Robinhood CEO Vlad Tenev has asked a question on very few peoples’ minds: Can dogecoin “truly be the future currency of the internet and the people” that bitcoin was intended to be?
The head of the popular stock and cryptocurrency exchange asked that question seriously on Twitter Thursday (April 14), coming to the conclusion that it’s possible, with two big upgrades.
Can #Doge truly be the future currency of the Internet and the people? As we added the ability to send/receive DOGE on Robinhood, I’ve been thinking about what that would take.
— VLAD (@vladtenev) April 14, 2022
Which raises one big question: How many people must take a joke seriously before it actually becomes serious?
Doge, you’ll recall (or if not, see below), was literally created as a joke eight years ago. Then in early 2021, Elon Musk discovered it, found it funny, and with a series of memes used his Twitter power to turn the far-under-the-radar cryptocurrency into a top-10 to -15 digital asset (currently No. 11) with a market cap of $19.5 billion.
Read more: Can Elon Musk’s Seat on Twitter Board End Dogecoin’s Joke Status?
And it is actually gaining some traction as a currency token. Crypto payments processor BitPay supports it, although it represents a tiny fraction of purchases, and Ethereum creator Vitalik Buterin is on the Dogecoin Foundation’s Advisory Board, re-established in August, along with a Musk appointee.
See more: BitPay Sees Consumer Crypto Payments Growing Beyond Bitcoin
No, Seriously
“First off, transaction fees have to be vanishingly small,” Tenev explained. “We’re already there … typical transaction fees have been [about] $0.003 … compared to the 1-3% network fees that major card networks charge.”
What doesn’t work, he said, are the current block time and block size — two factors that are vital to scalability. Block refers to the bundle of verified transactions added to a blockchain at regular intervals, recording them immutably — unchangeably — onto its ledger.
Read also: What’s a Blockchain and How Does It Work?
The frequency with which this happens and the maximum size of the block, which limits the number of transactions it can hold, are what determine the number of transactions per second (TPS) it can handle. The standard used by the crypto industry is Visa’s current 24,000 TPS and maximum 65,000 TPS.
See also: Bitcoin’s 10-Minute Block Time Batches and Fluctuating Transaction Fees Give RTP a Leg Up
“Ideally, the block time … should be fast enough that the transaction can be recorded in the next block in less time than it takes to pay at a point-of-sale terminal,” Tenev said, suggesting a move from Dogecoin’s current one minute to 10 seconds.
At this point, Musk chimed in, suggesting that six seconds — “better said as 6000 milliseconds, which is a long time to computers” — would be a better choice.
Then there’s block size. At 1MB, and its current one-minute interval, dogecoin can handle about 40 TPS (bitcoin has about 5 TPS and Ethereum around 12 to 14 TPS).
Increasing the speed and bumping block size to 1GB, and eventually 10GB, Tenev said “would provide all of the throughput a global currency would need for the foreseeable future.”
He added that Layer2 solutions like bitcoin’s Lightning Network would be necessary. Lightning adds another blockchain on top of bitcoin, taking off all the work of transactions and simply sending bundles of completed transaction data back to the Bitcoin Layer1.
This has proven successful enough to allow bitcoin payments firm Strike to announce last week that it has cut deals to bring BTC capability to NCR’s point-of-sale (POS) terminals, Shopify Payments, and prepaid payments processor Blackhawk Network.
Read more: Bringing Bitcoin Firmly into Payments, Strike Partners with NCR, Shopify, Blackhawk
Tenev added that while the Dogecoin blockchain is inflationary — about 5 billion new DOGE tokens are created every year, while bitcoin will max out at 21 million — the inflation rate is small enough to be comparable to, and eventually better than, the U.S. dollar’s rate.
Yes, But…
Which leaves just three caveats. First, plenty of Ethereum competitors like Algorand, Solana and Cardano, can already provide enough scalability — vastly more than enough in some cases — without needing any updates.
See also: What’s Algorand? The Blockchain Securing Transactions by Spreading the Wealth
Second, there’s Shiba Inu, another meme dog-themed token and dogecoin knock-off that not only has the necessary scalability, it is growing more popular. Enough so that Robinhood added SHIB — which already has a $14 billion market cap — to it roster earlier this month. Along with several Ethereum killers.
And finally, Robinhood is thought to hold vast amounts of DOGE, according to several reports, as much as 30% according to blockchain intelligence firm Elliptic, and has accounted for an outsize share of its crypto revenue — as much as two-thirds last year, although now dropping — Bloomberg reported in January.
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