Bitcoin Blog a1

Sunday, February 1, 2015

Dogecoin Paper

A while back I wrote a academic paper about dogecoin. I thought I might try to publish it but never got around to it, so I will put it here.

What is Dogecoin?

This brief will seek to answer some basic questions about cryptocurrencies. A cryptocurrency is “a peer-to-peer form of digital money that uses cryptography to ensure transactions can remain anonymous.” 1 The following questions are addressed in this brief: What is dogecoin? Why does it matter?  How does it relate to bitcoin? What are some uses and problems associated with both?

These questions will be explored topically: (1) bitcoin will be examined, (2) internet memes will be defined and explained, (3) the doge meme will be addressed (4) dogecoin and its origins will be analyzed, (5) issues will be discussed, (6) a unique community will be uncovered, and (7) potential uses will be expounded on.

Bitcoin. Bitcoin was created in 2009 by a person (or group of people) using the alias “Satoshi Nakamoto.” 2 The bitcoin is a peer-to-peer currency and, much like downloading on a peer-to-peer program utilizes multiple hosts for the sharing of a file, bitcoin has “miners” confirm transactions as they are made. When a user sends a bitcoin to another user, this transaction is sent to other bitcoin users. Bitcoin miners then verify the transaction’s authenticity. To be verified, the transaction is placed on the blockchain. These blockchains are then solved through a series of complicated algorithms, each part of the chain being a “block.” Blocks are often solved in pools or in other words a group of people working together. When the block is solved the miner(s) who solved it collectively receive 25 bitcoins. Modern bitcoin mining requires powerful application-specific integrated circuits. As more miners approve the transaction being sent, the transaction is recorded by more users, thus providing certainty that the money was indeed sent.

In every functioning bitcoin wallet, every transaction in the history of bitcoin is recorded there. Because bitcoin is a peer-to peer currency, bitcoin has no central authority with a ledger indicting who has which coins; rather, every wallet must first validate every transaction that has ever been made. This in turn allows the community to know who has how many coins; this knowledge is based on the public record of coins received and sent under that address. 3 The image below is one of the recognized symbols for bitcoin.



One should note that since bitcoins are not a physical object, this and all pictures of “bitcoin” are just representations of the currency.





 Figure 1
(Source: Bitcoin.org)
Bitcoins and other similar currencies fluctuate greatly in price. Figure 2 represents the closing prices of bitcoin since its creation.


Figure 2
(Source: blockchain.info Edit: by author)

This chart depicts bitcoin as not being very stable. Other cryptocurrencies also display similar patterns in fluctuations, or in other words the lack of stability and discernable trends.

Meme.    In psychology, a meme is defined as a behavior that spreads from person to person in a culture. However, when talking about internet memes, the term begins to take a new meaning that falls within the context of psychology’s definition of a meme. In The Gold Coast Bulletin, a meme is described as, “a visual medium used to share ideas and relate to situations in a humorous way.” 4 In other terms, an internet meme is generally a well-known picture that is captioned to fit the circumstances. An example of this is Doge.

Doge The word doge was a title used for a type of medieval Italian elected official. The word doge, as an incorrectly spelled term to identify a dog, was used in June 24, 2005 in an episode of Homestar Runner called “Biz Cas Fri 1.” Later, the word doge became associated with images of a Shiba Inu. 5 In fact, the Shiba Inu pictured below is the most common application of the meme.


Figure 3

As shown in this picture, the picture of the Shiba Inu is generally accompanied by multicolored comic sans font. 6 Further, the text will include phrases such as “wow,” “excite,” or “amaze.” Two word phrases may also be used, using the following modifiers: “much,” “many,” “so,” “very,” or “such.”  These modifiers must be used in a way that is grammatically incorrect in order for the meme to be properly applied. 7 For instance, when creating this meme one might say, “very business,” “much inform,” or “so bitcoin,” and this would be perfectly acceptable.

Dogecoin.  Dogecoin is, in essence, the marriage of bitcoin and the Doge meme. While many of the differences between the two coins, such as differences between SHA-256 and script mining, are too long and technical for a brief of this length to discuss. 8 Many others differences between these two coins, particularly the community surrounding both are quite interesting to look at.  Previously, a picture of a bitcoin was shown; if one were to transpose doge onto that coin, Figure 4 is what it would look like.

Figure 4
(Source: Dogecoin.com)


Figure 4  is the image for dogecoin on Dogecoin’s website. Here we can see the iconic picture of Atsuko Sato’s Dog, with brows raised in concern.9 I think this picture captures both backgrounds of the coin: its bitcoin origin and its doge meme silliness.

Issues. A big issue with these cryptocurrencies is they absolutely lack intrinsic value. In other words, the only value these currencies have is the value placed in them by people.
In his article, “Why Bitcoin Has Value,” Van Alstyne asserts  that bitcoins have value because people accept bitcoins. He explains that this acceptance is the reason any currency has value. He goes on to explain, “‘Money’ is a medium of exchange, a store of value, and a unit of account.” He claims bitcoin meets all three of these criteria. Specifically, he attacks the assertion made by some that to have value, a currency needs to be supported by a government body. He uses the example of Iroquois Native Americans to destroy this idea. He cites that this tribe of people used beads (wampum) to settle debts. He also uses the Weimar Republic in Germany as an example. In his example, marks were printed too fast and thus they were not accepted. 10

 Clearly, not all government-printed bills will be accepted in all circumstances. However, this doesn’t make the converse necessarily true either. The example of the Iroquois is a powerful one however. That is simply, value is given to things that people value, and even a government doesn’t necessarily create value.

Community. People often value community. Arguably, dogecoin has value in its sense of community, which is magnified because of the novelty of both the coin and the community. One example of this novelty in the community is the name it has branded itself with for its members, shibes. Perhaps, like a well-crafted bead, the doge is a well-crafted meme with a currency. Perhaps simply people valuing the dogecoin is sufficient to qualify it as a currency. I think that this sense of community amongst shibes helps give value to the coin. And, at the very least, both the coin and community are quite entertaining.

Because of this meme, an active culture and community surround the coin. Here, two particularly noteworthy phrases are used. The first is “to the moon,” which refers to the price of dogecoin skyrocketing. This expression is used to rally dogecoin users and encourage people to invest. The second expression is “1 Doge = 1 Doge.” This phrase is often used when the price of the coin drops. This expression serves as a reassurance to others that the price of the coin in US dollars doesn’t really matter; rather, the community as a whole is what truly matters. These ideas seem a bit contradictory.


Uses.  These coins have many potential applications. One application is mass fundraising. For instance the Jamaican Bobsled Team lacked enough money to go to the Sochi Olympics. When the dogecoin community heard of this need they created a fund raiser for the Olympic team. The dogecoin community gave the team money in the form of dogecoin, which was then exchanged for more traditional currencies to get the team to Russia. Cryptocurrencies allow this kind of fund raising by many people. 11 The closest comparable service to this is PayPal, which has much higher fees. Dogecoins transaction fees are less than a penny per transaction.

Another application is as the tip system of the internet. The dogecoin community is a very generous one. They have a culture of giving tips whenever something amusing is said, or something that is agreeable. This is possible due to the low transaction fees. It is also noteworthy that many other currencies have similar low fees, but the culture of tipping is not prevalent.



Closing.  Despite having shortcomings and issues, cryptocurrencies also have many uses. While they are not “investments” despite some popular belief, cryptocurrencies are an interesting way to exchange money, and one would be foolish to pass them off as nothing. The dogecoin, specifically, has had some big impacts on the world; one impact that was particularly visible was during the Sochi Olympics in which they helped sponsor the Jamaican Bobsled Team. Cryptocurrencies continue to have a diverse impact on the world.

Endnotes

1. Adam Greenberg. 2014. "The Value of Bitcoin." SC Magazine 25 (5): 33-35.

            2. Rajiv Prasad. 2014. "FBAR and FATCA Compliance in the Age of Digital Currencies." The Tax Adviser 45 (5):

            3. Ibid.

4. "It's All About Meme Naomi Hockins Asks What All the Fuss Is About with Internet Memes." The Gold Coast Bulletin, Jun 29, 2013.

5. “Know Your Meme.” July 20, 2014 http://knowyourmeme.com/memes/doge

            6. Ibid.

7. Gretchen  McCulloch. “A Linguist Explains the Grammar of Doge. Wow.” The Toast. February 6, 2014.  http://the-toast.net/2014/02/06/linguist-explains-grammar-doge-wow/

8. Rajiv Prasad. 2014. "FBAR and FATCA Compliance in the Age of Digital Currencies." The Tax Adviser 45 (5):

9. “Know Your Meme.” July 20, 2014 http://knowyourmeme.com/memes/doge

10.  Marshall Van Alstyne.  2014. “Why Bitcoin Has Value.” Communications of the ACM 57: 30-33.

11. Erika  Engle.2014. "Dogecoin Users Try to Widen Cybercurrency's Acceptance." Honolulu Star - Advertiser, Feb 17. http://search.proquest.com/docview/1498823165?accountid=4488.


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