The Central Authority of Dogecoin

Jacob Harper  |

The cryptocurrency bitcoin, along with its Merry Prankster cousin dogecoin, answer to no authority. At least in design they don’t. For the time being, they’re both slaves to the protocol, beholden only to their own code. Currencies whose only central authority is their own mathematically precise designs.

But like the High Modernists who insisted form should follow function and nothing else, cryptocurrency is doomed to encounter some pretty big problems as time goes on and there’s nobody to tweak that design if and when things get ugly.

Concerning adherence to money supply ideology, Bitcoin (and by extension, its most ardent supporters) is the more militant of the two, with the total number of bitcoins that can ever exist fixed at 21 million. Dogecoin is a little less hardline. While the supply of “doge” is fixed at 100 billion, the number is set to increase by 5.2 billion a year.

Dogecoin, in many ways, addresses the central hoarding problems of bitcoin and other “altcoins” like litecoin. It recognizes the problem of deflation, and Dogecoin’s forthcoming injection of money supply will do some to encourage spending.

But for the time being, it’s still relying strictly on a protocol. A computerized response that ignores the real conditions of the market. And it’s still not enough.

Since dogecoin will increase at a fixed amount, and not a fixed percentage, the effect will be essentially neutralized in about ten years. Then the problems of deflation will pop up its head again.

But let’s say the built-in inflation were different and the number of dogecoins currently in crculation did not increase at 5.2 billion a year but instead 5.2 percent of the total amount. That still creates its own problem. Suppose inflation gets out of control in relation to goods and services. You’d eventually have a currency that isn’t worth the ones and zeroes its coded on. “Shibes” would be throwing out tips like there’s no tomorrow even more than they do now.

The obvious fix to this is some kind of central human authority to monitor the market and tweak the supply in response to real-world supply and demand. That, of course, would be a violation of the central “decentralized” ethos of cryptocurrency.

But the alternative is to board a ship without a captain. Well, at least that’s certainly the case with bitcoin, who despite a purported unmasking from Newsweek still hasn’t definitively located their founder. With dogecoin, on the other hand, you have Billy Markus and Jackson Palmer. However, Palmer, the ostensible face of dogecoin (aside from its Shiba Inu mascot) has been clear that he is not that central authority, and doge does not “belong to me, Billy, or any single person. It belongs to the internet.”

Palmer said on Feb. 2 that the amount of dogecoins would remain uncapped; however, he has so far stayed far from saying he would personally monitor at what rate the supply increased. Or, for that matter, indicated anyone ever would become the equivalent of a Fed Chair.

So, in that respect, while dogecoin is more classically liberal than bitcoin in its attitude towards money supply, it still adheres to the ideology of the wisdom of numbers. The question is, is there any kind of valuation swing, deflationary or inflationary, that could trigger a mass demand for a rollback of the decentralized ideal? Is there any sufficiently dire situation that could warrant the introduction of a human element to check that wisdom of the protocol and possibly alter it to adjust the predictable money supply?

Such hypotheticals. Much ideological conundrums. Very we shall see.

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