Leave it to Elon Musk to give Dogecoin the boost it needed.
With yet another market-moving tweet on Friday, the Tesla boss – who famously called himself “The Dogefather” – lifted Dogecoin out of its recent slump and drove the crypto meme coin back over 22 cents after a steady fall that had seen it slip under 20 cents on Thursday. It’s still a long way from Dogecoin’s uncomfortable heights in May, when it broke 74 cents in build-up to Musk’s highly anticipated Saturday Night Live hosting appearance.
BTC & ETH are pursuing a multilayer transaction system, but base layer transaction rate is slow & transaction cost is high.
There is merit imo to Doge maximizing base layer transaction rate & minimizing transaction cost with exchanges acting as the de facto secondary layer.
— Elon Musk (@elonmusk) July 9, 2021
But while the notion that Musk can move the crypto markets at the touch of a button is well established at this point, it was his thoughts on the more advanced aspects of digital currencies that made this body particularly curious – especially for those who are not. well versed in their technical intricacies.
In response to YouTuber and Dogecoin investor Matt Wallace’s remark that upcoming updates would “place Doge perfectly to become one of the most widely used currencies in the world”, Musk put his own thoughts on upgrades to Dogecoin’s blockchain transaction system, which in his view would give it an advantage over Bitcoin and Ethereum.
While Bitcoin and Ethereum suffer from transaction rates that are too “slow” and transaction costs that are too “high”, according to Musk, Dogecoin could avoid such problems by using exchanges like Coinbase and Binance as a “de facto secondary layer” for process transactions – in theory allows them to be faster and more efficient.
As Musk noted, both Bitcoin and Ethereum have been pursuing “multilayer” transaction systems aimed at addressing such issues, and Bitcoin’s Taproot upgrade is expected to roll out in the coming fall. But in the case of Dogecoin, the Tesla CEO seems to think it would be better served by using the crypto exchange as an extra layer to enable faster and cheaper trading.
As Bitcoin.com notes, Dogecoin developers are currently working on the updates that Wallace mentioned in his original tweet, which promise to lower Dogecoin’s fee structure and increase transaction rates. And there was no shortage of crypto-conscious Twitter users who responded to Musk to name existing blockchain platforms that they said could perform the job requested, such as Lightning Network and Solana.
If the idea that crypto exchanges could serve as a “de facto secondary layer” to approve and process Dogecoin transactions seems curious, if not questionable, it may very well be because it may be. David Sacco, a professor at the University of New Haven’s Pompea College of Business, recounts Assets a system that gives third-party crypto exchanges a role in the processing of transactions seems “contradictory” to the very appeal of cryptocurrencies and their underlying blockchain technology.
“Cryptocurrency is about trading peer-to-peer without third parties; the value of crypto comes from it [blockchain-enabled] impenetrability that makes it possible to exist without any third party, ”notes Sacco. In that sense, Musk’s proposal is “a bit of a conflict for me,” he says.
There is also the possibility that allocating an extended role to certain exchanges could hinder Dogecoin’s overall “fungibility”, according to Sacco, by making it more difficult to trade the coin on certain platforms that are not involved in its transaction process. “It sounds like Ethereum and Bitcoin are doing [upgrades] that makes these currencies more fungible and easier to trade, ”he adds. “If Dogecoin goes its own route, I don’t know how that will make it more attractive.”
When discussing Dogecoin, it is of course difficult to discuss Musk’s thoughts – as more than any other person is most responsible for the Dogecoin phenomenon and has also played a significant role in the promotion and adoption of cryptocurrencies in general. . As always, the wider crypto world is left to see his Twitter account and see what happens next.
This story was originally shown on Fortune.com