Dogecoin, known to be created by software engineers Billy Markus and Jackson Palmer, started its journey as a joke soon after 2013. Featuring a Shiba Inu dog, the meme-inspired coin has now evolved into a reputable digital asset which is now a popular choice in the crypto world. Though it was never expected to be taken seriously, endorsements from public figures like Elon Musk, CEO of Tesla, and other prominent personalities within the crypto space leveraged its position as one of the most popular digital assets.
Dogecoin has been subject to several scams and legal issues due to its immense popularity, making it an easy target for fraudulent activities. However, regulatory agencies like the U.S. Commodity Futures Trading Commission (CFTC) have considered Dogecoin largely as a commodity rather than calling it a scam or a security.
What is Dogecoin?
It is an altcoin, launched in 2013, a few years after the launch of Bitcoin, the first cryptocurrency in the world. Its logo features the image of a Shiba Inu dog, Kabosu from Japan. Dogecoin is an open-source cryptocurrency that runs on blockchain technology using a proof-of-work (PoW) consensus mechanism. In contrast to other cryptocurrencies that focus on technological advancements, Dogecoin intended to open the door for newcomers into the cryptocurrency ecosystem.
The fun-based theme and community-driven approach at a low transaction cost led to its quick expansion after its launch. Dogecoin was largely used for small transactions like tipping, as it maintained steady growth. However, things took a dramatic turn in 2021, with several celebrity endorsements and viral social media content, the value of Dogecoin surged really high, reaching an all-time high of $0.70. Dogecoin surged so high that it even outperformed stocks by crossing most of the companies listed in the S&P 500. Even after eleven years after its commencement, the question, of whether it is a scam still remains in the cryptocurrency ecosystem.
Is Dogecoin a scam?
Dogecoin cannot be considered a scam. It operates on a decentralized platform using a proof-of-work (PoW) consensus mechanism. Decentralization ensures that no single authority controls the network, keeping all transactions secured. With its low fees and high transaction speed, it can be used for everyday transactions like tipping, fundraising, and other microtransactions.
Scams usually come with unbelievable returns and fake guarantees. Dogecoin, without any governing authority, doesn’t promise any of these unrealistic guarantees. Moreover, it runs on an open-source code that can be accessed by the public. Anyhow it has an unlimited supply of coins with more than 65% of its holdings in the top 100 owners may raise questions regarding the development of a centralized holding of assets.
However, similar to other cryptocurrencies, Dogecoin is also associated with scams and regulatory concerns. The popularity of the meme coin has been exploited as utilized in schemes like Pump-and-Dump schemes, fake giveaways, and other potential disputes.
Is Dogecoin a Security?
To consider an asset as a security, the U.S. Securities and Exchange Board has imposed certain frameworks, known as the Howey Test. Under this, any entity is considered a security only if it involves an investment of money that can generate profits with a common enterprise. Securities rely on mutual efforts. Though Dogecoin has an exceptional community of investors and support, it doesn’t offer any guarantee of returns. As it operates on a blockchain there is no central authority to regulate it, while security needs to be regulated by an authority. Moreover, SEC considered tokens launched through Initial Coin Offerings (centralized approach) for profit, which Dogecoin lacks. To conclude, Dogecoin cannot be considered a security.
Is Dogecoin a Commodity?
After exploring the features of Dogecoin as a scam and security, it is more likely to fit into the role of commodity. But what are commodities? Commodities are generally traded for their intrinsic value rather than their utility. Dogecoins are bought and sold based on the demand and supply in the market, which keeps them under the category of a commodity. Similar to commodities, Dogecoins also function on decentralized platforms.
However, it has to be endorsed by the Commodities Futures Trading Commission (CFTC). With Bitcoin and Ethereum classified as commodities, Dogecoin aligns with the features of other regulated cryptocurrencies that are regulated by CFCT.
The Future of Dogecoin
Classification of Dogecoin as a security may require stricter regulatory compliance by regulating bodies like the U.S. Securities and Exchange Commission. With lighter regulations, Dogecoin functions as a commodity that relies on the demand and supply in the market. With low transaction fees and fast processing, it can be easily used in everyday transactions. The inflationary model remains a concern in the long term, but it is expected to hold its position in the market by enabling cross-chain functionality. However, Dogecoin has got immense support from its community which will shape the future of Dogecoin as the cryptocurrency market evolves.
Conclusion
Dogecoin, the first meme-based coin in the cryptocurrency space, operates on decentralized platforms with an open-source code. Even though it started as a joke, it has gained popularity and a huge fan base with the growth of its community. So, understanding whether Dogecoin is a scam, security, or commodity is essential if you consider investing in Dogecoin. Dogecoin is neither a scam nor a security; instead, it is a decentralized digital asset that is more like a commodity. Even though its meme-based theme and unlimited supply pose questions of uncertainty, its demand and supply nature aligns with the features of the commodity. However, regulating bodies like CFCT and SEC should clarify their stand to accept Dogecoin as a commodity in the cryptocurrency ecosystem.