Shiba Inu (CRYPTO: SHIB), one of many in a litter of dog-themed meme coins, promotes itself as "More than just a meme." In theory, Shiba Inu has both a purpose and a cute dog theme.
Image source: Getty Images.
The Shiba Inu ecosystem promises decentralized finance, gaming, NFTs, and more. It has developed Shibarium, a layer 2 blockchain on Ethereum (ETH +10.19%) and ShibaSwap, a decentralized exchange.
It's a great concept. Combine the brand recognition of a popular meme coin with solid utility, and you could have cryptocurrency gold. But with flawed tokenomics, security questions, and leadership issues, Shiba Inu is about as far from gold as you can get. It's no wonder Shiba Inu is down over 65% year over year.
CRYPTO: SHIB
Key Data Points
There's nobody holding the leash
Shiba Inu was created by the pseudonymous Ryoshi. Another pseudonymous figure, Shytoshi Kusama, became Shiba Inu's lead developer and de facto spokesperson after Ryoshi left. At the start of this year, Kusama announced that they would also be stepping away as the organization no longer needed a visionary.
The plan is to elect a new leader via a Decentralized Autonomous Organization (DAO) vote. That hasn't happened yet. I don't doubt that Shiba Inu has a great community of hard-working developers, but organizations need someone in charge. I had issues with the anonymous nature of Shiba Inu's top dog before. However, even a pseudonymous figure is better than having nobody at the helm.
Shiba Inu is over-reliant on token burning
Burning involves sending tokens to a dead address, which effectively removes them from circulation. The idea is that reducing the number of tokens will increase the value of those that remain. A number of cryptocurrencies use token burning to control supply and show community support.
Token burning is key to Shiba Inu's economics. However, with almost 590 trillion SHIB tokens in circulation, you'd have to burn extraordinary quantities to make any difference to Shiba Inu's value. Plus, burning needs to be matched by adoption and use cases, and that is not really happening.
Security breach exposes deeper issues
On Sept. 12, a hacker targeted Shibarium and stole over $4 million in crypto. Without getting too technical, the attacker gained control of a majority of validators and used that control to compromise the network.
The Shiba Inu team took Shibarium offline for 10 days to prevent further breaches, implement fixes, and introduce new safeguards. It also says it will make users whole once it is safe to do so. Hats off to Shiba Inu: Many projects would not return investor money.
Even so, when you're dealing with people's cash, security has to be paramount. The breach raises questions about network security and dependability. Let's imagine Shiba Inu were a listed company. Its market cap of around $5 billion would make it bigger than WeBull (BULL +0.65%), a brokerage with over 1,000 employees. According to its LinkedIn profile, Shiba Inu has between 50 and 200 employees.
For me, the hack shows that the organization just isn't big enough or organized enough to fully support the myriad of projects it is undertaking. I appreciate the fun ethos and decentralized community, but I'd rather join a dog walking club and invest in projects with potential.
