Dogecoin (DOGE -0.17%) has always been one of the world's favorite meme coins. Started as a joke back in 2013, it has become one of the most popular cryptocurrencies in the world, with a market capitalization approaching $10 billion. Prominent Dogecoin supporters include Mark Cuban and Elon Musk, arguably two of the most influential billionaires in the world right now. But until recently, Dogecoin was always just a meme coin. It had almost zero utility in the real world.
That all changed this week with the launch of Dogechain, a new blockchain platform that enables Dogecoin holders to use their DOGE crypto tokens for non-fungible tokens (NFTs), games, decentralized applications, and decentralized finance (DeFi) protocols. Dogechain is calling itself a Layer 2 for Dogecoin, and it seems to solve many of the issues facing Dogecoin as it prepares for its next stage of development. Most importantly, it gives Dogecoin real-world utility.
Does all this sound too good to be true? Well, unfortunately, that might be the case. Dogechain is an unauthorized blockchain project, meaning it does not have the support of the Dogecoin Foundation, the original founders and creators of Dogecoin, or many prominent developers of Dogecoin. In fact, some Dogecoin developers specifically told Dogecoin holders via Twitter to be skeptical of the project. In short, it appears that Dogechain has gone completely off the chain.
But in a beautifully, wonderfully crypto kind of way. The developers of Dogechain knew what they were doing. The new blockchain platform really is a Layer 2, but it is not a classic Layer 2, in that it is not built directly on top of the Dogecoin blockchain. Instead, the developers used Polygon Edge, a custom blockchain software offering from Polygon, to create the new blockchain. The developers of Dogechain then made it possible to "bridge" Dogecoin to the new platform, where it can be used for NFTs, blockchain gaming, and decentralized apps. And since they used Polygon, which is itself a Layer 2 for Ethereum, the new blockchain platform is fully Ethereum compatible.
Even the developers of Dogechain were a bit surprised by how much traction the new blockchain platform is getting. In just five days, they say, over 58,000 wallets were created and over 480,000 transactions took place. And people are creating all kinds of Dogecoin-inspired coins that you can now buy and sell via Dogechain. If you thought Dogecoin was a meme coin, some of the new coins being created can best be described as ultra-ultra-ultra meme coins. For example, Doge Eat Doge is now trading at the incredibly low price of $0.00000000229. Not surprisingly, people inside the Dogecoin community say there's a new "Wild West" mentality around Dogecoin that has been missing since early 2021.
From meme coin to utility coin?
It's important to keep in mind that Dogecoin is still a proof-of-work blockchain that is not compatible with smart contracts. Vitalik Buterin, co-founder of Ethereum, has said that he would help Dogecoin transform into a proof-of-stake blockchain capable of supporting smart contracts, but there is no official plan to accomplish anything close to what Dogechain has seemingly accomplished overnight. In the Dogecoin "Trailmap" for 2022, for example, the No. 1 priority was just a website refresh for Dogecoin.com.
Meanwhile, Shiba Inu (CRYPTO: SHIB), arguably the second-most popular meme coin, is in the midst of launching a Layer 2 blockchain network known as Shibarium, which will be compatible with Ethereum. Shibarium will add a whole layer of new utility to the Shiba Inu token. In addition, Shiba Inu is now collaborating with a top Hollywood design studio on a new metaverse project and making a push into the metaverse space. Soon, it may no longer be possible to dismiss Shiba Inu as just a silly, dog-inspired meme coin.
And that is the big takeaway lesson here. In order for meme coins to survive, they need to become utility coins. Yes, it's fun to invest a few bucks in a meme coin and watch it try to skyrocket to the moon, but it looks like even Dogecoin and Shiba Inu are waking up to the new reality that investors want real-world use cases if they are going to invest their hard-earned fiat in speculative coins that could easily crash back to zero.