In the case of Bitcoin this is easily explained: Silk Road, "laundering" (for good or bad) and speculation. Since this is the first time many people have heard of this currency a natural question is: who is using this and why?
In the case of this specific currency, it seems like it's mainly used on social networks like Reddit for small transactions (tip), and due to its origins as a cheap joke currency it managed to get early traction. With this explanation in hand, the concrete uses becomes more clear.
Abstract values don't exist in a vacuum. There's always a concrete use of it, even if it's just speculation (Tulips) or gestures of goodwill (~ tip).
Let's say you're interested in cryptocurrencies. The hassle and expense you have to go through to get your hands on some Bitcoin is significant enough to put most people off.
By contrast, to get your hands on some Dogecoin, just post to /r/dogecoinbeg and you've got a pretty good chance of being tipped some.
Or, for people who like Bitcoin: decentralized transaction log, low/no transaction fees, and fraud protection.
Credit card companies almost unconditionally insure their customers against fraudulent transactions. Bitcoin does not. Banks will actively monitor accounts for suspicious transactions and lock the account if necessary. Bitcoin does not. Banks provide a friendly, easy to use and traceable list of your previous transactions. Bitcoin does not. Banks provide a mechanism to reverse transactions. Bitcoin does not.
As a consumer though, I much prefer the fraud protection that the credit card companies provide. And as a vendor, the 1% or less of chargebacks is probably outweighed by the number of customers who do buy because they feel safer using their credit card online.
Bitcoin/cash shifts protection from third parties, like stores, to the user. This dramatically changes the nature of security in both good and bad ways.
To swap out a word or two: "Fraud protection in the sense that, if you protect your wallet, no one can steal your cash."
I don't think that matches the commonly understood meaning of "fraud protection".
If you know someones address then you can go back and check all the transactions.
As for refunds, merchants selling using bitcoin still have to follow law of the land, in most civilised countries there is a "Supply of Goods and Services Act" or equivalent legislation where a customer is entitled to a repair, replacement or refund if the good/service is bad.
Buying with bitcoin is no different to buying in cash
You obviously do not understand bitcoin or are confused about some aspects of it.
Groups of people that trust a third party can also do bitcoin denominated private transactions (the only visible transactions would be with the trusted third party). You see this at most bitcoin exchanges.
None of the things you mention are uses, they are features. Great features, sure, but it's not something that you actually do with a currency. It's like saying dollars are used by paper, or for central bank. Bitcoin - right now - is not used much for commerce, aside from black market type stuff.
This is IMO a sign that a discussion has jumped the shark and is no longer worth participating in. Once you get to the "you're either with us or against us" point people have picked their sides and you're arguing against brick walls.
In all seriousness, it's like a post-modern take on cryptocurrency. It's hilarious and thought provoking and stupid and intelligent, all at the same time. And it's so doge.
And you can actually purchase stuff with it. Cheap translation services, pictures, haikus, you name it.
I purchased 2 nonsensical stories, 1 completely useless and yet awesome doodle and a re-sizing service for a picture.
However the best part in Dogecoin is that it makes certain kind of cryptocurrency evangelists have a twitch in their eye. The amount of "Dogecoin ruins the reputation of serious cryptocurrencies!" posts makes it rather awesome.
The best quote "Dogecoin? Are you kidding me? I'm all for altcoins, but this is just making a mockery of what we're all trying so hard to turn into a respectable enterprise." This quote was actually the one that made me play around with Dogecoin a bit.
I have a hunch that this is part of the reason why dogecoin is somewhat popular. People use dogecoin because they can. And they intentionally ignore any cries on how it's not going to hold value etc. It's not supposed to. It works fine for what it already is. Tipping and nonsensical internet services.
That's a much more rational position. I mean, you'd have to be an incredible idiot to think that Dogecoin was worth something eo ipso, but slightly less of an idiot to think that there were other people who thought so, and even less of an idiot to think that other people thought that there were idiots who believed that Dogecoin was valuable, and so on.
In Doge we trust.
Once Doge popped up, I called my mom and told her she could mine! I set up her machine, and for a while she was pulling in a few thousand a day. Even with growing difficulty she's mining a few hundred a day. She's excited, and she's learned an absolute ton about cryptocurrencies because of Doge. She thinks the meme is cute, and she's been tipping people on Reddit, and giving away Doge in "real life" as well.
Bitcoin feels unaccessible to people like my mom. Most of the discussions that happen in the various Bitcoin communities occurs at a technological level that limits the kinds of participants involved. Since there are 100 BILLION Doge, it will always be affordable, joke or not, and with the kind community developing around it, it allows people like my mom to get involved and to learn some interesting things that will most likely impact her future.
My mom will hold on to her 1 BTC, sure, but she's using her Doge. She bought a cool trilobite fossil on the dogemarket subreddit, and is thinking of putting up her hand knit scarves for sale.
When 60 year old folks who have never been interested in the intersections of technology and economy start using Reddit and mining and using cryptocurrency, there is something special happening.
Could I start an aarondfcoin? Is it all about getting the network effect to make a non-backed (fiat) currency actually worth something?
I was just so shocked to see that Dogecoin was actually worth anything.
Why are so many coins released? Quite simply, most coins are forks of Bitcoin/Litecoin/etc with minor tweaks. Occasionally, you get a truly new coin based on something new, but most simply tweak the coins per block, the difficulty re-targeting rate, the starting difficulty, the block time, etc. Coingen.io exemplifies how simple this is. Of course, there are exceptions, such as the upcoming Etherium , the first Turing complete cryptocurrency (as far as I know, at least).
Despite that, most coins basically fail. Sure, they receive hashing power, and some even get onto exchanges. Most of them, however, don't really go anywhere.
So, yes, it is relatively easy to create and launch a coin. It is a bit harder to launch a coin that makes it to an exchange. It is harder still to make one that also sticks around and stays in the public consciousness (such as dogecoin).
Finally, let's say you have a great idea for a new coin. The way some people previously got rich by creating a new coin was to premine the coin. Basically, one would mine the first x number of blocks, before releasing it. This still happens, but is now much more often frowned upon. So, to get rich off of creating a coin, you basically would need to premine a coin, and convince others that you had a good reason to premine it . This absolutely still happens, but is becoming tougher to pull off.
So yes, you could create aarondfcoin. Yes, you could probably release it and get hashing power thrown at it. But, would you make money doing so? Well, that requires a bit more effort. Keep in mind that there are hundreds of attempted alt currencies for every dogecoin success.
That said, yes, there is still room for success here, but it usually requires more than just creating aarondfcoin. The virality aspect is the more important aspect, at the moment.
 See the bitcointalk announcement forum https://bitcointalk.org/index.php?board=159.0
 http://ethereum.org/ and the whitepaper: http://ethereum.org/ethereum.html
 Yes, there are a still a number of ways to make money off of releasing a coin that doesn't involve premining (or appears not to involve premining), but that is a topic worthy of its own thread.
Litecoin apparently was one of few altcoins to avoid premining that is everyone (who followed BTC forums that is) got off on equal footing.
To me the funny thing is there is enough consternation over this to have an official term for it.
Satoshi, whether a group or individual, invented Bitcoin and planted the seeds for its success against all odds. Now that it's huge everyone is regretting not getting in early, but I see no reason why the creators and early adopters don't deserve their spoils.
It's nice that Litecoin decided to start everyone on equal footing, but let's not fool ourselves: that's an adoption tactic not altruism. At the end of the day Litecoin is the most successful of the copycat digital currencies but it's still a copycat.
If this cryptocurrency survives, it will be uneconomical to mine by the commoners sometime this year.
Dogecoin is like any other currency. The things that make it useful are belief and people willing to exchange things for it. It's unlike other currencies in that mostly the things being exchanged are electronic and not worth meatspacecoin.
There is, of course, no reason it has to stay that way.
But yes you can create your own cryptocurrency and make a lot of money off of it. This is a good and a bad thing. Good because it should create competition to make better cryptocurrencies. It also helps build the currency as all the miners invest resources in it and get exposed to the currency and have an incentive to try to get others to use it. Bad because, well that money is coming from somewhere, and the users of the cryptocurrency are essentially paying a tax to the miners for not really contributing anything of value.
I'm not ready to say DOGE will win the cryptocurrency wars, but it certainly wouldn't the first time that a "joke" or "hack" turned into something real and lasting.
Now that people are trying to copy dogecoin it's going to be a lot harder to have that slow ramp.
Dogecoin is special because it was first, and the early community built a loving friendly place. People like friendly doges.
People love it because it started as a joke that they themselves were in on. And then the joke became real.
If you premined the coin you could theoretically cash out about half of that value, and the minute after the coin would be dead.
This would not show on any external chain monitors like the story source as most of the trading is occurring within reddit; only when a client cashed out to their wallet would the transaction actually touch the blockchain.
Pollution created through the mining of relatively worthless items can be an issue though.
That was fixed.
What makes bitcoin different is the network effect and the infrastructure - there are many people who think bitcoin is the cryptocurrency and this is a self-fulfilling prophecy. Some day another cryptocurrency may overtake it but for now it's the one because people say it's the one.
There is already at least one scrypt-focussed ASIC, however. https://alpha-t.net/product/scrypt-asic-miner/
But it's probably more from from the fact that some people are attacking the currency by sending massive volumes of micro-transactions. Many people have been receiving thousands of really tiny donations (off-reddit).
That's all I meant. :)
* Price goes up
Several pools have as many as 6000+ individuals currently mining it. Really the only thing preventing the transaction number from being even higher is that most pools only give out accumulated awards to their members every 30 minutes or so (during which the pool may have mined several blocks).
But the supply is 28,310,185,834 DOGE.
Once the situation settles, the risk takers will move on to the next thing, because that's what they like to do. But they aren't going to leave a dead ponzi behind.
A Ponzi scheme is an investment that represents account balances that are satisfied from a cash pool that only grows from new investors, and provides fictitious returns on the balances.
This really is quite a simple scheme, but alarmingly effective, because as long as people trust that the account balance is legitimate, and the returns are good, people will not exit the scheme. Sometimes, as (apparently) in Mr. Ponzi's case, this emerges not through an attempt to steal money, but in an attempt to buy time to recover from trading losses.
Do we disagree on the definition of Ponzi scheme here? If we agree on the definition, then I don't see any way that you can claim bitcoin/dogecoin/litecoin is a Ponzi scheme -- there are no account balances (in anything but the coin itself), there's no promised return, there's no cash fund that is satisfying investors making exits (unless there's a massive conspiracy of exchanges).
Maybe you can switch to comparing cryptocurrencies to pump-and-dump schemes? Or just call it a scam, an attempt by the creators to create wealth out of thin air by preying on the gullibility of libertarians.
Just like art is art first, or an antique chair is a chair first. The investment or any of these can be described as a ponzi scheme by the above criteria. The first few buyers of a chair make money, it only works is people are still interested in buying the chair...
> Sent last 24h:
> 583,524 BTC ($490,161,390 USD)
> 56,695,554,108 DOGE ($22,823,181 USD)
I understand Dogecoin has a use (Reddit) and could be a great investment in the future, but currently, it represents only a tiny fraction of what Bitcoin, or Litecoin are.
We'll see who is mining come May. If they still are, then it won.
Otherwise look at the sidebar at http://www.reddit.com/r/dogecoin/ Dogecoin market/exchange for a list of exchanges.