The meme-inspired dogecoin remains a much-talked-about cryptocurrency asset. Especially having soared to an all-time high of $0.72 on May 8. Yet, despite making headlines this year due to its volatility, doge is still considered a meme to many serious investors.
This is partly because of its instability, lack of liquidity and utility, and potential infinite supply that concerns skeptics. Especially those outside the cryptocurrency space.
One solution has been bringing proof of work assets to decentralized finance (DeFi) markets. This was most recently done by BTCST with its τDoge.
τDoge is a wrapped dogecoin that enables users to access the benefits of DeFi. For instance, staking and earning rewards – by bringing more capital efficiency and liquidity to the market. As a rewardable asset that puts Doge to work, it also brings dogecoin to DeFi.
The dogecoin problem
Dogecoin is a widely popular cryptocurrency, largely thanks to Tesla CEO Elon Musk’s frequent tweets on his favorite asset.
It initially started life as a meme coin back in 2013. Since then, it has soared in value, with 2021 seeing a rise of nearly 13,000%.
Despite its mainstream attention, a die-hard community of followers, and celebrity support, one of dogecoin’s biggest weaknesses is its minimal real-world use. According to business directory Cryptwerk, out of the 32 million businesses in the U.S., over 1,400 accept payment or tips in doge.
Another issue with doge is that it has no supply cap. So investors are skeptical of investing due to the potential infinite token supply. Added to that is the fact that dogecoin’s block rewards take place every minute. That’s 600,000 new coins every hour, 14.4 million every day, and 5.26 billion every year.
Before 2014, doge did have a supply cap, which stood at 100 billion coins. However, in February of that year, founder Jackson Palmer decided to remove this to discourage people from holding it.
As many have pointed out, this makes the asset inflationary and, by default, decreases its value. Not only that, but many analysts have pointed out that the meteoric rise in doge is due to its low liquidity and extreme growth in the network. This is especially due to key opinion leaders like Musk and community members who actively support doge.
This is neither efficient nor sustainable. However, there is still a loyal community of doge holders that would like to put doge to better use. They would like to make the coin work for more community members and holders.
DeFi, the dogecoin solution
To come up with a viable solution to meet the growing demand of the doge community searching for more productive ways to HODL doge, the hashrate-backed wrapped version of the doge was introduced.
This wrapped token, known as tau doge, or τDoge, is a synthetic asset or a tokenized version of another cryptocurrency that allows doge to be swapped and traded cross-chain.
τDoge lets users do more with their doge, such as earning rewards and staking it on various DeFi applications like PancakeSwap. Since τDoge brings more utility to dogecoin through more use cases, capital efficiency and liquidity are greatly increased compared to doge that just sits in a wallet.
The Tau Protocol mechanism allows users to have any token in a wrapped form take part in DeFi.
Linking DeFi and proof of work
Cryptocurrency has come a long way since the advent of BTC, bringing thousands of new assets into the market.
As a result, cryptocurrencies’ reputation is largely tied into aspects like volatility, utility, and liquidity. However, for mainstream adoption to take place, these issues first need to be resolved.
This is where DeFi enters the scene. Through various tools, people can actively use their favorite tokens to earn rewards they otherwise would not have earned. This helps to bridge the gap between hashrate assets and DeFi.
As a result, solutions leveraging this, by linking DeFi and proof of work tokens like doge, help to increase utility and liquidity but also mitigate volatility.
Introducing dogecoin to DeFi, and eventually other cryptocurrencies could, in turn, push mass adoption by bringing positive features to the crypto market.
The post Dogecoin Is More Than a Meme Coin When It Comes to DeFi appeared first on BeInCrypto.