
It's nice that Litecoin decided to start everyone on equal footing, but let's not fool ourselves: that's an adoption tactic not altruism. At the end of the day Litecoin is the most successful of the copycat digital currencies but it's still a copycat.
You make all the great points, but forget to mention scarcity. The most extreme I've seen is fourtytwo42 [1].
The scarcity combined with an extremely low difficulty in the start is a huge incentive for miners to flock to a new altcoin, and exaggerate its perceived value.
Based on what I've read, it is meant to be a memory-hard coin, so I would assume GPU (and, if like previous coins, an AMD-based card), or possibly CPU to start. That said, I've not yet read enough, so take the above with a grain of salt.
Its scrypt based proof of work function, its a litecoin alt-coin derivative. It offers little over other scrypt based alt-coins. A UK company has announced they will be selling scrypt ASIC miner appliances in 2014.
If this cryptocurrency survives, it will be uneconomical to mine by the commoners sometime this year.
It's nominally worth $850k, but I am skeptical you could find someone to take the other side of that trade.
Dogecoin is like any other currency. The things that make it useful are belief and people willing to exchange things for it. It's unlike other currencies in that mostly the things being exchanged are electronic and not worth meatspacecoin.
There is, of course, no reason it has to stay that way.
tphyahoo, FYI, seems that you have been hellbanned for almost 4 years. That's such a long time that it feels almost evil. Maybe you should contact HN admins and ask for forgiveness.
The currency (and the meme it is "based on") is somewhat attractive, its silly image made me laugh, and mine for a few days, getting 120 000 or so Doge. If enough people think it funny enough to use, and of low enough value to actually use instead of just hold, it may have a future as a low value tipping currency. Your aarondfcoin lacks that funny easygoing silly meme power, I belive.
I can't explain why dogecoin is worth so much, probably just crazy speculators (after all, the only market is people using it as a joke/meme, no one is ever going to spend significant amounts of money on it - I hope.)
But yes you can create your own cryptocurrency and make a lot of money off of it. This is a good and a bad thing. Good because it should create competition to make better cryptocurrencies. It also helps build the currency as all the miners invest resources in it and get exposed to the currency and have an incentive to try to get others to use it. Bad because, well that money is coming from somewhere, and the users of the cryptocurrency are essentially paying a tax to the miners for not really contributing anything of value.
Except it's conceivable that having virality baked into it (e.g. being a "joke/meme") could actually help its adoption move much faster than it otherwise would. And once you have a cryptocurrency that has a lot of buy-in, why not use it for real transactions?
I'm not ready to say DOGE will win the cryptocurrency wars, but it certainly wouldn't the first time that a "joke" or "hack" turned into something real and lasting.
Keep in mind that this generator uses premined genesis block - the same for all currencies. Creating new one, with unique genesis block, with adjusted difficulty can take some time.
By mining your own genesis block, you can adjust starting difficulty.
If the difficulty is set too low, then first miners will mine enormously more blocks, before the difficulty readjusts.
Good luck getting aarondfcoin to gain any sort of traction or following. If you can convince a committed and numerous group to believe in anything, it will be worth something.
If a local group decided to start their on local currency, just like a couple of groups do (https://en.wikipedia.org/wiki/Local_currency), then using a bitcoin like system might make sense for them.
That part shouldn't be any harder to understand from an economic standpoint than the fact that a $1 lottery ticket can become worth millions of dollars overnight.
Dogecoin is kind of the Redditcoin [0]. This might be one reason, why it is so heavily used. For reddit users, it probably easier to get started with doge than with bitcoin. Since it is seen as fun, (micro) transactions are casually thrown around [1].
supposedly FEDORAcoin or "TIPS" is the most traded or gifted currency within reddit.
This would not show on any external chain monitors like the story source as most of the trading is occurring within reddit; only when a client cashed out to their wallet would the transaction actually touch the blockchain.
This is an absolutely unfounded assumption but one could think a large part of those transactions might be some sort of tips. I can confess I'm happy to have some supply of a very cheap currency that I can give to people for fun. I have no use for DOGE other than this, but my friends and I are enjoying it.
Pollution created through the mining of relatively worthless items can be an issue though.
This is absolutely the source of the transactions. When you consider that no other crypto currency has a mass appeal use at this point, it makes sense that the transactions would be higher for DOGE than any other. Conversely, The primary use of Bitcoin is value storage.
An alternative source of the transactions is dust (people sending tiny transactions as a way to increase the size of the blockchain - an attack on the currency).
How is Dogebook different than Facebook? I mean you can create an account in both, follow your friends, "like" stuff...etc. They are essentially the same so they must both be worth billions, right?
What makes bitcoin different is the network effect and the infrastructure - there are many people who think bitcoin is the cryptocurrency and this is a self-fulfilling prophecy. Some day another cryptocurrency may overtake it but for now it's the one because people say it's the one.
That depends what you mean by "works better as a currency." Considering you need two parties for what I would consider a useful application of currency, I'd say Bitcoin works better.
Right, so chances are dogecoin is and will remain lower-valued than bitcoin in the aggregate. That's relevant how? Surely multiple virtual currency bubbles can exist concurrently.
It's not. It's identical with a slightly modified POW and some of the values tweaked. The incompetent developer has already accidentally broken the currency once, so it doesn't really bode well for it in the future.
Eh? The chain broke because the author made a hard forking change with 10 days notice. You can't do that. Bitcoin staged theirs over months and still managed to leave some people behind. It's not FUD if it's true.
It is different from BTC - it's a fork of Litecoin, meaning it uses scrypt rather than SHA-256 and cannot be effectively mined using BTC-oriented ASICs.
I think the transaction volume comes partly from Reddit tipping with tipbots (a beautiful aspect of the modern age).
But it's probably more from from the fact that some people are attacking the currency by sending massive volumes of micro-transactions. Many people have been receiving thousands of really tiny donations (off-reddit).
The 'dust' issue was resolved recently by changing the minimum transaction amount. AFAIK, this vulnerability affects many other alt coins that haven't had the masses of people looking at their implementations.
This is transactional volume, and although of course the transactions are pretty small keep in mind that the total transactions over the last 24h was $13 million which is still pretty impressive. (Bitcoin was $500m) - http://bitinfocharts.com/
People tip other people Dogecoins on sites like Reddit. That's its main use and that's why there are so many transactions. Since the coin has a total supply of 100 billion coins vs 21 million for Bitcoin, you can easily tip someone 100 Dogecoins without it really costing you much, but you can't do that with Bitcoin for obvious reasons.
This sort of thinking is natural but incorrect since cryptocurrencies are divisible to many decimal places. It's just as easy to tip BTC, but tipping .00001 Bitcoins doesn't feel the same as tipping 100 Dogecoins, even though it's just as easy and exactly the same. It's just another one of those things that matters for adoption that nerds would never consider.
I'm not sure what you are describing as incorrect. Tipping 100 Bitcoins would cost nearly $100,000. Yes, you can tip the same value in Bitcoins, but tipping a decimal amount is not fun since everyone is conditioned to local currency value that generally goes to 2 decimal places at most. Nerds are considering this. There is a big movement in bitcoin to denominate coins in millibitcoins or microbitcoins.
The reason for the large number of transactions is that so many people are mining Dogecoin. Most miners automatically sell their mined Dogecoin for Bitcoin, and new Dogecoin blocks are mined roughly every 60 seconds.
Several pools have as many as 6000+ individuals currently mining it. Really the only thing preventing the transaction number from being even higher is that most pools only give out accumulated awards to their members every 30 minutes or so (during which the pool may have mined several blocks).
IDK, there was an alarming comment on the doge community page that this particular system would soon have a block chain that would be too large to contain on anyone's computer if the transaction volume keeps up. Could be someone (or many people) just spamming transactions for the lulz to make dogecoin unfeasible to keep.
Its like silver vs gold. The volume for silver is much higher as its price range is a lot more manageable for people. I also wouldnt be suprised if just one person created the majority of these to push hype. Theyre all a bunch of ponzi schemes. Sadly i also think theyre here to stay for at least a long while.
Christ I'm sick of people describing these as Ponzi schemes. It displays a distinct lack of economic (and modern history) knowledge. Especially when the intent matters.
Go on then: it pays out a lot to early "investors". It can only maintain this rate of return as long as adoption is increasing. Why is it not a Ponzi scheme?
Because the value of this currency does not come from the ponzi effect, nor will it disappear as it wears off. We'll see less investors, less risk takers, but the purpose it serves will be sustained and even improve as it stabilizes.
Once the situation settles, the risk takers will move on to the next thing, because that's what they like to do. But they aren't going to leave a dead ponzi behind.
Why don't we just agree that it is legitimate to call it a scam (leaving the question of whether it is a scam out of the issue). I know that this is devolving into a semantic argument, but it clearly isn't a Ponzi scheme, as a particular type of scam.
A Ponzi scheme is an investment that represents account balances that are satisfied from a cash pool that only grows from new investors, and provides fictitious returns on the balances.
This really is quite a simple scheme, but alarmingly effective, because as long as people trust that the account balance is legitimate, and the returns are good, people will not exit the scheme. Sometimes, as (apparently) in Mr. Ponzi's case, this emerges not through an attempt to steal money, but in an attempt to buy time to recover from trading losses.
Do we disagree on the definition of Ponzi scheme here? If we agree on the definition, then I don't see any way that you can claim bitcoin/dogecoin/litecoin is a Ponzi scheme -- there are no account balances (in anything but the coin itself), there's no promised return, there's no cash fund that is satisfying investors making exits (unless there's a massive conspiracy of exchanges).
Maybe you can switch to comparing cryptocurrencies to pump-and-dump schemes? Or just call it a scam, an attempt by the creators to create wealth out of thin air by preying on the gullibility of libertarians.
You're right that there's no explicit account balance. Words are imperfect; ultimately bitcoin is a new type of scam. But I want a term that emphasises the disproportionate returns given to the early "investors" - an ordinary stock pump-and-dump doesn't have bitcoin's built-in deflation. I think a Ponzi scheme is the closest fit.
Just like art is art first, or an antique chair is a chair first. The investment or any of these can be described as a ponzi scheme by the above criteria. The first few buyers of a chair make money, it only works is people are still interested in buying the chair...
Percentage of what? Since there _is_ a relative value between cryptocurrencies, counting volume without taking in account value is meaningless.
I understand Dogecoin has a use (Reddit) and could be a great investment in the future, but currently, it represents only a tiny fraction of what Bitcoin, or Litecoin are.
Dogecoin is going to be the defacto way to give kudos to someone on the internet, i.e., Doge Tip Bot on reddit/twitter. I think with that in mind, Doge is going to expose millions of people to cryptocurrency and actually give them the ability to own at least a few, unlike Bitcoin.
The difference is that bitcoin will likely be considerable more useful next month and next year and dogecoin will be a joke you can read about on the internet.
