The past week has been quite interesting for the crypto market. Coin prices are still witnessing mixed results primarily because investors are nervous heading into the last two weeks of the year.
However, Elon Musk, the Tesla CEO and crypto enthusiast is also back to ruffling feathers with his opinions.
More Talk From the Dogefather
Last week, Musk was named TIME Magazine’s Person of the Year. The honor was given to him for several reasons, including his influence over the growing crypto population and his recent accolade of being the wealthiest individual in modern history.
While in his TIME interview
, Musk continued his crypto promotion, especially touting Dogecoin for payments. The billionaire tech mogul explained that he believes DOG is a better form of payments than Bitcoin itself, with the meme-based currency having more potential for transaction flow efficiency than Bitcoin.
“Bitcoin is not a good substitute for transactional currency. Even though it was created as a silly joke, Dogecoin is better suited for transactions. The total transaction flow that you do with Dogecoin, like transactions per day, has much higher potential than Bitcoin,” Musk said.
Musk also explained that this doesn’t make DOGE a better cryptocurrency than Bitcoin. For one, Bitcoin is a better store of value, meaning that investors would prefer to hold and trade it than to use it for payments. The billionaire also pointed out that Bitcoin has low transaction volumes due to its surging cost per transaction.
On the flip side, Musk claimed that DOGE isn’t so much of a great store of value. Its inflationary nature makes it tricky for investors who want to maintain their wealth or hedge against tough financial climates. So, most people would prefer to spend DOGE instead of hoarding or keeping it.
Musk has gone even further, claiming
that Tesla will offer official merch soon enough and customers would be able to make payments in DOGE. That particular news sent DOGE’s price surging, with the asset gaining 25 percent in a day.
Is Elon Right?
For now, it remains to be seen how well DOGE will be able to function as a payment method. But, Musk could have a point. Tesla announced earlier this year that it would cease accepting Bitcoin as a payment method due to the asset’s environmental impact.
Many have criticized Bitcoin for being dangerous to the environment. The argument is that mining Bitcoin - as well as its endless transactions - requires massive amounts of energy and resources, which eventually degrade the environment. But, that doesn’t necessarily take away from its efficiency as a payment method. Inasmuch as Bitcoin might not necessarily be good for the environment as it is, it still works for payments regardless.
Services Prefer Bitcoin or Platform Native Coins
Bitcoin also enjoys the power of incumbency. The fact that it was the first cryptocurrency to ever be launched means that more people will be willing to support it - both on the payments side and on the recipient's side.
For a perfect example of this, take crypto gaming platforms. These days, there are several platforms that use gamification to penetrate the crypto space. One of the fastest growing is LotTrade
, which allows traders to monetize their skills and compete with each other, providing their ranking and score in real time.
LotTrade and other gaming platforms increase the fun of the industry, making crypto more attractive. However, many of these platforms continue to primarily support Bitcoin or their own coins - not DOGE or any other “hype” or meme altcoins. This shows that many of these altcoins might not necessarily be ready for the mainstream. “Our token stands for a number of use cases, providing value to the users of our platform. LOTT serves as a utility to govern the platform, a pass to the higher level of tournaments, a means of loyalty, rewards and additional sources for earning, enabled by staking. Besides, it is also a motivational trigger to encourage activities within the platform,” says Leonid Litvinenko, CEO and Co-founder of LotTrade.
While cryptocurrencies remain highly volatile and susceptible to price swings, Bitcoin has primarily been able to stay stable. The asset maintains healthy changes, rarely crossing the 10 percent rise - or drop - in a day. Compare that to Dogecoin, which could easily move by over 10 percent in a day - case and point; its price jumped by 25 percent in a day after the Tesla announcement.
Volatility continues to affect cryptocurrencies and their acceptance for payments. For now, Dogecoin might not necessarily be the right choice for most people and businesses that want to get paid in crypto. As Michael Kamerman, CEO of Skilling says, “The masses understand headlines, tweets, and endorsements and the masses will likely mature as crypto enthusiasts begin to appreciate the movement for its more technical nuances.”
Inflation Affects Dogecoin Too
Then, there’s the coin’s inflationary nature. As Musk explained, Dogecoin is highly inflationary. Initially, Dogecoin had a hard cap of 100 billion tokens - similar to Bitcoin, which had a hard cap of 21 million. However, the coin’s developers eventually changed their plans, removing the hard cap and making Dogecoin more available to everyone.
Basically, as long as miners continue to mine on the Dogecoin chain, there will be more units of the coin available for them to work. In fact, whenever a block is mined, the miner will get 10,000 DOGE for their work. Unless the code is changed, this will continue in perpetuity.
Sadly, this is a terrible flaw for DOGE and its prospects of acting as a payment method. The laws of economics tell us that when demand is held constant, the asset’s price goes down and its supply rises. If the asset’s price continues to grow without limits, its price could eventually go down.
If DOGE’s supply economics don’t change, its prospects of acting as a payment method will be significantly affected. Of course, this doesn’t necessarily mean that things are gloomy for the coin. DOGE has a committed online community, and these people have been responsible for the coin’s rise by over 10,000 percent in 2021 alone.