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Dogecoin mining rewards along with transaction volumes are now comparable with those found in Litecoin and bitcoin cash.
Dogecoin vs. Litecoin and bitcoin cash
Dogecoin has quickly attained the 13th position in market capitalization. DOGE token has gained 1800% since the beginning of the year.
DOGE logged the majority of its price gains on Jan. 28 and 29, as GameStop hype and a tweet from Elon Musk pushed the token to new all-time highs.
“The power of the meme has created value, and that dog’s face is a powerful marketing tool which has proven to be viral time and time again,” said Votta.
Support from Elon Musk has added a lot of credibility to the cryptocurrency. In fact, the on-chain stats of DOGE have improved considerably, competing with leading payment protocols in Litecoin and bitcoin cash.
Mining Is More Profitable
The coin’s total daily fees have jumped from $1000 to $27,000, earning miners fees comparable to those seen in Litecoin and bitcoin cash. The rising price of Dogecoin means that miners are earning more in fees.
The transaction fee on the network is 1 DOGE per 1 Kb transaction. At the time of writing, Dogecoin’s average transaction was $0.15. In comparison, the mean value of Litecoin and bitcoin cash transactions is $0.05 and $0.0035, respectively.
The surge in the network’s total fees came at the expense of skyrocketing prices on the two days in January. The graph below shows that change on a logarithmic scale, which reduces the apparent magnitude of Dogecoin’s rising fees.
Further, Dogecoin runs on merged mining, i.e., as a by-product of Litecoin miners. Higher profitability promotes the mining ecosystem of the token. However, there is a huge drawback in the tokenomics of DOGE.
To compensate for the low fees there is a block reward of 10,000 DOGE. This economic compromise has made the supply of DOGE unlimited, and the current rate of inflation is 4.1%.
Dogecoin Transaction Volumes
The total volume of USD transferred daily is currently comparable with Litecoin at around $100 million.
DOGE’s price surge in January caused transfer volume to increase from less than $10 million to a peak of $1.4 billion.
In comparison, the 90-day average transaction volume on BCH is $825 million.
The disparity between bitcoin cash fees and value transferred suggests that BCH processes high-volume transactions. On the other hand, Litecoin and Dogecoin seem to be used for small transfers. Votta suggested that it is unlikely that Doge will overtake the market capitalization of BCH.
The compromise with the inflation to reward miners has also reduced its intrinsic value. Votta added that Dogecoin is not likely to “overtake Litecoin because of its scarcity and speed.”
The tokenomics of Dogecoin makes the cryptocurrency fit for tips, game credits and micropayments.
Nonetheless, the sentiments around Dogecoin are quite positive and aided by the ongoing crypto bull market. While the currency may lack long-term growth potential, the short-term technical view of the cryptocurrency could be poised to climb higher.
Votta added, “developers are starting to build new applications because of this latest visibility.”
The ecosystem development of Dogecoin requires the development of mining ecosystem along with a dedicated developing team to fix bugs and release updated Dogecoin node client software like Bitcoin and Litecoin. Payment adoption would also help the project, with one company so far adopting DOGE.
Disclosure: The author held Bitcoin at the time of press.
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