- It was up to Elon Musk to give Dogecoin the much-needed boost
- Musk has the ability to influence the crypto markets at the touch of a button
- According to Musk, Bitcoin and Ethereum are hampered by transaction rates that are too sluggish and transaction costs that are too high
On Friday, the Tesla CEO—dubbed The Dogefather—lifted Dogecoin out of its current slump with yet another market-moving tweet, sending the crypto meme-coin back above 22 cents following a continuous slide that had seen it slip below 20 cents on Thursday. That’s still a far way from Dogecoin’s astronomical highs in May when it surpassed 74 cents in anticipation of Musk’s highly anticipated Saturday Night Live hosting gig. Dogecoin’s value has increased by 19 percent since billionaire Elon Musk comments, while Bitcoin’s value has increased by 9.74 percent, both of which are positive indicators for cryptocurrencies that were suffering last week.
Dogecoin gains 8% after Elon Musk says DOGE payments compete with Bitcoin.
Elon Musk posted the comments saying that Dogecoin would be better at making payments than cryptocurrency . In its recent public praise of Doge currency token – it brings few returns but also quite a lot of mockery. DogeCoin rumours indicate a new marketing strategy needs to emerge after SpaceX CEO latest promotional move.
Elon Musk Dogecoin remarks are causing a stir in the cryptocurrency markets
But while the notion that Musk can move the crypto markets with the push of a button is well established at this point, it was his thoughts on the wonkier aspects of digital currencies that made this instance particularly curious—especially for those not well-versed in their technical intricacies.
Musk responded to YouTuber and Dogecoin investor Matt Wallace’s observation that upcoming updates would position Doge perfectly to become one of the most used currencies in the world by pitching his own ideas for improvements to Dogecoin’s blockchain transaction system that, in his opinion, would give it an advantage over Bitcoin and Ethereum.
Dogecoin has risen more than 14,000 percent in the last year, surprising even the crypto community, and now has the sixth-largest market capitalization. Its gains have been noted as an illustration of the strength of retail traders, the allure of memes, and a case study of what can happen in a world where the Federal Reserve and other central banks are attempting to mitigate Covid-19’s economic impact by employing relatively lax monetary policy.
And, of course, Dogecoin wouldn’t be Dogecoin without some social media action to spice things up. There’s no doubting that Musk, the founder of Tesla Inc., has influenced the price of Bitcoin and Dogecoin on Twitter. Many in the Bitcoin community have been shocked by the world’s third-richest man’s recent actions, which include a U-turn on accepting Bitcoin as payment and a tweet implying a split with the largest cryptocurrency. However, some Dogecoin supporters are actively pursuing him.
Billionaire Elon Musk believes in Dogecoin
Musk has said that a new upgrade was coming in near future. The company’s chief executive said Tesla should support the upgrade. The update could help Doge to become one of the most used currencies. In May, Tesla’s CEO said that it could add a 10th to tens of thousands of blocks per month and drop it by 100. The under-mentioned changes introduce decisions about whether these transactions belong to miners instead of the relay network and amplify the control over the fees to increase sovereignty of each nodes individual operator.
He is a firm believer in base layer technology especially blockchain technology. He explained that Dogecoin has a minuscule transaction fee and that the developers are retooling the system by gradually deploying the updates to the network over multiples.
BTC, ETH Protocol Upgrade is Coming Soon
A planned protocol upgrade according to Musk, BTC and ETH are working on a multilayer transaction system, however the base layer transaction rate is slow and transaction costs are high. Doge increasing base layer transaction rate and reducing transaction cost with exchanges operating as the de facto secondary layer, in my opinion, has appeal. On-chain transactions would be the norm in Dogecoin, according to the proposal, with exchanges effectively assuming the function of the Lightning Network in Bitcoin. Large quantities of transactions are presently processed internally by exchanges without accessing the blockchains of the different coins.
Tesla and SpaceX CEO Elon Musk was replying to crypto YouTuber Matt Wallace, who expressed enthusiasm for a forthcoming protocol improvement. Both Bitcoin and Ethereum are working on a layered transaction system, but the base layer transaction rate is slow and transaction costs are high, Musk said. Maximizing base layer transaction rate and minimising transaction cost with exchanges operating as the de facto secondary layer has appeal, in my opinion. On-chain transactions would be the norm in Dogecoin, according to the proposal, with exchanges effectively assuming the function of the Lightning Network in Bitcoin. Currently, exchanges are processed.
Coinbase and binance as a de facto secondary layer for executing transactions
Unlike Bitcoin and Ethereum, which have slow transaction rates and large transaction fees, Musk believes Dogecoin may sidestep these problems by employing exchanges like Coinbase and Binance as a de facto secondary layer to execute transactions, allowing them to be faster and more efficient. Both Bitcoin and Ethereum, as he pointed out, have sought layered transaction methods to address similar vulnerabilities, with Bitcoin’s Taproot upgrade set to launch this fall. However, in the case of Dogecoin, the Tesla CEO appears to believe that installing crypto exchanges as an additional layer to allow faster, cheaper trading would be preferable.
Developers for Dogecoin are presently working on the modifications described by Wallace in his original tweet, which promise to cut Dogecoin’s cost structure and enhance transaction rates. And there was no shortage of crypto-aware Twitter users who responded to Musk by mentioning existing blockchain networks like Lightning Network and Solana that they felt could accomplish the job.
David Sacco’s thoughts on Dogecoin
If the thought that crypto exchanges may act as a de facto secondary layer for authenticating and processing Dogecoin transactions seems strange, that’s because it could be. According to David Sacco, a professor at the University of New Haven’s Pompea College of Business, a system that allows third-party crypto exchanges to participate in transaction processing is paradoxical to the appeal of cryptocurrencies and the blockchain technology that underpins them.
Cryptocurrency is about peer-to-peer transactions without the need of third parties; the value of crypto is derived from its [blockchain-enabled] impenetrability, which allows it to exist without the use of a third party, according to Sacco. Musk’s suggestion, he argues, is a bit of a dilemma for him in that aspect.
According to Sacco, offering an outsized role to select exchanges could hurt Dogecoin’s overall fungibility by making it more difficult to trade the coin on platforms that aren’t participating in the transaction process. He adds that it appears like Ethereum and Bitcoin are undergoing [upgrades] that will make the currencies more fungible and easier to trade. I’m not sure how going its own way will make Dogecoin more appealing.
Of course, when it comes to Dogecoin, it’s difficult to ignore Musk’s opinions—who, more than anyone else, is responsible for the phenomenon that is Dogecoin, as well as having played a significant role in the marketing and adoption of cryptocurrencies in general. The rest of the crypto industry will have to keep an eye on his Twitter account to see what happens next.