Before Dogecoin can ever become “the future currency of the internet and the people,” Robinhood CEO Vlad Tenev says it needs to make a few changes.
In a Twitter thread on Thursday, the trading app’s chief outlined how the popular meme coin could one day become the internet's chosen currency—perhaps inspired by Tesla CEO Elon Musk's recent calls for Twitter to integrate Dogecoin, and the response from fellow crypto executives like FTX CEO Sam Bankman-Fried, who tweeted, "sure, why not DOGE."
Tenev first highlighted how the low fees associated with using Dogecoin already beat “the 1-3% network fees that major card networks charge.” The average cost of using Dogecoin since April 1 has, for example, ranged between $0.19 and $0.30, according to BitInfoCharts.
For context, Bitcoin has ranged between $1.35 and $3 over the same period. Ethereum’s transaction fee range is much wider, from lows of $11 to highs of $43.
Despite the competitive fees, Tenev says Dogecoin’s speed still leaves much to be desired.
“Doge’s current block time is 1 minute,” he tweeted. “This is a bit on the long side for payments – a ten-second block time would be more appropriate as it would be less than the typical time spent completing a debit card transaction.”
Block time refers to how quickly a crypto network confirms transactions and adds them to its blockchain.
At 1 minute, Tenev argues, Dogecoin is still far outside the realm of becoming an effective means of payment (especially when compared to Visa or Mastercard).
With a 1-minute blockchain and a 1-megabyte block size, Dogecoin can currently process roughly 40 transactions per second (TPS). Though this is much faster than Bitcoin and Ethereum, it pales in comparison to traditional rails.
As a comparison, Visa’s network can theoretically handle 65,000 tps. Doge would need to be able to significantly outperform Visa, which entails increasing throughput by at least 10000x. Fortunately, this is easy to solve simply by increasing the block size limit.
— VLAD (@vladtenev) April 14, 2022
Tenev does, however, have an idea to fix this. And it's the same one that Elon Musk has pitched in the past: increase Dogecoin's block size.
Increasing Dogecoin’s Block Size
By increasing the size of Dogecoin’s blocks or the amount of data stored in each block, Tenev argues that the cryptocurrency could increase its transaction speed.
He suggests that developers behind the meme coin aim for a 10-gigabyte block over time.
Larger blocks do come with a tradeoff, however.
As crypto networks grow larger, the hardware requirements for storing the network’s transaction records also increases. At a certain point, these requirements can become so large that it's no longer feasible for smaller hobbyists to maintain the network. This could eventually lead to centralization concerns.
This tradeoff, understood as speed over decentralization, would "require more sophisticated hardware," Tenev acknowledges. It would make it more expensive for enthusiasts to mine Dogecoin at home. But if you ask Tenev, "I think that’s actually a fair tradeoff."