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There is one other aspect here I find very interesting, and it has to do with the efficient market hypothesis. The fact that people are buying Dogecoin simply

There is one other aspect here I find very interesting, and it has to do with the efficient market hypothesis. The fact that people are buying Dogecoin simply because it is a fun internet meme kind of flies in the face of people who still view the price of financial assets as mostly rational, value-based prices, that can be deconstructed along the lines of asset-based valuation, financial ratios, available information, et cetera. Dogecoin kind of shits all over that. If people will buy a financial asset literally because it was a funny meme they saw on Reddit, then it kind of untangles the notion that prices really must have anything to do with reality. Someone might rightfully ask the question, "Should I invest in Dogecoin?", and at this stage of our financial markets, I really don't have a good answer for that.

rabidsnail 13y ago
Dogecoin is a good, not a medium of exchange. Why do people buy iPhone apps? iPhone apps don't even have resale value.
- kamakazizuru 13y ago
  except they do have a resale value.
  - rabidsnail 13y ago
    Try reselling Angry Birds.
    - kamakazizuru 13y ago
      sure - apps dont have a resale value. but that doesnt mean video games in general dont. You're just providing an exception to a rule that's all. Also - you're defying your original point of something being a good. Angry birds is not a good - its a service.
- oakwhiz 13y ago
  How is Dogecoin a good if its only feature is the mode by which it is exchanged? Disclaimer: I possess Dogecoins
  - rabidsnail 13y ago
    It makes the people that hold it laugh, which is valuable to them.
- phillmv 13y ago
  The word you're looking for is "asset", and mediums of exchange are by definition always assets. When people talk about their aspirations for Bitcoin, the most techno-utopians want it to become a commonly accepted store of value or unit of account. Keep in mind that mediums of exchange can be seen as purely "any mechanism that can signal the irrevocable transfer of the value". The innovation btc brings to this is instead of transferring physical items you create cryptographic hashes that you then publicize. It's worth noting that when we talk about money we're trying to describe emergent phenomena. This is what we've got, and the following items are just useful ways of thinking about the issue - except unlike in physics we don't have the leeway to conduct careful, repeatable experiments. http://en.wikipedia.org/wiki/Asset http://en.wikipedia.org/wiki/Asset http://en.wikipedia.org/wiki/Medium_of_exchange http://en.wikipedia.org/wiki/Medium_of_exchange http://en.wikipedia.org/wiki/Store_of_value http://en.wikipedia.org/wiki/Store_of_value http://en.wikipedia.org/wiki/Unit_of_account http://en.wikipedia.org/wiki/Unit_of_account I forget the (accounting/financial) term for talking expenditures like videogames or movies or haircuts. I'm pretty sure we can describe those all as "services" but I've yet to find the appropriate wikipedia article. If someone can jog my memory that'd be great.
highCs 13y ago
The fact that people are buying Dogecoin simply because it is a fun internet meme kind I think the point is that people do not buy Dogecoin because it's fun in itself but because it's the currency of fun, in other terms, their currency. "Their" meaning "a slice of the population" as a country is a slice of the population too. "Before", currencies were determined by geopolitic, now it's up to the people proximity in the wider sense. It's not happened yet but that's what the success of Dogecoin suggest.
- firebones 13y ago
  Bingo. There's not really much overhead to creating a new cryptocurrency, so worries about deflationary pressures should be removed since new currencies can emerge. The currencies will emerge out of specific cultures, in this case the meme culture, but as we've seen in the past, through various gaming cultures and as someone else suggested "Bieber-coin". (Exercise for the reader: is this much different than dot-com bubble paper millionaires with thousands of options?) Think of who is in the 1% of a country's wealth--a mix of capitalists who were good at acquiring that currency and folks who inherited it. In the cryptocurrency world, the moneyed are the creators, the miners and in the case of dogecoin, the creative-meme class who serve as a marketing arm. Many of them are in it for the lulz, and consequently have great upside with little downside, since it will always retain an intrinsic value as a karma proxy. The speculators may inadvertently make real-world millionaires out of this class. It would not surprise me at all in the next year to see companies with large social subcultures at least attempt to launch their own cryptocurrencies, or extend their in-game currencies to become linked to a cryptocurrency.
  - hmsimha 13y ago
    In-game currencies are already a thing, but I suspect the reason they never caught on as viable liquid currency is their centralized nature.
    - gojomo 13y ago
      For in-game currencies so far, the centralization has meant two strikes: one, fear of the proprietor's control; two, the risk other entities (governments) could exert control via pressure on the proprietor. Emergent decentralized currencies address both – and might also improve centralized-proprietor currencies by competition and precedent. (Proprietors will accept more community input, and win greater tolerance from governments, because of pressure from alternatives.)
Houshalter 13y ago
People have always bought silly trinkets and useless things, what's wrong with that? This doesn't "fly in the face" of anything, the price is being set by supply and demand. It just so happens memes can create demand. The people actually investing in dogecoin are doing so because they believe the price is going to go up, the same as people who invest in anything else. They will lose or gain money depending on whether they are right or wrong.
grey-area 13y ago
Someone might rightfully ask the question, "Should I invest in Dogecoin?", and at this stage of our financial markets, I really don't have a good answer for that. This is where recognising a distinction between investing and speculating comes in handy. It's quite possible to speculate in dogecoin (relying on greater fools coming after) in the short term and make some money. In the long term it is extremely unlikely to have any value at all, so if you take investment to be long term search for value, the answer to should I invest is no. The interesting thing about fiat (all our currencies at this point, including crypto ones, unless you want to quibble over semantics), is that it depends on confidence for its value. Without confidence it is worth nothing (Assignats, Zimbabwean dollars etc). This realisation doesn't give me great confidence in Bitcoin or any of its spin-offs though. It's an interesting experiment and noteworthy, but I think fatally flawed as a currency or an investment because of the explicit rejection of verified identity, regulation, and inflation and its attempts to emulate paper cash. Perhaps the next currency to emerge will be corporate sponsored rather than state-sponsored, as corporations are still rising in power over states, but it will be a very interesting century, because most of the national currencies probably won't survive it, and by 2100, no-one will be using physical tokens for payments (cash). States will naturally resist any encroachment on their power over currency and taxation, which up to now has been absolute. I expect any stateless currencies which do manage to rival say the USD to come under heavy pressure from both speculators like Soros, and currency blocs who perceive a threat to their monopoly on trade.
- steveklabnik 13y ago
  > Perhaps the next currency to emerge will be corporate sponsored rather than state-sponsored, What about celebrity-sponsored? "Buy his next album in Bieber-coin."
  - grey-area 13y ago
    That would be hilarious, and quite in keeping with the status of celebrities in our society as the new aristocracy. Gaga-coin or Bieber-coin - millions of fans would actually buy that sort of thing. I think they'd need physical gold coins though, for extra bling, or perhaps Gaga would go for pink plastic. Oh, just looked, and it turns out someone already thought of this but with dollar bills: http://www.trendhunter.com/trends/pop-culture-cash-by-james-charles http://www.trendhunter.com/trends/pop-culture-cash-by-james-...
beaner 13y ago
"Rational" has never meant that people know what they need, only that they know what they want. And people can "want" things for any number of silly or rational reasons. In the case of Dogecoin, it may be silly to you, but humor is the "rational value" people are getting from trading it.
hayksaakian 13y ago
Part of the reason is because for the longest time, the smallest unit of "value" recognized by most people was 1 US Cent. Crypto currencies, like Dogecoin are intrinsically more divisible. If someone made a funny comment on the internet, and i wanted to reward them. In 2012, I might "like" or "upvote" their comment -- a subjective measure of appreciation. In early 2013, I might "give gold" or "gild" comments or posts I like on reddit. In 2014, I'll probably just give some Doge, or whatever the new popular currency is (which I can easily buy with my other altcoin/currencies online). I can also give more or less based on how much I want. This wouldn't work with pennies or USD because 100 Doge still __feels__ like a lot -- even though it's some fraction of a penny. For a long time, people would give each other "internets" to reward what they like. The only difference now is that you can buy internets with real money, and they retain at least some quantitative value.
- kordless 13y ago
  Don't forget that each transaction is recorded and secured as well. There is a ton of Doge to be made in analyzing the interactions.
- tarlyn 13y ago
  This is one of the most insightful things I have read. If doge turns into the defacto "tipping" or "internets" coin, then it truly will be something useful ;)
baddox 13y ago
> The fact that people are buying Dogecoin simply because it is a fun internet meme kind of flies in the face of people who still view the price of financial assets as mostly rational, value-based prices, ... I don't see anything particularly unique about all of this. They buy dogecoin because they value the dogecoin more than the asset they're using as payment. That's how all purchases and trades work. You're just pointing out that the reason people value dogecoin more than the money they spend for it has to do not with something "essential," like buying food to stay alive, but rather for entertainment. The way you phrase things is making the concept sound more unusual than it actually is.
moron4hire 13y ago
I look at buying a dogecoin like buying one of those "joke-a-day" calendars. It's probably going to sit in a drawer in your desk, not actually used for its original purpose as a calendar, but you take it out every few months and rip off the old pages, reading the jokes. It's just a shitty joke book, made to look like a calendar, thereby encouraging you to destroy it and buy another one next year. If someone were to ask me if they should invest in joke-a-day calendars, then the obvious answer is, unless you are interested in getting in the business of printing joke-a-day calendars, or selling them, then no, joke-a-day calendars are not an "investment".
genwin 13y ago
Some people got beanie babies because they liked them, others because they thought their value would increase. The same thinking drives Dogecoin.

rabidsnail 13y ago

Dogecoin is a good, not a medium of exchange. Why do people buy iPhone apps? iPhone apps don't even have resale value.

kamakazizuru 13y ago
except they do have a resale value.
- rabidsnail 13y ago
  Try reselling Angry Birds.
  - kamakazizuru 13y ago
    sure - apps dont have a resale value. but that doesnt mean video games in general dont. You're just providing an exception to a rule that's all. Also - you're defying your original point of something being a good. Angry birds is not a good - its a service.
oakwhiz 13y ago
How is Dogecoin a good if its only feature is the mode by which it is exchanged? Disclaimer: I possess Dogecoins
- rabidsnail 13y ago
  It makes the people that hold it laugh, which is valuable to them.
phillmv 13y ago
The word you're looking for is "asset", and mediums of exchange are by definition always assets. When people talk about their aspirations for Bitcoin, the most techno-utopians want it to become a commonly accepted store of value or unit of account. Keep in mind that mediums of exchange can be seen as purely "any mechanism that can signal the irrevocable transfer of the value". The innovation btc brings to this is instead of transferring physical items you create cryptographic hashes that you then publicize. It's worth noting that when we talk about money we're trying to describe emergent phenomena. This is what we've got, and the following items are just useful ways of thinking about the issue - except unlike in physics we don't have the leeway to conduct careful, repeatable experiments. http://en.wikipedia.org/wiki/Asset http://en.wikipedia.org/wiki/Asset http://en.wikipedia.org/wiki/Medium_of_exchange http://en.wikipedia.org/wiki/Medium_of_exchange http://en.wikipedia.org/wiki/Store_of_value http://en.wikipedia.org/wiki/Store_of_value http://en.wikipedia.org/wiki/Unit_of_account http://en.wikipedia.org/wiki/Unit_of_account I forget the (accounting/financial) term for talking expenditures like videogames or movies or haircuts. I'm pretty sure we can describe those all as "services" but I've yet to find the appropriate wikipedia article. If someone can jog my memory that'd be great.

highCs 13y ago

The fact that people are buying Dogecoin simply because it is a fun internet meme kind I think the point is that people do not buy Dogecoin because it's fun in itself but because it's the currency of fun, in other terms, their currency. "Their" meaning "a slice of the population" as a country is a slice of the population too. "Before", currencies were determined by geopolitic, now it's up to the people proximity in the wider sense. It's not happened yet but that's what the success of Dogecoin suggest.

firebones 13y ago
Bingo. There's not really much overhead to creating a new cryptocurrency, so worries about deflationary pressures should be removed since new currencies can emerge. The currencies will emerge out of specific cultures, in this case the meme culture, but as we've seen in the past, through various gaming cultures and as someone else suggested "Bieber-coin". (Exercise for the reader: is this much different than dot-com bubble paper millionaires with thousands of options?) Think of who is in the 1% of a country's wealth--a mix of capitalists who were good at acquiring that currency and folks who inherited it. In the cryptocurrency world, the moneyed are the creators, the miners and in the case of dogecoin, the creative-meme class who serve as a marketing arm. Many of them are in it for the lulz, and consequently have great upside with little downside, since it will always retain an intrinsic value as a karma proxy. The speculators may inadvertently make real-world millionaires out of this class. It would not surprise me at all in the next year to see companies with large social subcultures at least attempt to launch their own cryptocurrencies, or extend their in-game currencies to become linked to a cryptocurrency.
- hmsimha 13y ago
  In-game currencies are already a thing, but I suspect the reason they never caught on as viable liquid currency is their centralized nature.
  - gojomo 13y ago
    For in-game currencies so far, the centralization has meant two strikes: one, fear of the proprietor's control; two, the risk other entities (governments) could exert control via pressure on the proprietor. Emergent decentralized currencies address both – and might also improve centralized-proprietor currencies by competition and precedent. (Proprietors will accept more community input, and win greater tolerance from governments, because of pressure from alternatives.)

Houshalter 13y ago

People have always bought silly trinkets and useless things, what's wrong with that? This doesn't "fly in the face" of anything, the price is being set by supply and demand. It just so happens memes can create demand. The people actually investing in dogecoin are doing so because they believe the price is going to go up, the same as people who invest in anything else. They will lose or gain money depending on whether they are right or wrong.

grey-area 13y ago

Someone might rightfully ask the question, "Should I invest in Dogecoin?", and at this stage of our financial markets, I really don't have a good answer for that. This is where recognising a distinction between investing and speculating comes in handy. It's quite possible to speculate in dogecoin (relying on greater fools coming after) in the short term and make some money. In the long term it is extremely unlikely to have any value at all, so if you take investment to be long term search for value, the answer to should I invest is no. The interesting thing about fiat (all our currencies at this point, including crypto ones, unless you want to quibble over semantics), is that it depends on confidence for its value. Without confidence it is worth nothing (Assignats, Zimbabwean dollars etc). This realisation doesn't give me great confidence in Bitcoin or any of its spin-offs though. It's an interesting experiment and noteworthy, but I think fatally flawed as a currency or an investment because of the explicit rejection of verified identity, regulation, and inflation and its attempts to emulate paper cash. Perhaps the next currency to emerge will be corporate sponsored rather than state-sponsored, as corporations are still rising in power over states, but it will be a very interesting century, because most of the national currencies probably won't survive it, and by 2100, no-one will be using physical tokens for payments (cash). States will naturally resist any encroachment on their power over currency and taxation, which up to now has been absolute. I expect any stateless currencies which do manage to rival say the USD to come under heavy pressure from both speculators like Soros, and currency blocs who perceive a threat to their monopoly on trade.

steveklabnik 13y ago
> Perhaps the next currency to emerge will be corporate sponsored rather than state-sponsored, What about celebrity-sponsored? "Buy his next album in Bieber-coin."
- grey-area 13y ago
  That would be hilarious, and quite in keeping with the status of celebrities in our society as the new aristocracy. Gaga-coin or Bieber-coin - millions of fans would actually buy that sort of thing. I think they'd need physical gold coins though, for extra bling, or perhaps Gaga would go for pink plastic. Oh, just looked, and it turns out someone already thought of this but with dollar bills: http://www.trendhunter.com/trends/pop-culture-cash-by-james-charles http://www.trendhunter.com/trends/pop-culture-cash-by-james-...

beaner 13y ago

"Rational" has never meant that people know what they need, only that they know what they want. And people can "want" things for any number of silly or rational reasons. In the case of Dogecoin, it may be silly to you, but humor is the "rational value" people are getting from trading it.

hayksaakian 13y ago

Part of the reason is because for the longest time, the smallest unit of "value" recognized by most people was 1 US Cent. Crypto currencies, like Dogecoin are intrinsically more divisible. If someone made a funny comment on the internet, and i wanted to reward them. In 2012, I might "like" or "upvote" their comment -- a subjective measure of appreciation. In early 2013, I might "give gold" or "gild" comments or posts I like on reddit. In 2014, I'll probably just give some Doge, or whatever the new popular currency is (which I can easily buy with my other altcoin/currencies online). I can also give more or less based on how much I want. This wouldn't work with pennies or USD because 100 Doge still __feels__ like a lot -- even though it's some fraction of a penny. For a long time, people would give each other "internets" to reward what they like. The only difference now is that you can buy internets with real money, and they retain at least some quantitative value.

kordless 13y ago
Don't forget that each transaction is recorded and secured as well. There is a ton of Doge to be made in analyzing the interactions.
tarlyn 13y ago
This is one of the most insightful things I have read. If doge turns into the defacto "tipping" or "internets" coin, then it truly will be something useful ;)

baddox 13y ago

> The fact that people are buying Dogecoin simply because it is a fun internet meme kind of flies in the face of people who still view the price of financial assets as mostly rational, value-based prices, ... I don't see anything particularly unique about all of this. They buy dogecoin because they value the dogecoin more than the asset they're using as payment. That's how all purchases and trades work. You're just pointing out that the reason people value dogecoin more than the money they spend for it has to do not with something "essential," like buying food to stay alive, but rather for entertainment. The way you phrase things is making the concept sound more unusual than it actually is.

moron4hire 13y ago

I look at buying a dogecoin like buying one of those "joke-a-day" calendars. It's probably going to sit in a drawer in your desk, not actually used for its original purpose as a calendar, but you take it out every few months and rip off the old pages, reading the jokes. It's just a shitty joke book, made to look like a calendar, thereby encouraging you to destroy it and buy another one next year. If someone were to ask me if they should invest in joke-a-day calendars, then the obvious answer is, unless you are interested in getting in the business of printing joke-a-day calendars, or selling them, then no, joke-a-day calendars are not an "investment".

genwin 13y ago

Some people got beanie babies because they liked them, others because they thought their value would increase. The same thinking drives Dogecoin.