The History of Dogecoin
Greetings from Coinbase Bytes,
Elon Musk tweets, the markets move — just another week in 2021. Shortly after his crypto-centric SNL hosting stint, the Tesla CEO announced the electric car company would no longer accept Bitcoin as payment, continued to tweet favorably about Dogecoin, and prompted serious price swings: BTC fell to lows near $42,000 while ETH fell to the $3,100 level. Both have recovered mildly since.
So how exactly did we get here? In this week’s Bytes, we’re following the thread by exploring Musk’s confusing about-face and compiling a brief timeline of Dogecoin. Let’s get started.
Elon’s impact on crypto markets
A brief history of Dogecoin
What is proof of stake?
Price changes are for the past week, ending on May 19, 2021 at 09:00 AM UTC
See the latest prices
MUSK WE DO THIS?
Crypto markets retreat after Elon Musk’s BTC reversal
Last week, Musk sparked volatility with a series of tweets, reversing months of pro-Bitcoin moves. He announced that Tesla would suspend accepting payments in Bitcoin. The reason? “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining,” he said on Twitter. “Cryptocurrency is a good idea on many levels, but this cannot come at great cost to the environment.” A lot to unpack here.
Since late 2020, Bitcoin prices have trended toward record highs. One source of this momentum has been institutional crypto adoption as big firms seek to diversify balance sheets and hedge against inflation.
Tesla made the biggest Bitcoin move of the public companies that reported crypto investments, buying $1.5 billion in BTC in February.
Tesla doesn’t appear to be divesting its Bitcoin, but Musk muddied the waters by responding “indeed” to a tweet suggesting the company might. Even as Musk re-clarified that Tesla hasn’t sold its remaining Bitcoin stake, prices wobbled.
What about the environmental impact Musk noted? While everyone agrees that Bitcoin mining is a resource-intensive process, the precise environmental impact is much harder to quantify.
Cardano and other cryptocurrencies rallied amid the larger market rout — why? Proof of stake is a more environmentally sustainable process to expand blockchains than Bitcoin’s proof-of-work method. Many of the assets that saw gains rely on this more energy-efficient system.
Why it matters… Many are researching mining’s exact energy footprint. According to the Cambridge Bitcoin Electricity Consumption Index, there is “little evidence” that mining directly contributes to climate change, and anywhere between 20 and 70 percent is powered by renewable energy. Research from Cathie Wood’s ARK Investment Management, finds that traditional banking is much more energy-intensive. And a number of major mining companies, like Argo Blockchain, committed this week to renewables and carbon-neutral production.
Read about BTC’s energy use
WHO LET THE DOGE OUT?
A brief history of Dogecoin. So timeline.
From Musk’s SNL appearance to vocal skeptics and curious family members, Dogecoin is inescapable in 2021. DOGE’s value rose by more than 12,000% from January 2021 to early May — but its cultural momentum has been building for almost a decade. As Musk continues to tweet about his favorite crypto, and new dog-themed coins crop up, let’s take a look at the original memecoin’s history.
- December, 2013: Software developers Billy Markus and Jackson Palmer meet on Reddit, bond over appreciation of a popular meme, and create Dogecoin — a joke-based alternative to Bitcoin. Unlike BTC, which is designed to be scarce, Dogecoin is intentionally, comically abundant, with 10,000 new coins mined every minute and no maximum supply.
- January, 2014: Dogecoin enthusiasts on Reddit raise more than $50,000 in DOGE to fund the Jamaican bobsled team’s trip to the Sochi Winter Olympics.
- March, 2014: Same community raises $55,000 to sponsor NASCAR driver John Wise’s Talladega appearance. (The car’s graphics include a giant Shiba Inu on the hood.)
- April, 2019: Elon Musk tweets about DOGE for the first time: “It’s pretty cool.” Musk also reaches out to the Dogecoin development team around this time, according to Decrypt.
- January, 2021: Investors on Reddit’s WallStreetBets forum band together to pump “memestocks” like GameStop and AMC. Looking for the next opportunity, traders settle on DOGE, which is worth a fraction of a penny.February, 2021: Musk tweets a flurry of DOGE memes, including a photoshopped image from The Lion King (in which the Tesla founder holds a Shiba Inu up to the sky). Prices begin to spike.
- May, 2021: DOGE hits its all-time-high of $0.72, driven by the broader crypto boom, months of individual investor interest, and a steady drip of Musk tweets, punctuated by his appearance on SNL. (Prices fall in the hours after the broadcast, but remain vastly up for the year.)
Why it matters… Despite Dogecoin’s ubiquity, the question remains: why is it valuable? The short answer is supply and demand, as is the case with many assets. While traditional investors like Warren Buffett tend to be obsessed with “fundamentals,” younger online traders may be more focused on momentum — and in a financial system where many feel excluded, the idea that a joke-based coin can be worth about as much as General Motors or Adidas might just be part of the appeal.
What is proof of stake? Cardano rises as market falls
The announcement that Tesla would explore more energy-efficient cryptocurrencies kicked off speculation by experts and retail investors alike: which alternative would the company choose? In subsequent days, prices for Cardano rose as Bitcoin and the broader market fell. But what makes a blockchain more efficient? One feature could help: a mechanism of verifying transactions called “proof of stake,” which many experts see as a solution to crypto’s energy consumption.
Why it matters… Cardano, which aims to be the most environmentally sustainable blockchain platform, uses a unique proof-of-stake mechanism. Ethereum is also moving to a proof-of-stake blockchain with its ETH2 upgrade. According to Ethereum Protocol Developer Preston Van Loon, the shift to proof of stake is “about six months away, if everything goes well.”
Read up on proof of stake
Vitalik burns $6.7B of SHIB coins, Zuck has crypto goats
Portnoy’s complaint… Barstool Sports founder Dave “Davey Day Trader” Portnoy tweeted his dismay about Elon Musk’s perceived influence over Bitcoin: “He’s been pulling the levers, like the Wizard of Oz, on crypto.”
Zuck’s zoo… Musk isn’t the only CEO with BTC takes. Mark Zuckerberg posted a photo of two unlikely pets whose names seem to be a sly wink to Bitcoin maximalists: “My goats: Max and Bitcoin.”
Burn notice… Recently, the founders of DOGE-inspired memecoin Shiba Inu Coin sent Vitalik Buterin half of all existing SHIB (presumably in an attempt to convince other traders that the Ethereum cofounder is fan). After Buterin donated more than $1 billion worth to India for Covid relief, he “burned” the majority of his remaining SHIB, removing them from circulation. Via a message on Ethereum blockchain, he warned other developers: “PLEASE DO NOT GIVE ME COINS OR POWER IN YOUR PROJECT WITHOUT MY CONSENT!”
Writer’s block… Rick and Morty creator Dan Harmon’s new show, Krapopolis, will be “the first-ever animated series curated entirely on the Blockchain,” Fox announced.
What is a DEX?
A The native crypto for the Dash blockchain
B A peer-to-peer marketplace where transactions occur between traders
C A disincentivized exchange
D A way for banks to facilitate crypto lending
Find the answer at the end of the email.
Learn about DEXs
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Internet Computer is a utility token that allows users to participate in and govern the Internet Computer blockchain network.
iExec RLC is an Ethereum token for the iExec cloud platform in which users can monetize and rent computing power and data.
Cartesi is a utility token that powers the Cartesi network, which aims to solve blockchain scalability and high fees using a technology called Optimistic Rollups.
Mirror Protocol is an Ethereum token that governs the Mirror Protocol which “allows the creation of fungible assets, that track the price of real world assets.”
B A peer-to-peer marketplace where transactions occur between traders