One of the most popular discussions with regard to Dogecoin concerns the value of the digital currency. Even though difficult to assess, a recent report by PwC on the Single Euro Payments Area (SEPA) offers some insights on what could be the potential Economic impact of Dogecoin.
Most Europeans will have heard about SEPA by now, as there are 33 countries (mostly EU and some other counties) joining in SEPA. The aim of SEPA is, as the name implies “to create a harmonized, common market for payment processing across Europe.” SEPA requires the use of International Bank Account Numbers (IBANs) and will affect all euro-denominated payments.
SEPA is said to reduce recurring annual costs by $30 (€22) billion for all stakeholders (e.g. companies and banks) and the EU-16 countries. Also $313 (€227) billion will be freed in liquidity and credit lines. These numbers are attributed for a large part to companies, which would save $18 (€13) billion on “reduced banking fees, price convergence and simplification of bank account structures.” $248 (€180) billion in idle cash would be unlocked due to “closing out stand-alone accounts and simplifying cash-pooling structures.” The bank accounts and connections that won’t be required anymore will reduce idle cash currently on these accounts. For banks the operation expenses will be reduced by $8 (€6) billion and another $12 (€9) billion due to a release of liquidity. The main gain for consumers is more protection, but other than that no direct benefits. In all cases, these numbers are just those that can be quantified. Increased cross-border sales opportunities are not included, for example.
Dogecoin versus SEPA
The previous can be compared to the basic principles of Dogecoin. Rather than a Eurozone payment system, Dogecoin can be seen as a global payment system. PwC assumed SEPA would be fully embraced, let’s assume Dogecoin will be fully embraced. Many of the benefits attributed to SEPA could also be attributed to Dogecoin. Fully embracing Dogecoin would greatly simplify cross-border payments. International transfers would occur through a standardized Dogecoin account, reducing the need for other accounts. The maintenance costs for supporting systems would be greatly reduced as transactions are handled by the network. Due to the uncapped set-up of Dogecoins (sometimes pointed out as a mere technical difference), the network will perpetually be rewarded with a fixed amount of new coins for their efforts. This is a big difference compared to others such as Bitcoin, where there will never be more than a predetermined amount of coins in circulation. The latter would drive up transaction fees in the long run, as an alternative form of compensation. This would significantly decrease the added value of these cryptocurrencies for the global Economy.
Compared to SEPA the benefit of Dogecoin for companies and consumers would have to be even bigger. A transfer to any Dogecoin wallet costs only a minimal amount in transaction fees. In the U.S. there is a 21-cent cap on debit card swipe fees. But 21-cents in transaction costs is still a ridiculous amount in the Dogecoin world. But the most visible benefit would be with international Wire transfers. Unlike debit card swipe fees, the costs of international Wire transfers are generally charged directly to the consumer. A transfer between the U.S. and Europe will normally set you back somewhere between $20-25 and will take several days to be processed. Dogecoin transactions can be done in the same format worldwide, and will have low costs and processing time regardless of destination.
Being a new phenomenon, there would also be a cost to fully embracing Dogecoin. Time and money will have to be invested in, for example, investigating and building a suitable regulatory framework. Expensive Anti-Money Laundering programs that will be required, along with more technical security and financial transparency immediately come to mind. The recent bankruptcy of one of the world’s biggest cryptocurrency exchanges, MtGox, has shown that there is still a long way to go on this area. But given the numbers involved, it doesn’t seem likely that this would significantly reduce the potential Economic impact.
In the end, $30 billion is just a number, but putting it into perspective gives us an idea about the potential size of this digital Economy. It seems very likely that the benefit from fully embracing Dogecoin could be absolutely massive, and that the current value of all cryptocurrencies combined is nothing but a speck of dust in the transaction world.