Dogecoin: The Rise and Fall of the World's Cutest Cryptocurrency - Bad Ideas #43

Bad Ideas Podcast

Dogecoin started life as a joke. Jackson Palmer, Tweeted "Investing in Dogecoin, pretty sure it's the next big thing." This was a reference to a popular meme featuring a breed of dog called a Shiba Inu adorned with Comic Sans text. Jackson was poking fun at the rapid proliferation of so-called "altcoins" cryptocurrencies that hoped to rival the success of Bitcoin. But the response to Palmer's joke was enthusiastic and positive. Still, the joke might have ended there if not for a programmer named Billy Markus. Markus had dabbled with creating his own cryptocurrency in the past and he contacted Palmer to offer his services. Together the two men cooked up Dogecoin, an altcoin cryptocurrency inspired by a joke about how there were too many altcoin cryptocurrencies being created. Naturally it featured the clueless face of a Shiba Inu dog. The cryptocurrency launched on December 6, 2013. By December 19, the value of the joke currency had skyrocketed, quadrupling it's value in just a few days of trading. The money based on a meme seemed to have a memetic appeal all it's own. Three days later the currency would lose 80% of its value, but by now it was at the very least being talked about in serious cryptocurrency circles. However three days after THAT on December 25, a hacker managed to manupulate a popular Dogecoin storage solution called Dogewallet and stole $12,000 worth of Dogecoin. As if that wasn't enough drama for the cryptocurrency that was still less than a month old, the Dogecoin community, led by the makers of Dogewallet launched an initiative called "Save Dogemas" to make whole those who had had their Dogecoin stolen. This generosity of the early Doge community was not a one-off. In 2014 they led a Dogecoin fundraiser to send the Jamaican bobsled team to the Olympics, and then they helped build a well in Kenya. But the happygolucky Dogecoin community hadn't seen the last of its share of troubles. Throughout 2014 a user in the Dogecoin reddit subreddit who called himself _Moolah started engratiating himself to community by generously tipping other community members in Dogecoin seemingly for no reason. And once he had their trust he asked them to invest in his new business venture, an online Dogecoin exchange called Moolah. But after accepting investment from the community to get the site up and running and then accepting deposits of Dogecoin into his newly created exchange, Moolah experienced a "critical bug" and many users lost the ability to withdraw their Dogecoin. The man behind Moolah was eventually identified as Ryan Kennedy, a man with a history of cons and scams. And because of the nature of Dogecoin it was difficult to know what could be done about it. Dogecoin and other cryptocurrencies aren't "money" in the legal sense, so people who had been scammed had no clear legal recourse. Dogecoin also suffered price manipulation at the hands of cryptocurrency "investors" looking to make a quick buck in the largely unregulated market. By 2015 the shine had worn off of Dogecoin, and even creator Jackson Palmer said he wanted to take a step back from the cryptocurrency community. Why? Because he didn't care for the kind of people he saw taking an interest in cryptocurrency. "All in all, the cryptocurrency space increasingly feels like a bunch of white libertarian bros sitting around hoping to get rich and coming up with half-baked, buzzword-filled business ideas which often fail," Palmer told coindesk.com. He had also become dissallusioned with the lack of security in the world of cryptocurrency. He had created a version of cryptocurrency that had made regular people feel comfortable investing in this new kind of financial market, and the result was that many of those people had lost significant amounts of money and there was no recourse for them. The irony is that Palmer had CREATED dogecoin to point at the flaws in the altcoin market. Even back in 2013 new cryptocurrencies were being created all the time. They were presented as investement opportunities, but they were often the tools of what are called "pump and dump" schemes where the creator of a cryptocurrency artifically inflates the price of that currency and then sells off their holdings to gullible investors. And the process shows no signs of slowing. As of March 16, 2018 there were 1,638 different cryptocurrencies. In the end Dogecoin itself isn't the bad idea here. But it's entire history has been a lens through which we can view the problems with cryptocurrency in general and alt-coins in particular. Cryptocurrency isn't even a good idea as an investment. At the beginning of the year the market capitalization of Dogecoin was 1.5 billion dollars. Today it has plunged along with the rest of the cryptocurrency market to where it is today at 386 million dollars.