First of all, congrats to DOGE for capturing the imagination of so many people. More people experiencing the magic of crypto-currency is great. I love how a not-too-serious project can still exhibit the fundamental behaviors of crypto-currency. Underpinning the fun, meme-able, and entirely non-corporate branding is the same rock-solid math and cryptography-based digital ledger that was pioneered by Bitcoin’s open-source code.
The only issue I have with DOGE is with its modified economics. Not having a hard cap on the issuance is a mistake, and puts DOGE in a category of coins that have historically not done well long term. Not only is there a lot of DOGE, leading to a very high market cap, which is calculated by multiplying outstanding supply by the last trade price, but like Doritos, they’ll “make more.” The problem is that an ever-expanding supply requires an ever-expanding demand to maintain price. If DOGE were the only option available, then maybe it could work for a long time. There are other options. Why wouldn’t everyone want a fun meme-able crypto-currency, with low fees, and a hard-cap on issuance based on an exponential decay?
Enter Ravencoin ($RVN) Based on the same rock-solid math behind Bitcoin, but with lower fees, higher on-chain capacity, better mining dispersion, and the built-in ability to burn RVN and create your own uniquely named token for tickets, stocks, gift cards, NFTs, and more.
Don’t get me wrong. I like that DOGE has made a statement and that people standing together have pushed this project into the top 5 by market cap. And, if the tokenomics were similar to Bitcoin, Ravencoin, or Litecoin, I’d add it to my long-term portfolio and go along for the ride.
With 10,000 DOGE per block being issued to miners, with no halving mechanism, it means the supply goes to infinity over time. This is similar to the economic policy that the US is pursuing, except that DOGE supply issuance isn’t accelerating, so DOGE has a small edge over the US monetary policy. A policy of infinite supply doesn’t end well for DOGE or the US. In fact, economics 101 says the price ends at 0 since price is where the supply and demand curves meet. Where is the price set on infinite supply? Yes, it’s zero.
So, why is the price of DOGE where it is, if the long-term mathematics says it goes to zero? Because of information asymmetry. That’s a fancy and politically correct way of saying people don’t know better (yet). How many DOGE hodlers do you think know the issuance schedule of DOGE? I don’t know the answer either, but let’s add one more person to the list — you. The DOGE network issues 10,000 DOGE per minute and will continue to do so. That’s 5.25 billion more DOGE per year — every year. At the current price of $0.30, the DOGE network needs about $1.5 billion additional DOGE buying demand to hold its current price, and that must continue ad infinitum.
By contrast, the Ravencoin network issues 5,000 RVN per minute, but around January 19th of 2022, that number will be cut in half to 2,500 RVN per minute, and four years after that will be cut in half again to 1,250 RVN per minute. These halvings will continue, so that after about 40 years, less than 10 RVN per minute will be issued. This exponential decay curve ensures that RVN does not have an infinite supply, thereby keeping the tokenomics sound, and allowing the supply/demand curve to cross where a non-zero price is possible. Where that curve crosses will depend on demand, but the algorithm ensures the supply is predictable, and more importantly, finite.
So now what? You’ve bought DOGE and want RVN. Perfectly understandable.