Dogecoin (DOGE 4.89%) is arguably the most popular meme coin in the world right now. Having started as a joke back in 2013, Dogecoin currently ranks as one of the top 10 cryptocurrencies in the world, with a market capitalization of approximately $8 billion. However, its overall utility remains limited, and it remains a hugely speculative coin priced at mere pennies.
In its nearly 10-year history, the all-time high for Dogecoin is just $0.74.This would seem to suggest that, even with a carefully planned social media influencer campaign and the support of high-profile individuals like Elon Musk (aka "The Dogefather"), Dogecoin is never going to reach the $1 mark without a massive transformation of its underlying blockchain technology. Here are a few of the things that have to go right if Dogecoin has any shot of reaching the $1 mark.
Increase the number of use cases for Dogecoin
Right now, Dogecoin's utility is remarkably limited. You can use it to tip social media influencers. You can use it to pay for some goods and services at a few e-commerce retailers. But other than that, Dogecoin has little to no value. So in order for Dogecoin to make another run at the $1 mark, there needs to be added utility.
Image source: Getty Images.
A positive sign on this front is the recent launch of Dogechain, which is a Layer 2 scaling solution for Dogecoin.While Dogechain is not officially sanctioned by the Dogecoin development team, it dramatically boosts the number of use cases for Dogecoin. You can use Dogecoin, for example, to purchase NFTs. You can use Dogecoin to invest in DeFi protocols. And you can use Dogecoin to invest in new tokens.
Transition to a proof-of-stake blockchain
Dogecoin runs on an energy-intensive proof-of-work blockchain, similar to Bitcoin (CRYPTO: BTC). That pretty much guarantees that Dogecoin will never be able to process more than the 40 or so transactions per second it is capable of right now. Transaction finality, which is the time needed to add a new block to the blockchain, is still an agonizingly slow 1 minute.The easiest way to improve these performance metrics is by transitioning to a proof-of-stake blockchain.
In other words, Dogecoin needs to pull an Ethereum (CRYPTO: ETH). Imagine if Dogecoin were able to recreate the frenzy, hype, and speculation that we're currently seeing around The Merge. That could send the price of Dogecoin soaring. And, yes, Vitalik Buterin of Ethereum, who now sits on the advisory board of the Dogecoin Foundation, has promised that he would help to start the process with Dogecoin, just as soon as he's done with The Merge.In its Trailmap for 2022, Dogecoin specifically mentioned a staking mechanism, and that could be huge in terms of getting people to lock up their Dogecoin in return for staking rewards on a proof-of-stake blockchain.
How to stand out from other meme coins?
When it first launched in 2013, Dogecoin was the only canine-themed meme coin in town. Now, it's surrounded by similar types of meme coins, all with dogs as a mascot. There's Shiba Inu (CRYPTO: SHIB), of course. But there's also a whole kennel full of other, more speculative coins. It's a lot harder for people to get behind Dogecoin these days when there are so many canine meme coin alternatives.
But there's hope here, too. 2023 is going to mark the 10th anniversary of the launch of Dogecoin. This could be digital gold for all the social media influencers and hype beasts out there who love to tout Dogecoin. All Dogecoin needs is a clever marketing tagline like "10x in 10 years. Do it for the Dogefather." Remember 2021? We saw the same kind of speculative froth as the price of Dogecoin skyrocketed to an all-time high, buoyed by huge numbers of retail investors putting in as little as $25 in the hopes of earning easy money.
Can Dogecoin go to $1?
There's so much that needs to go right for Dogecoin before it can ever hit $1. In nearly 10 years, it has never achieved this feat. So it will likely take a full-scale transformation of Dogecoin to make this happen. Or, as Elon Musk once suggested, maybe Dogecoin could one day become the currency of Earth.That might speed up the process. It's certainly possible, I guess, but I'm not counting on it. For now, I'm passing on Dogecoin.
According to the Chinese zodiac, the next Year of the Dog will be 2030. We may have to wait that long for Dogecoin ever to reach $1. In the meantime, I would suggest putting your hard-earned fiat to work elsewhere.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
