
How Dogecoin changed my perspective on cryptocurrency - steveklabnik
http://words.steveklabnik.com/how-dogecoin-changed-my-perspective-on-cryptocurrency
======
natural219
There is one other aspect here I find very interesting, and it has to do with
the efficient market hypothesis. The fact that people are buying Dogecoin
_simply because it is a fun internet meme_ kind of flies in the face of people
who still view the price of financial assets as mostly rational, value-based
prices, that can be deconstructed along the lines of asset-based valuation,
financial ratios, available information, et cetera.

Dogecoin kind of shits all over that. If people will buy a financial asset
literally because it was a funny meme they saw on Reddit, then it kind of
untangles the notion that prices really must have anything to do with reality.
Someone might rightfully ask the question, "Should I invest in Dogecoin?", and
at this stage of our financial markets, I really don't have a good answer for
that.

~~~
rabidsnail
Dogecoin is a good, not a medium of exchange. Why do people buy iPhone apps?
iPhone apps don't even have resale value.

~~~
oakwhiz
How is Dogecoin a good if its only feature is the mode by which it is
exchanged?

Disclaimer: I possess Dogecoins

~~~
rabidsnail
It makes the people that hold it laugh, which is valuable to them.

------
vezzy-fnord
Basically, the author is saying that the absurdity of Dogecoin made him
realize that most currency is intrinsically worthless, with the only reason
that it has value being a state power or arbitrary group of people (as in the
case of cryptocurrency) has assigned it one... also known as fiat.

A very old and evident observation.

Not exactly enlightening, but there you go.

~~~
steveklabnik
To be clear, _I_ already knew this. I'm saying that I think that it might lead
_other_ people to reflect upon the nature of money.

~~~
belluchan
Why dogecoin? Why not megacoin, that's also pretty absurd.

~~~
steveklabnik
> Megacoin , Your Global Currency. Your Modern Wallet. Global, Anonymous,
> Secure.

Sounds pretty serious business to me.

~~~
shurcooL
Are there any crypto-currencies that are not anonymous? I like secure, modern,
low cost transactions, but I don't like the anonymity. I want a currency where
everyone knows how much I spent, what I bought, and it applies to everyone.
Does that exist?

~~~
GeneralMayhem
Just Tweet your Bitcoin address. All Bitcoin transactions are inherently
public in that everyone knows which addresses have sent how much to which
other addresses; the only anonymity is that nobody knows who (as in which
real-world person) owns/controls the address.

~~~
jacalata
That doesn't address the stated " it applies to everyone" requirement.

------
KVFinn
I was in the early days of Dogecoin and it was fun BECAUSE it was worthless.
Give out 10k on a lark for a funny picture, etc.

Now that's it's being seen a real story of value, rather than a tool to send a
bit of karma around... it's kinda losing the fun. Serious investor/speculator
people are buying and selling, arbitrage between exchanges, absolutely massive
GPU farms that out mine anything regular person could get.

I guess that's what an efficient market does. Reminds me of the auction house
in Diablo 3 where the developers finally realized that an efficient market
drained all the fun out of playing the game.

I still have a bunch so one part of me hopes it goes up in real value but the
other part of me hopes it stays worthless so it can continue to be used the
way it was at the start.

~~~
Houshalter
Well we could always make a new worthless currency. And set it so it
intentionally inflates infinitely so that this can't happen. Zimbabwe-coin
maybe.

~~~
KVFinn
>Well we could always make a new worthless currency. And set it so it
intentionally inflates infinitely so that this can't happen. Zimbabwe-coin
maybe.

Yeah that might work. If you could somehow decay the value of held currency to
encourage spending directly that would be even better though I can't imagine
it being feasible.

~~~
knapp
> If you could somehow decay the value of held currency to encourage spending
> directly

Freicoin has a demurrage fee, based on the theories of Silvio Gesell:

[http://freico.in/](http://freico.in/)

[https://en.wikipedia.org/wiki/Silvio_Gesell](https://en.wikipedia.org/wiki/Silvio_Gesell)

------
gojomo
Totally agree, as a Bitcoin fan who also sees Dogecoin as a positive sign.

Some Bitcoin boosters believe "there can be only one" winning digital
currency, and hope/predict it will be Bitcoin.

I instead expect many to be tried, most to fail, but a wide variety to survive
and live in strange, ever-changing symbiosis. They're just so easy to
bootstrap, now, and the possibility/exploration space is so large. Bitcoin
might always hold a special position, as the first, most-capitalized, hard-
money option (and as Klabnik notes, gateway)... but many of its assumptions
may not fit other niches. All sorts of subcommunities, including pranksters,
can assign moneyness/value to whatever they'd like easier than ever before.

I'd especially expect regional movements and cross-cutting projects to mint
new tokens as a tool of common-purpose and incentive-coordination: something
straddling the worlds of equity and currency.

Crazy times ahead. Dogecoin may eventually seem obvious and mundane in
retrospect.

~~~
steveklabnik
Yup. The lighthearted nature of both the coin and the community is drawing a
lot of attention from people who haven't cared about cryptocurrency before,
including myself.

It shouldn't be that surprising to anyone on Hacker News: marketing is
important. Bitcoin was all "we're going to destroy fiat currency, fuck the
government." Dogecoin is "hey lol isn't this silly? Have some coins." It's no
wonder that people are reacting to it in a completely different way, even
though they're (basically) the same thing.

> They're just so easy to bootstrap, now, and the possibility/exploration
> space is so large.

I saw a tweet that said "Hottest Christmas gift 2013: build your own
cryptocurrency kit." Since all of this is open source, it should be really
interesting to see what happens once you can basically alter a configuration
file and get your own currency, wallet (online and off), exchange, HFT bot,
faucet, poker site...

Not to mention the more 'serious' altcoins, like Sexcoin. I haven't
investigated that coin in serious detail, but coins trying to take on a
specific vertical are _very_ interesting.

And that's not even getting into things like Namecoin, which build
legitimately new tech on top of the blockchain.

It's all terribly interesting.

------
AndrewBissell
If you go back and read what people thought about money in, say, 1870, there
was a time that the notion of purely paper currencies was widely held to be
the same sort of absurd folly that cryptocurrencies are accused of exhibiting
today. Yet, they eventually wound up conquering the global financial
landscape. They got their start by being convertible into the prevailing forms
of money (gold & silver), just as BTC relies on convertibility into USD now.

None of which is to say that BTC will necessarily be the next Big Thing in the
world of currencies, but just that the ideas in the world of money which are
widely held to be ridiculous today could very well be commonplace in 4 or 5
decades.

------
ianpenney
I'm starting to think there's a place for something like Dogecoin as a
teaching tool. Although, heh, certainly not if there are too many people take
it so seriously on either side of any debate about its value.

Sure, limited liquidity on exchanges like Cryptsy suggests that DOGE currently
holds some* "real value" at present. I think it's best described as a high
score contest. You can't sell a million USD worth of Doge to anybody right
now, but that's not a bad thing! If a crypto-currency-game with a cute mascot
gets more kids and teens into learning about computer science and math, we
should find ways to keep it innocent and fun!

I remember running Distributed.net as a teenager, just to see how much
processing power in keys per second I could personally muster. It was exciting
because it taught the power and limitations of parallel computation.

To anybody who has managed to search and hack their way to mining their first
Dogecoin (or anycoin) using only source code and blogs? Well done!!! You
should consider this a great computing merit badge and maybe even a hacker
rite of passage.

I hope future generations will have the same opportunity, community and
incentives necessary to participate in the excitement of a gold rush, even if
they can only make a actual pennies a day doing it. Having fun while learning
at a young age is priceless.

(Looks like about 1.5 million DOGE / 1 BTC?)

~~~
steveklabnik
I have actually thought the same thing. I think it makes for a really
interesting teaching tool.

------
mcantelon
Dogecoin's value lies in its absurdity. The absurdity makes it fun, people
play with things that are fun, and people playing with things makes them grow.
Unfortunately, Dogecoin is quickly attracting folks treating Dogecoin as
something to "pump" using traditional multi-level-marketing-type propaganda.
So there's an emerging culture clash within the quickly evolving Dogecoin
community.

~~~
steveklabnik
Absolutely, this is a hot topic on the subreddit right now. See threads like
[http://www.reddit.com/r/dogecoin/comments/1tey1w/guys_we_nee...](http://www.reddit.com/r/dogecoin/comments/1tey1w/guys_we_need_to_chat_we_are_at_risk_for_becoming/)

------
shurcooL
Here's an interesting observation I made.

You can instantly become both the world's richest and generous person. Take a
friend that you trust, and sell him a piece of paper for $10000000000000
billion dollars. Suppose he agrees (even if he doesn't have that money right
now, he/his descendants can pay it off over their lifetimes). Now you have
$10000000000000 billion dollars of wealth. But, you decide to be generous and
give $10000000000000 billion dollars to your friend, for free (which in turn
allows him to pay off his debt to you).

Basically, two things happened simoultaneously: nothing, and a two-way
exchange of $10000000000000 billion dollars. Which, if you report to the
government, you both owe a lot of taxes now because you've had a lot of
income.

~~~
johndevor
I think that's where the IRS' definition of "fair market" value comes into
play. They'd only tax you on the market value of that piece of paper... which
is $0.

~~~
nathan_long
How large does a market have to be to "legitimately" place a value on
something? If there exists one person who will pay you $10 for your used
tissues, are they worth $10? What if there are 10 such people, or 100?

I'd say the market has to be 1 person, but I suppose the IRS has a different
definition.

------
jmount
If I had before me a fly and an elephant, having never seen more than one such
magnitude of either kind; and if the fly were to endeavor to persuade me that
he was larger than the elephant, I might by possibility be placed in a
difficulty. The apparently little creature might use such arguments about the
effect of distance, and might appeal to such laws of sight and hearing as I,
if unlearned in those things, might be unable wholly to reject. But if there
were a thousand flies, all buzzing, to appearance, about the great creature;
and, to a fly, declaring, each one for himself, that he was bigger than the
quadruped; and all giving different and frequently contradictory reasons; and
each one despising and opposing the reasons of the others—I should feel quite
at my ease. I should certainly say, My little friends, the case of each one of
you is destroyed by the rest. I intend to show flies in the swarm, with a few
larger animals, for reasons to be given.

AUGUSTUS DE MORGAN A BUDGET OF PARADOXES
[http://www.gutenberg.org/files/23100/23100-h/23100-h.htm](http://www.gutenberg.org/files/23100/23100-h/23100-h.htm)

------
CryptoJunky
Personally I think Dogecoin is hilarious. I put together a guide for anyone
that is interested in playing around with it.

[http://cryptojunky.com/blog/2013/12/19/getting-started-
with-...](http://cryptojunky.com/blog/2013/12/19/getting-started-with-
dogecoin/)

Regardless the intention of Dogecoin, it seems to be working as an
introductory cryptocurrency for a lot of new users. Can't tell whether or not
it will stick around yet, but I've heard a lot of responses from users saying
it is the first cryptocurrency they've wanted to try out.

~~~
AndrewBissell
I think one of the reasons Dogecoin is working so well as an introductory
cryptocurrency is _because_ it's all being done for a laugh. A lot of the most
vocal people in the other currency communities are out to promote their mining
pools or attract money into their favorite alt-coin, which turns off newcomers
by giving the whole thing an air of carnival barking.

~~~
CryptoJunky
Agreed. I think unit bias might have something to do with it as well. People
love receiving even 10 dogecoin, but the equivalent value in Bitcoin, which
would be some small decimal, is not regarded as being as valuable (even though
they're equivalent on exchanges).

What's more is that dogecoin's transaction fee is much much smaller than
litecoin or Bitcoin, making it easier to make small transactions and give
internet tips.

------
jff
The funniest part about Dogecoin was how the initial point was to make fun of
bitcoins, but it rapidly turned to people taking it pretty seriously but
pretending they aren't. Dogecoin mining pools, dogecoins for sale on ebay...
they've become what they hate.

~~~
greyman
I disagree, it was not making fun of bitcoins as a concept, but only satirized
some aspects of the bitcoin community, and at the same time trying to make the
cryptocurrencies to be more accessible to people. Moreover, part of the joke
was that it very well could become real.

------
minimax
Here we have more evidence of the miraculous ability of crypto currencies to
turn unassuming computer programmers into economics experts. Let's take a look
at some choice quotes.

 _There’s no inherent reason that a piece of paper has a certain amount of
value. There is a subjective reason, though: namely, that a large enough
number of people agree that USD is a worthwhile commodity. They believe that
for a number of reasons, including that our Army will go off and fucking kill
anybody who threatens to break the spell that makes everyone agree that USD
are worth your time to accept._

That's a bunch of needlessly cynical and completely ignorant bullshit. We
don't use the army to convince people to use dollars. That's quackery. People
use dollars because the value is relatively stable, most goods for sale in the
U.S. and exported from the U.S. are priced in dollars, people in the U.S. pay
their taxes in dollars, oil tends to be priced in dollars internationally,
foreign countries hold lots of dollars as reserves, in the U.S. you can have a
bank account denominated in dollars that will retain it's value up to $250,000
even if the bank blows up(!), and so on. All of these are reasons people use
dollars. It isn't something that's done at the point of a gun.

 _Everyone agrees that dollars are worth something, and we trade them all the
time. They’re really easy to trade. I don’t know of any coffee shop near me
that takes Euros, so even though 1€ is “worth more” than $1 USD, the Euro note
I have in my backpack is basically useless for me to get some coffee.
Economists call this property ‘liquidity,’ and it basically means ‘how easy is
it for me to get what I want with this commodity.’_

Stop calling currencies commodities. Currencies aren't like some weird subset
of commodities. The reason Euro isn't useful in the U.S. is because there are
no good reasons for it to be useful. I can't pay my taxes in Euros. Almost
nothing for sale here is priced in Euros. If I try to deposit Euros in my
dollar denominated bank account I will get a shitty FX rate from the bank.
There is a lot of obvious friction involved in using things other than USD as
a currency in the U.S. It has nothing to do with "liquidity."

 _Imagine a “Dogecoin VISA”, a credit card where I hold a balance in DOGE._

Great idea! Ok so now a bank has given me a certain amount of dogecoin
denominated credit. Presumably that is backed up by dogecoin denominated
savings accounts or whatever. People give their dogecoins to the bank and the
bank lends the dogecoins to me. I spend my full line of credit but I can't pay
it back. Suppose there are a bunch of crappy dogecoin debtors out there and
none of us can pay back our dogecoin denominated debt. Now suppose the banks
depositors get wind of the situation and all try to withdraw their deposits at
once. Classic bank run. Depositors are all fucked because there is no FDIC
insurance for dogecoins.

* TWTR -> USD -> BTC -> DOGE -> MYCOMPANY *

You lose money at every step along the way. You pay the spread for every
transaction, and if banks get involved, you can probably expected to get
fucked in all sorts of mysterious ways by the FX desk at some point too.

~~~
twobits
"That's a bunch of needlessly cynical and completely ignorant bullshit. We
don't use the army to convince people to use dollars. That's quackery. People
use dollars because the value is relatively stable, most goods for sale in the
U.S. and exported from the U.S. are priced in dollars, people in the U.S. pay
their taxes in dollars, oil tends to be priced in dollars internationally,
foreign countries hold lots of dollars as reserves, in the U.S. you can have a
bank account denominated in dollars that will retain it's value up to $250,000
even if the bank blows up(!), and so on. All of these are reasons people use
dollars. It isn't something that's done at the point of a gun."

a) The value isn't stable. Dollars have lost ~90+% of its value since the fed
was created. b) You pay taxes in dollars, because otherwise you'd be thrown in
jail by force. c) Oil doesn't "tend to be valued in dollars". It's an
agreement between the us and the saudis, to only sell oil in dollars, in
exchange for protection. Leaders of other countries trying to change that,
were suddenly found to be dictators, deposed and killed. d) Foreign countries
hold dollars because otherwise they can't buy oil. e) The bank account doesn't
hold it's "value" of 250k. It holds its nominal price.

Finally, because of the oil thing, the us has been happily printing dollars,
and exporting its inflation to the whole world, stealing everybody.

Sorry, but you are the ignorant.

~~~
afterburner
"The value isn't stable"

Stability here means not volatile. USD is not volatile, nor are the other
major currencies of the world. USD moves tiny amounts day to day and year to
year versus other currencies.

You are of course referring to inflation. But inflation in the US has been a
slow, gradual thing. The Fed was created 100 years ago. You might have been
able to buy a lot more with $1000 in 1913, but you got paid a lot less. Since
your salary, and taxes, and almost all goods, were paid for in USD, it didn't
matter if all the numbers crept up together slowly.

To call USD unstable, while defending something like BTC or Dogecoin, seems
somewhat ignorant, or at least misleading.

~~~
twobits
"Since your salary, and taxes, and almost all goods, were paid for in USD, it
didn't matter if all the numbers crept up together slowly."

The key word is "together". They don't go up together. There is a time
differential, with salaries trailing behind. People get constantly negatively
affected this way.

~~~
afterburner
Let me put it this way: they go up together far, far, _far_ more than whatever
BTC or Dogecoin is doing.

Talking about very normal inflation in order to make make BTC/Dogecoin look
bad is just weird. BTC dropped 50% in a day. And it could go up 100% tomorrow.
That's volatility. Denying this just comes off as trolling.

~~~
twobits
I am not arguing for bitcoin or dogecoin. I am arguing against the dollar, and
the notion that the dollar isn't backed (just) by force.

------
steveklabnik
Now that several exchanges have implemented DOGE/BTC, I've been joking that I
should build a HFT bot in Rust.

I probably won't, but the idea is amusing.

~~~
obilgic
Which part is amusing? I already operate a HFT bot written in Go.

~~~
steveklabnik
I can't really explain to you why HFT on a meme-backed currency is funny to
me, I guess we just have a different sense of humor. It just seems incredibly
absurd.

------
BTCenthusiast
The DOGE phenomenon is pretty interesting. Aside from lightening things up a
bit, it does point to the ridiculousness of fiat currencies in general.
Essentially we're fighting and clawing over numbers, abstractions if you will.

At the least dogecoin brings a bit of levity to the idea of currency. Currency
is simply information and in the void of a better solution, a necessary
instrument.

If dogecoin is some sort of absurdist art project, it certainly seems to be
working.

~~~
vacri
It will date pretty fast, just like every internet meme before it. Imagine an
AllYourBaseCoin, or a StuffOnMyCatCoin. Or even a KonyCoin. It will run it's
course and people will forget it - I'll be coloured surprised if doge[coin] is
anything but a footnote in a year.

------
sgtpepper
wow. such blog. much words.

~~~
delinka
Please, for the love of doge, put the meme phrases in the correct order.

~~~
Dylan16807
There's an order? I thought you were supposed to take a shotgun approach.

~~~
delinka
such sarcasm. much miss. wow.

------
seiji
A tracker for the current top 59 cryptocurrencies:
[http://coinmarketcap.com](http://coinmarketcap.com)

~~~
vacri
'Unobtainium'? I might actually mine for some of that...

~~~
seiji
It's fitting that cryptocurrencies become a giant CCG.

------
yetanotherphd
So the author got angry because he thought Dogecoin was making fun of
cryptocurrency, then (wrongly) decided that Dogecoin was actually making fun
of all currency?

Cryptocurrency is a very interesting phenomenon, especially since it involves
very significant amounts of money. But the total value of all cryptocurrency
is still very small compared with say, M0 (the most equivalent measure of the
total number of US dollars). I personally predict a future with neither huge
upward or downward movement in the total value of bitcoins. There is still
plenty of room for improvement and innovation in fiat currency, and fiat
currency doesn't have the problem that new ones pop up all the time.

~~~
tekspirit
This is one of the longest and most interesting threads I've read in a long
while.

And since Paypal bought a bank to become legit, what stops some entity from
becoming a bank somewhere, and allowing whatever crypto currency (heck, all of
the respectable ones) and lets you get a Visa/Mastercard that lets you buy
stuff anywhere, meaning they, in real-time, auto-denominate your crypto coins
in whatever jurisdictional currency you are active in, and if you have enough
to buy the thing in question, it's yours!

And for liquidity, the bank in question could simply API into coin
base/cryptsy or whatever else is trading stuff, and sell off your coins when
you transact (and what do they need to cover? Just the value fluctuation, not
linked to any fiat currency, since they run to zero value as time goes to
infinity).

Probably the Visa/Mastercard dudes will require a settlement in some fiat
currency, so the coins would be settled to that, whatever it is.

------
GigabyteCoin
I have been involved with Bitcoin since 2011 and Dogecoin is seriously hurting
my brain. I can't wrap my head around 1) why so many people are mining a coin
(spending their hard earned money to protect the dogecoin blockchain) and then
turn around and repeat "much wow, such doge, etc etc" on the subreddit. AND 2)
just how popular this thing has become.

I mean, it's a joke... right? And yet people seem to infatuated with it. Their
subreddit has over 12,000 subscribers and it's just under 2 weeks old.

I love a good joke, but I still don't understand dogecoin.

~~~
VladRussian2
you don't have a doge i guess. Such miss.

------
pistle
Dogecoin confirms everything about Bitcoin, but the pious is the pious.

Some MLM-minded peeps know you have to be at the top, so they start their own
half-assed thing and prod the overly self-loving crowd of rabidly anti-fiat
currency Ron Paul lovers and a few naive shiny thing followers to pump and
dump the hot new thing. Cryptocurrency.

Make millions in the comfort of your own home working only a couple hours a
week. You could live this lifestyle and so much more. You could probably
become an Herbalife distributor!! The first to accept only cryptocurrency.

------
Jack000
there was a spike in dogecoin prices last week, making it the 9th most
valuable cryptocurrency: [http://www.ibtimes.co.uk/bitcoin-alternative-
dogecoin-soars-...](http://www.ibtimes.co.uk/bitcoin-alternative-dogecoin-
soars-900-other-crypto-currencies-suffer-1429823)

though it's dropped back to 14th since.

with the viral aspect of it, I can see dogecoin actually gaining some
traction. It would be funny if it unseats the likes of namecoin, primecoin or
other serious cryptocurrencies.

~~~
amark
The power of dogecoin comes from the community. If it can become the "default"
crypto for redditors and the like, it will see huge success. No other currency
has launched with such a strong community backing.

It's one of the reasons I think Dogecoin is such a good bet.

------
midas007
The most likely scenario is that future monies, both government and non-
government backed, will likely adopt crypto proof-of-work as the specie value.
It becomes just another feature that brings more to the table than "full faith
and credit." I don't have any faith that any G20 economy will not end up like
Greece on the long-term, so crypto currencies in 30 years could be more viable
than stockpiling gold bars, fine furniture and artwork.

------
patrickg_zill
Two things people miss about Bitcoin, Litecoin, Doge, etc.:

\-- these currencies are not denominated in other currencies except as a
convenient way of thinking about their value; they can serve the purpose of
"exchange" without any particular currency

\-- there is no debt attached to their creation; in that sense they are not
like Euros and USD, which always have been borrowed into existence; they are
more like a physical item used as currency in that way, like silver or gold

------
Finbarr
I think dogecoin is hilarious. Even more amusing is the fact that it's getting
more attention than Litecoin on Google right now:

[http://www.google.com/trends/explore#q=litecoin%2C%20dogecoi...](http://www.google.com/trends/explore#q=litecoin%2C%20dogecoin&date=today%201-m&cmpt=q)

------
dusklight
The writer mentions that he doesn't believe in the subjective theory of value,
but doesn't explain why. I am really curious as to what his reasons are.

------
possibilistic
Any speculation going on amongst the HN crowd concerning Dogecoin? How high do
you think it will go? Do you think it can maintain value, or is it just a fad?

------
abus
Does "Dogecoin was began" make sense?

~~~
steveklabnik
Might be a regionalism, or I might just suck at writing. I wondered that upon
a re-read, but decided to leave it because I couldn't tell.

~~~
ibdknox
"was begun" or "began" would be the correct usages I believe. FWIW, "came into
existence" or "started" seem like they'd fit nicely there :)

~~~
steveklabnik
Changed. If /u/dogecoinbot worked here I'd tip you. ;)

