The cryptocurrency dogecoin’s value has surged over the past few months thanks to the alignment of several important factors, including extra capital from stimulus checks, the popularity of free-trading apps like Robinhood and the backing of billionaire SpaceX and Tesla CEO Elon Musk.
But one reason has been understated in media reports, Billy Markus, the software engineer who co-created the coin, tells CNBC Make It: the community that’s formed around it over the past few years.
Markus created dogecoin, based on the Doge shiba inu meme, in “about two hours” in 2013 as a parody of the better-known cryptocurrency bitcoin; the “absurdity of Dog Money,” as he puts it, is by design. But investors aren’t in it strictly for the memes, he says.
“The crypto community can be pretty elitist and not very inclusive, and we wanted to make a community that was more fun, lighthearted and inclusive,” Markus writes in an email. “It worked, and is why the dogecoin community consistently maintains a presence.”
As its creator, Markus has an inherent interest in the coin’s success (though he claims to only own what people have recently given him). But he says that the community typically follows its Do Only Good Everyday motto, as evidenced by members’ responses to the American Cancer Society now accepting dogecoin donations.
Markus, who tweets under the handle Shibetoshi Nakamoto in a nod to pseudonymous bitcoin founder Satoshi Nakamoto, often encourages his followers to donate their dogecoin to worthwhile causes while warning them against potential scams in the space.
In a Reddit post, he says that donating to charity isn’t the only way to do good, however. “Anything that is amusing or fun has value as well,” he writes.
Dogecoin has given investors something to rally behind over the past few difficult months when there was little else to look forward to, Markus says. “People have been suffering, stuck in their homes and struggling, seeing their dollar not go as far as it has previously.”
While no one can be certain of dogecoin’s long-term prospects, Mike Bucella, general partner at crypto-investment firm BlockTower Capital, says it has done a great deal to bring attention to crypto investing more generally. It’s lowered the barrier to entry for average investors to a, at times, confounding space.
“Very few things have done as much to bring eyeballs and people into crypto,” Bucella says. “That’s a crazy thing to say, but dogecoin specifically has brought in the retail masses.”
But to be clear: Like other cryptocurrencies, dogecoin is extremely volatile, and many have warned that it is a bubble waiting to burst. While the coin is up more than 10,000% in 2021 overall, it’s fallen around 30% from its recent high.
Investors should not invest any money in it that they cannot afford to lose entirely, and should be doubly cautious of dogecoin because there is not a finite number of the coin that can exist (each year a fixed issuance of 5.2 billion additional coins can be released, according to Markus). That makes the real value hard to judge, says Bucella.
This differs from bitcoin, which has a limited supply of 21 million, creating a “built-in scarcity,” James Ledbetter, editor of fintech newsletter FIN and CNBC contributor, told CNBC Make It.
But with a market capitalization over $56 billion as of Wednesday, dogecoin has also transcended being a mere joke.
“It’s definitely absurd,” says Markus. “But there’s something pure about it too.”