On Sunday (June 19), Tesla and Space X CEO Elon Musk voiced his support for popular meme-based cryptocurrency Dogecoin, helping it to become the top percentage gainer amongst the top 10 cryptoassets in the past 24 hours.
Dogecoin was initially released on 6 December 2013, as a “fun and friendly internet currency.” It was created by Billy Markus and Jackson Palmer. It is “a decentralized, peer-to-peer digital currency” that has as its mascot “Doge”, a Shiba Inu (a Japanese breed of dog).
Since then, its popularity has substantially increased, especially this year, mostly thanks to support by billionaires Elon Musk (the CEO of Tesla and SpaceX) and Mark Cuban, to the point that it is currently the 10th most valuable cryptocurrency, with a market cap of over $7.5 billion. In fact, in 2019, Musk said that $DOGE might be his favorite cryptocurrency.
Earlier today, Musk tweeted that he will keep supporting Dogecoin, which was not too surprising given that he has been saying nice things on Twitter about Dogecoin for the past three years.
What was surprising, though, was what the Tesla CEO said after one psendoymous crypto analyst (“Altcoin Gordon”) challenged him to buy $DOGE, to which Musk replied that he is.
According to data by Trading View, currently (as of 7:57 a.m. UTC on June 19), on crypto exchange Coinbase, $DOGE is trading around $0.0558, up 5.88% in the past 24-hour period.
During a an interview in late December 2021, Elon Musk shared his latest thoughts on money, cryptocurrency in general, Dogecoin, and Bitcoin. These comments were made during an interview for episode #252 of the Lex Fridman podcast. Below are some highlights from Musk’s comments during this excellent interview.
Fridman and Musk started this portion of the interview by talking about the planet Mars and that despite Musk’s tweeting (more or less) that the ideal cryptocurrency for Mars is Dogecoin, Mars needs to have its own completely separate cryptocurrency (i.e. one not tied to Earth):
“Well, we need to have a different currency because you can’t synchronize due to speed of light — not easily… Because… Mars… the closest approach is four light minutes away, roughly, and then at first approach, it’s roughly 20 light minutes away, maybe a little more.
“So can’t really have something synchronizing, you know, if you’ve got a 20 minute speed of light issue. If it’s got a one minute blockchain, it’s not going to synchronize properly. So I don’t know if Mars will have a cryptocurrency is a thing, but probably. Seems likely, but it would be some kind of localized thing in Mars.“
Musk next talked about cryptocurrency in general, calling it an “interesting approach to reducing the error in the database that is called money.” He went on to say:
“You know, I think I have a pretty deep understanding of what money actually is on a practical day to day basis because of PayPal… Right now, the money system –actually for practical purposes — is really a bunch of heterogeneous mainframes running old COBOL.. Pity the poor bastards who have to maintain that code…
“Banks are still buying mainframes in 2021 and running ancient COBOL code. And, you know, the Federal Reserve, probably has even [something] older than what the banks have…. And so the government effectively has editing privileges on the money database and they use those editing privileges to make more money whenever they want. And this increases the error in the database that is money.
“So, I think money should really be viewed through the lens of information theory… and so it’s you’re kind of like like an internet connection like what’s the bandwidth? You know, took total cut rate. What is the latency generator packet drop? You know, errors in errors and network communication.
“And then what system, from an information theory standpoint, allows an economy to function the best and you know cryptos are an attempt to reduce the error in money that is contributed by governments diluting the money supply as basically a pernicious apprenticeship full of taxation...
“Just think of money as a database for resource allocation across time and space.“
Musk next talked about Bitcoin and its disadvantages (vs something like Dogecoin) as a form of payment:
“There’s a fundamental issue with Bitcoin in its current form in that its transaction volume is very limited and the latency for confirmed transactions is too long — much longer than you’d like. So, it’s not it’s actually not great from a transaction volume standpoint or a latency standpoint.
“So, perhaps, it’s useful to solve an aspect of the money database problem, which is store of wealth or an accounting of relative obligations, I suppose. But it is not useful as a currency, as a day-to-day currency…
“Part of the reason why I think there’s some merit to Dogecoin — even though it was obviously created as a joke — is that it actually does have much higher transaction value capability than Bitcoin and the costs of doing a transaction — the Dogecoin fee — is very low.
“Right now, if you wanted to do a Bitcoin transaction, the price of doing that transaction is very high and so you cannot use it effectively for most things. Nor could it scale to a higher volume…
“When Bitcoin was started — around 2008 — the internet connections were much worse than they are today, like an order of magnitude…. I mean there’s the way way worse, you know, 2008. So having a small block size and a long synchronization made sense in 2008, but in 2021, it’s like comically low…
“And I think there’s some value to having a linear increase in the amount of currency that is generated… If a currency is too deflationary… there’s a reluctance to spend it… But if this some dilution of the currency occurring over time, that’s more of an incentive to use it as a currency.
“So, Dogecoin, sort of randomly, has just a fixed number of coins… that generate every year. So, there’s some inflation, but it’s a fixed number. So, the percentage of inflation will necessarily decline over time. I’m not saying that it’s like the ideal system for a currency, but I think it actually is just fundamentally better than anything else I’ve seen — just by accident.“