An unlikely sponsor making its NASCAR debut later on Sunday: Dogecoin, with its cartoon Shiba Inu staring down drivers — in a cute way — from the bumper of car 98.
Josh Wise, the car’s driver, qualified for the Aaron’s 499 race in Talladega but needed the money for the sponsorship. The Dogecoin community reached out to Wise and raised more than $55,000 to pay for the doge-wrapped car. Like many people, Wise had never heard of the cryptocurrency — instead, the Doge community found him.
The meme-based altcoin is worth a fraction of a penny, but its true value is in its ability to introduce people to the concept of cryptocurrency, which has become a very big deal over the last year with the advent of bitcoin. For the Dogecoin community, Wise’s situation was a chance to help someone out — Shibes, as the community members call themselves, are known for their fundraising. But through the Dogecoin activism, the cryptocurrency community is gaining something even more valuable: exposure to new audiences.
So what is this dog on a coin?
A currency that looks like a joke started as one.
The doge meme, pronounced DOHJ, pairs a mispronunciation of dog from a Homestar Runner video with a photo of a Shiba Inu with raised eyebrows. On the photo, phrases like “Such Doge. Much happy. Wow” are overlaid in colorful Comic Sans. Jackson Palmer, a marketing professional at Adobe, first tweeted in November that he was going to invest in Dogecoin after he’d seen a bunch of different altcoins with ridiculous names.
Investing in Dogecoin, pretty sure it’s the next big thing. tmblr.co/ZXKfHx-duU4J—
Jackson Palmer (@jacksonpalmer) November 28, 2013
The momentum and virality of the meme took it from there.
After a couple people encouraged Palmer to create Dogecoin, he bought the domain name, put a picture of Doge on the virtual coin and slapped on a funny tagline. He kept getting retweeted and the visitor count went through the roof. Billy Markus, a programmer who had been developing a spinoff of an altcoin, tweeted at Palmer that he was able to change all of the fonts in his currency to Comic Sans. A few weeks after Palmer’s first tweet, the pair launched Dogecoin on Dec. 8, 2013.
“We thought ‘Yeah, we’ll release it and like most funny things online, people will use it for three days and then they’ll give it up and that’s it,’” said Palmer in an interview with Gigaom. “We put it up on Dogecoin.com and the thing just exploded. I wasn’t even mining it at the time.”
In the first month alone, the site had more than a million unique visitors and even surpassed bitcoin in the number of daily transactions for a couple weeks. The Dogetipbot, which doge fans can use to “tip” people through social networks for posting funny or interesting comment, has already processed more than $150,000 in tips. With those numbers, it’s obvious that the Internet found dogecoin to be funny — but kept coming back.
Even with its rising profile, Dogecoin still tries to not take itself too seriously. Just watch its official hype video below:
How can a dog on a coin be a currency?
Behind the layer of comic sans and shiba inus, the technology behind Dogecoin is incredibly serious.
Dogecoin is an alternative digital currency (or an altcoin) based on the bitcoin protocol, which uses decentralized, peer-to-peer computing to let people more easily send money online. Our current payment system is centralized, trusting for-profit companies like Visa or PayPal to move our money for us. Instead, bitcoin uses cryptographic algorithms and a public ledger called the blockchain to verify transactions. Here’s a good explainer video:
Because all of the code is open-sourced in the open system, many other currencies have spawned from it. There are hundreds of altcoins — from Litecoin to Namecoin to Auroracoin — that are all derived from the bitcoin technology, just with different alterations or derivations.
Markus designed Dogecoin to be similar to Luckycoin or Litecoin, which instead use scrypt technology — a special type of cryptography function — in their proof-of-work algorithms. Since there’s no government to print currency, computers do the work of “mining” a coin using algorithms.
After Markus and Palmer launched Dogecoin, the altcoin immediately took off thanks to the fact it was already based off a viral meme. The Dogecoin community adopted the slogan “To the moon!” to describe the raising price, interest and optimism in the cryptocurrency.
This chart from bitinfocharts.com shows the number of transactions from Dec. 8, 2013 to May 2, 2014. Dogecoin’s transaction numbers spiked in late December soon after the currency launched.
To the moon!
Aside from its obvious meme association, one reason people leapt onto Dogecoin was the ease of mining at the time. Bitcoin had been invented in 2011, but by the time it reached more internet mainstream in 2013, it became hard to make a profit using a normal computer.
John Eaton, a systems analyst for a start-up, started mining Dogecoin at the end of December just after it was launched after discovering it on a subreddit dedicated to the doge meme. While he’d investigated mining bitcoin before, it wasn’t until he found the dogecoin community that he decided to join in. He mined about 200,000 dogecoin or about $400 worth at its peak until he decided to turn off the mining rig because of the noise it made.
Andrew White dresses in a Shiba Inu t-shirt for Dogecon. Photo by Biz Carson/Gigaom
“For me, it was that they were just starting out. They’re having fun. They’re tipping freely. There’s no barriers to entry,” Eaton said in a phone interview from Minnesota. “For me personally, it was a great way to learn more about cryptocurrencies. I didn’t get in thinking that I was going to make money or that it even was money.”
The lightheartedness of the cryptocurrency even attracts people within the cryptospace. Andrew White, a technology consultant, had been involved with bitcoin since 2011, but has also become interested in Dogecoin as he’s watched it grow as a currency.
“Everything I’m seeing is pointing to greater legitimacy. More people have gotten into it and understand it,” White said dressed in a shiba inu t-shirt at the Dogecon conference in San Francisco. “Passion breeds loyalty.”
Built-in virality makes it a ‘gateway’ currency
Facebook has the like, Reddit has the upvote and Twitter has the favorite or the retweet. However creeping into all of these social networks is the Dogetipbot. On Reddit, it’s common to see someone be tipped anywhere from 50 doge to 5,000 doge for posting interesting content.
“If someone throws a 100 dogecoin at me, it’s like ‘Oh I have 100 dogecoin and I don’t know what that means, but it’s cool,’” Palmer said. “It kind of just snowballs out until you have a massive community. In Reddit’s case, it’s 80,000 people in that subreddit that have Dogecoin.”
It’s a generally negligible amount of money from one person to signal that they thought this was a contribution of value, but it also serves as a built-in viral marketing tool for the currency itself. If someone receives some doge for a Reddit comment, then they may start searching Google for Dogecoin and how it can be used. And although there are a growing number of merchants that accept Dogecoin or are willing to trade it to USD or BTC, a lot of users keep Dogecoin within the tipping ecosystem to reward other people.
Jackson Palmer, co-founder of Dogecoin, speaks at Dogecon on Friday, April 25. Photo by Biz Carson/Gigaom
The low value of Dogecoin also gives it the advantage over bitcoin when it comes to access and entry-level users. While anyone could tip or give $1 worth of cryptocurrency as an introduction, it’s much more exciting receive 2,034 dogecoin rather than 0.00222811 bitcoin. The low value also means that people are willing to toss it around more and tip other people — just further spreading the word of cryptocurrency.
Can Dogecoin and bitcoin coexist?
One of the most startling differences between Dogecoin and bitcoin is the user profile and community behind the currencies.
The Dogecoin community is known online for its friendliness — thanks in part to the tipbot — and also for its philanthropy. Dogecoin made its Olympic debut at the Winter Olympics in Sochi when it sponsored the Jamaican Bobsled team. The community has since gone on to raise money for Doge4Kids to train service animals and Doge4Water to raise money for wells in Kenya (a campaign in which they paired up with I Can Has Cheezburger meme creator Eric Nakagawa). The NASCAR dogecar will debut today, but dogecoin enthusiasts have already moved on to their newest fundraising effort with Doge4Cancer.
The Jamaican bobsled and NASCAR sponsorships came to life after someone posted on the Dogecoin subreddit, which has more than 79,000 members subreddit. As people latched onto the idea, Palmer set up official accounts managed by the Dogecoin Foundation so people could securely donate money. Four months after the birth of Dogecoin, the foundation is accepting nominations on May 5 to officially elect a board.
That doesn’t mean that the bitcoin community is hoarding coins in couches and just sitting on it. Many of their members are active in raising money for The Water Project and other philanthropic communities. The difference lies in the public stage of the events Dogecoin endorses and the resulting demographic that they reach as a result.
Dogecoin’s No. 98 racecar will hit the NASCAR track today in Talladega. Photo courtesy of Caphits/Imgur.
At the bitcoin-centric Coin Summit earlier this year, most of the attendees were male, touting business cards and suits mixed in with the techie crowd. At Dogecon, the entire room skewed 10 to 15 years younger, with some parents bringing their kids after school to see what was going on. The demographic of Dogecoin most closely aligns with the social media demographic rather than the traditional cryptocurrency, Palmer said.
Dogecoin’s ability to reach a different crowd than bitcoin is only a net positive for cryptocurrency, said Bitcoin Foundation board member Elizabeth Ploshay.
“When bitcoin first started, it was a lot of people into the technical aspect of it, a lot of software engineers and ‘computer geeks’. But it’s since expanded tremendously to people,” Ploshay said. “Bitcoin’s base is very, very broad. Any cryptocurrency to get mass adoption has to start somewhere, so it will meet the needs of a nice adoption group then expand. What Dogecoin can do is bring more people into the digital currency space and certainly get them excited about bitcoin.”
Part of bitcoin’s expanding user base is a result of its push to get the currency into the hands of the consumer, whether it’s through an ATM or a debit card or the ability to buy a coffee with bitcoin. Companies like Overstock.com and Square’s online marketplace accept bitcoin for payment.
“The goal is to get as many companies into an innovative form of transaction as possible because we can recognize digital currencies are the way of the future,” Ploshay said. “So whether it’s bitcoin or Dogecoin, moving away from the current centrally controlled fiat structure that we have, that’s ideal in my book.”
The Dogecoin seen at Dogecon. Photo by Biz Carson/Gigaom
Dogecoin and bitcoin diverge from this mentality though. Palmer said he believes that the closed circular ecosystem of tipping and receiving Dogecoin should be an example of the ecosystem that bitcoin should foster. “It’s pretty terrible that we’re a digital online currency, all these currencies are, and we’ve prematurely jumped out and said let’s conquer the real world,” Palmer said. “If you can’t conquer the digital world, then you’re doing something wrong.”
BitPay CEO Tony Gallippi said his company has looked at adding Dogecoin to its payment processing network, but the currency didn’t meet the mark when it came to liquidity, security or user base.
“Typically when you add bitcoin as a payment method you are seeing an increase in revenue because people paying in bitcoin are new customers to your business. Adding an altcoin isn’t additive from a customer perspective since every customer who uses an altcoin also uses bitcoin, so you aren’t gaining anything new,” Gallippi said in an email interview. “Doge is unique in that it does seem to have a different demographic of a userbase, but it’s still too new and small. I see Dogecoin as a great way to teach people and kids about using cryptocurrencies.”
Since Dogecoin lacks the VC attention and money bags like the bitcoin space, its strength for now is in its ability to introduce people (and especially a younger crowd) to cryptocurrency — whether it’s through a tip on Reddit or because a NASCAR car had a cool logo design on it and someone searched for it.
“The viability of any alternative currency — Bitcoin, Litecoin, Dogecoin, whatever it is — relies solely on mass adoption of that currency. It doesn’t matter if it hits a million dollars per bitcoin if only 200,000 people in the entire world own them,” Palmer said. “Really what I think Dogecoin has been succeeding in doing is slowly easing the average person into understanding what digital currency is and how it might benefit them. In five years, it might be bitcoin or Litecoin or Dogecoin, but there will be a digital currency.”
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