Digital currency wingmen (and women)

save-FerrisI have a new article up over at CoinDesk discussing some of the challenges facing Dogecoin as it relates to block halving rewards:  What Dogecoin Must Do to Survive

There were some edits and a few things were removed, so for those interested I also have my original copy in (pdf) that has one more option, a chart, plus a few more details and links.  The title of the original is “Dogecoin likely needs a wingman to survive” (it also links to the MemoryCoin “death”).

There are a number of potential solutions and many well-intentioned, motivated people are trying to organize a variety of ways to “Save Doge” happen.

For instance, this is/was a very popular Dogecoin thread from yesterday: Here’s your ASICs and pools — one of the developers has purchased ASICs from gridseed and is giving them to randomly selected people with the stipulation that they turn the hashrate towards dogecoin.

There are four problems with this specific proposal:

  1. It will simply increase the difficulty rate, pushing out other marginal miners who cannot profitably provide security on doge towards other more profitable chains (this  has occurred with Bitcoin in the past as well).
  2. From my reading it does not appear that there is any way to control those who receive the ASICs from pointing the ASICs on to another more profitable chain(s).  Whoever is distributing these would need to do some kind of “lock-in” otherwise this will occur.
  3. The question of who pays electricity is not highlighted or answered in the top of the thread.
  4. Nor is the question of who keeps the coins that are generated.  Are the holders of the coins required to keep them, sell them, trade them?  If they have to pay for electricity, taxes, logistics then they will likely need to liquidate those coins.

What this essentially amounts to is temporarily subsidizing hashrate on the doge network but with several unintended consequences that will likely create more challenges down the road.

Again, I think competition and choice is good.  I do not think (and this is just my opinion) that a monopoly-of-ideas behind just one token is an effective way to promote a new innovation that itself was purportedly designed to compete with other forms of payment.  In an open market, market participants decide and their preferences can change based upon economic conditions.  It impossible to predict what the market will decide a priori thus despite these predictions and trends the market may move in a different direction.

However, this reddit plan above ultimately just sends money to the utility companies, postponing the inevitable by writing checks to an electrical money pit.

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