08 February 2021

The value of money is a story people tell each other

Coins are worth what people think they are worth.

In the world of crypto:  Bitcoin (BTC) is the big kahuna -- the original digital currency that is probably not going away.  It proves you can create scarcity in the digital realm so (like gold) it has value that is perceived to grow over time (as the world supply is limited .. or even eventually shrinks).

Ethereum (ETH) is a blockchain of "Smart Contracts" .. essentially, instead of keeping track of balances on a ledger (like the bitcoin blockchain does) it stores code.  It's a perpetual computer that runs its programs distributed across the internet.  This makes it a great platform for creating your own altcoin (and that's what many have done).  So, as enthusiasm for crypto booms, ether booms.

Altcoins have some differentiator that gives them unique value in the marketplace.  For example, a Bitcoin transaction can take 10 minutes or more to confirm.  So, Litecoin (LTC) and Ripple (XRP) came along to assume risk and provide near instantaneous confirmations on transactions.  They're banking that people would rather pay for their hotdogs with a crypto that doesn't require you to hang about at the cash register for 10+ minutes.  The problem I see with these coins is:  we're not quite yet in a crypto-transactional economy.  These coins are a few years ahead of their time; because, people are still using dollars to buy their hotdogs.

And that brings us to Dogecoin (DOGE) -- which is a joke -- literally.  It started as a prank on 4chan, but, guess what:  People seem to like it.  It has become a common way to "tip" people on the internet (because, initially, it was nearly free) .. so .. it was akin to "internet points".  Then a funny thing happened:  it became a sorta measure of internet culture.  Elon Musk was probably the first to realize this and takes the opportunity to pronounce it as his "favorite crypto" a couple of times a year.  And guess what:  it pops every time he does that.  It also pops when stuff like the GameStop thing happen.  So -- though it may not have any fundamental value, I think what's going on here is:  it has cultural value.  And, in its own way:  Dogecoin is the big kahuna in that game.

(and that's my two-satoshis)