Dogecoin (DOGE -1.68%) just got a splashy new exchange-traded fund (ETF) in the U.S., and World Liberty Financial (WLFI) is courting attention with its stablecoin called USD1 (USD1 0.02%) and its management team, which is comprised largely of the Trump family members. Both coins invite big dreams, like potentially becoming a millionaire with a well-placed investment.
But can either of these assets deliver on that hype?
Image source: Getty Images.
What actually pays the bills in crypto today?
Let's start by taking a look at World Liberty Financial's business model with USD1.
Stablecoin issuers earn money on the cash and short-term Treasuries that back their tokens; some may also earn a fee when their token is transferred from one crypto wallet to another. When the reserves sit in money market funds or Treasuries, the interest fees belong to the issuer. That model could theoretically produce eye-popping profits if the stablecoin is used at a large enough scale.
World Liberty Financial's USD1 pitches itself as a multichain asset with cross-chain bridging. Management claims that a consumer debit card that spends USD1, with Apple Pay integration, is on the near-term product roadmap. It's also available for use on Coinbase Global. So, it has a couple of distribution avenues that could help USD1 increase its balance, which is the engine of the company's revenue.
There is a catch: The interest on reserves does not flow to stablecoin holders; it accrues to the issuer. And World Liberty Financial has been very clear that owning its token does not entitle holders to any economic upside associated with USD1 or any of its future ventures.
Therefore, buying the WLFI token gets you the rights to participate in the token project's governance scheme on a limited basis, but with no claims on reserves or cash flows, and no claims to ownership of any assets. USD1 has a clear business model if it scales, but buyers need to assume that the governance process will eventually steer value toward them to justify the investment -- and that assumption could very easily be wrong.
So, there is absolutely no mechanism by which buying World Liberty Financial or USD1 can make anyone into a millionaire at present.
Dogecoin remains more entertainment than enterprise
Unlike with World Liberty Financial, nobody would assume that buying a meme coin like Dogecoin entitles them to control of any assets, voting rights, or distributions, and, as of now, it doesn't offer any of those things. What it does offer is the opportunity to see a cute dog icon in your crypto wallet every time you open the application, which may entertain or soothe you in some way (or perhaps the opposite when the price goes down a lot).
As stated, a U.S. Dogecoin ETF launched on Sept. 18, and ETFs can broaden access and reduce friction for some investors, which can lead to prices rising. But ETFs don't change the underlying economics of the asset. There is still no protocol mechanism that captures external cash flow to return to coin holders or to boost the price of the coin itself.
In theory, Dogecoin could add features, strike payments partnerships, or surf a celebrity-driven demand wave like it has in the past.
Indeed, there are currently some proposals being evaluated by its developers which would see it add a smart contract-like system and perhaps a Layer-2 (L2) blockchain as well. As currently envisioned, that would add in the ability for the chain to perform useful cryptographic work, which just might generate usage fees and burn tokens to take them out of circulation and tighten the supply.
But the implementation is nowhere close to being started, and it might not ever be brought to fruition even if it does start.
Which is the better investment to become richer?
In practice, by buying Dogecoin, investors are committing to a path that relies purely on sentiment to overpower the absence of cash generation and, separately, also the absence of a mechanism for value to accrue to holders. The latter problem is the same issue as with World Liberty Financial, but Dogecoin has an even less plausible path to a solution to the core problem.
That's not a great setup for a millionaire-maker thesis in the next few years for either asset, in case it wasn't clear. Neither of these two coins are investment-grade today, so don't buy them.
Nonetheless, a stablecoin like USD1 can throw off revenue for someone to collect, and, with some substantial finagling via governance measures, and with some significant (and unlikely) concessions from management, investors could one day collect some returns from their investment in World Liberty Financial. In contrast, Dogecoin needs to actually build significant new infrastructure, and then get people to use it, which is a much higher bar to clear.
Therefore, World Liberty Financial is the narrowly more credible pick for being a potential millionaire maker, though it is a near certainty that nobody will make $1 million by investing in it.
