- Dogecoin developers have been hard at work on a new upgrade to the meme-coin's network.
- Without support from miners and node operators, however, the upgrade can't be adopted.
SpaceX and Tesla CEO Elon Musk and the core developers behind Dogecoin are pushing an upgrade proposal to reduce transaction fees for the popular meme-crypto from 1 DOGE to 0.1 DOGE, making it more viable as a payment method.
For the plan to be adopted, it must win community support and be taken up by Dogecoin miners and node operators. Eventually, the developers and Musk are aiming to introduce fees of 0.01 DOGE. A demo of the proof of concept will be shown today at 2 pm EST.
Musk was voted Dogecoin CEO in 2019. Surprisingly, he accepted the temporary accolade. Since then, he has been advising the devs on their plans to make the cryptocurrency, which started out as a joke, a viable payment method—one that can routinely be used to buy a cup of coffee, as Decrypt exclusively revealed in May.
This is an important improvement
— Elon Musk (@elonmusk) June 22, 2021
Reducing transaction fees by 90% is one of the key objectives, and the Tesla chief called the proposal—originally introduced by Doge core dev Michi Lumin—“an important improvement.”
Lumin told Decrypt the developers had plans to lower the fee, even before Musk got behind the proposal.
While it’s sustained recent losses, falling from a high of $0.73 in May to $0.17 in June, Dogecoin is still the sixth biggest cryptocurrency by market cap, according to CoinGecko. But the price increase has meant the mandatory 1 DOGE fee per transaction makes it unsustainable for tipping and smaller purchases.
However, as Dogecoin is a decentralized cryptocurrency, the devs and Musk must first persuade the community to accept their proposal. Many are in favor, but, while the devs can release upgrades to the code and make a case for why people should implement them, it’s up to individual node operators and miners whether they introduce the forthcoming release.
At least two-thirds of the network must adopt the upgrade and a further update which will lower the default fee, according to the devs. They are promoting the new changes to make sure the community recognizes their value, and that miners are convinced they will benefit from a lower fee.
The case for lower DOGE transaction fees
Dogecoin is based on the same code that uses Bitcoin, but there are important distinctions between the two cryptocurrencies, said Lumin.
Crucially, Dogecoin differs from Bitcoin in the way miners are rewarded. Dogecoin miners receive a 10,000 DOGE subsidy for every block mined, and existing transaction fees only add up to 20-30 DOGE, she explained.
Dogecoin does not have a "fee market,” which means that transactions do not have to compete for block space via fee schedules, and rewards from transaction fees are “not a significant source of miner profits,” she said.
DOGE fees were originally introduced to “avoid 'spam and dust' transactions; people using microscopic/negligible amounts of Dogecoin to harass or deny service,” said Lumin. Now, with the latest price increase, this objective can be achieved with a much lower amount, she added.
“Arguably at the current price, with fees reduced 100-1,000x, transactors these days are going to be paying the same amount for 'dust' transactions that they would a year ago,” she added. At that time, DOGE was trading at $0.00247.
Lumin is one of four core devs working on the Dogecoin code. Three have day jobs and work on Dogecoin in their spare time. Lumin works primarily as a radio, audio, and cryptography engineer. She is based in Colorado—the only core dev in the U.S.
She got involved in Dogecoin in 2014. “I've always seen Dogecoin as the ‘good guy coin,’ and a friendly, gateway and introductory crypto. Right away you could see that the community was different,” she said.
But the devs kick back at the perception of Doge as a jokecoin. While it’s “not ‘serious as a heart attack’ like other coins,” they take its development seriously, Lumin said. “We know a several billion-dollar economy is depending on us to make the right choices.
While the devs and Musk make the case for low transaction fees, support (in-kind) for their improvement proposals, has emerged from an unexpected quarter.
In an appearance on the Lex Fridman podcast last Friday, Cardano founder Charles Hoskinson said that Dogecoin has potential, and is a solid project for someone to fix up.
Cardano’s cryptocurrency ADA, is currently the fifth biggest by market cap. Much of its recent popularity has resulted from a solid research base, an enthusiastic community, and, well, this year’s meteoric bull run. With more real-world utility, Dogecoin could be more viable, said Hoskinson, adding that he was not against a collaboration between the two cryptocurrencies.
But Hoskinson, who is also an Ethereum co-founder, pointed out that Dogecoin had shown a great deal of volatility in recent months, and it would take years to develop it as a viable option. He warned that Musk’s influence could hurt investors unless Dogecoin’s codebase was improved, and called for “real developers” to work on it “so, at least it has a value floor and won't collapse.”
Hoskinson’s disdain for their status highlights the Dogecoin devs’ fight to be taken seriously—even with Musk onside.