Yesterday digital currency Dogecoin celebrated its first anniversary. The genesis block of the coin, originally intended as a joke, was mined on December 8, 2013. One year later, Dogecoin is still among the biggest cryptocurrencies in terms of market capitalization and also still the second most popular cryptocurrency according to CoinGecko.
The coin’s success has been a complete surprise to many, including the creators. It was anticipated that Dogecoin would have disappeared in one year; hence the currency’s mining schedule was only set up to accommodate a short lifetime. A total of almost 100 billion Dogecoins would be released in one years’ time, and the last block would have been mined in February 2015. Due to a misunderstanding the number of Dogecoins was never really limited to a maximum amount, but instead it would continue to add 5 billion new coins per annum. It was later decided that this would not be altered.
In August, Digiconomist already covered most of the history of Dogecoin since inception. At the time, Digiconomist concluded that “it would be too early to completely write-off the joke that turned into a currency”, despite being battered for several months. This was before it was revealed in October that the person that was responsible for causing a major rift in the Dogecoin community, Moolah CEO Alex Green, was in fact alleged scammer Ryan Kennedy. Kennedy subsequently disappeared, along with $1.4 million worth of Bitcoins, leaving the community in disarray.
In attempt to assess how this has impacted Dogecoin, and how Dogecoin has developed in general since August, a breakdown for the number of transactions per transaction type has been made below.
The graph shows four transaction purposes being: tipping, consumer goods, trading and investing. Also Dogecoin’s price development has been included. The four lines have been categorized based on every individual transaction’s size. Tipping includes transactions worth $2 or less. For consumer goods this ranges from $2 to $50, while transactions worth between $50 and $2000 are categorized as trading activity. Any transaction worth more is categorized under investing.
Of course, this method is not flawless and the following caveats should be kept in mind. Since it concerns transaction data, the exact purpose is not known. An assumption is made based on the size of the transaction, but this does not rule out a different purpose or even just a transfer between a single person’s wallets. Furthermore, exchanges and tipbots may process transactions internally, limiting their output on the blockchain. Nevertheless, it can be assumed that at least the error in the data is roughly constant, allowing it to still reveal some interesting trends. To put more emphasis on this, only the 7-day moving averages are displayed.
Validation and Interpretation
The first thing that can be noticed is the peak in tipping mid-October. This happens around the GEICO 500 weekend, a NASCAR Sprint Cup in which the Dogecoin-sponsored Dogecar appeared for the last time. This peak therefore seems to make sense. The line also reveals that it did not lead to a durable increase in Dogecoin tipping. At the same time, trading activity shows a downward trend. Again, this is logical given Dogecoin’s slowly decreasing price. The only time when trading activity peaks is in September, when the Dogecoin exchange rate is still very unstable. Trading activity is typically the most probable in volatile markets due to the short term nature of the trading positions. Once the rate remains steady, there is not a lot of money to be earned by traders.
Spending on consumer goods seems to peak when the price of the digital currency is higher. This is consistent with results from a recent study on Bitcoin that revealed an increased tendency to spend Bitcoins in a bull market. For Dogecoin, it is positive that this line has at least remained stable recently. Lastly, the number of large investment transactions peaks in the period following the GEICO 500 weekend and Moolah scandal. Since there are no clear effects on the Dogecoin price, it could be that the number of new investors balances with the ones bailing out.
Overall, the most important conclusion would be that at least Dogecoin’s core transaction types, tipping and regular spending have remained more or less stable despite the Moolah scandal. Of course, growth is required, but given recent events and the fact that the coin is based on a meme (typically not lasting for a long time) this is already quite an achievement. It provides a solid foundation for Dogecoin to build on in its second year.