Despite a growing community and recent high-profile endorsements, Dogecoin (DOGE) appears to be less sound than perhaps investors believe. The top 20 addresses reportedly hold more than 50% of the total supply.
Dogecoin’s Wealth Distribution
Dogecoin blockchain data shows that over half of all DOGE is controlled by just 20 wallets. In fact, a single address holds around five billion of the almost 130 billion coins currently in circulation.
On Thursday, Feb 4., Binance CEO Changpeng Zhao highlighted the wealth concentration via Twitter:
Some pros/risks of #Doge.
Pros: Cool, fun, PR manager @elonmusk. Decentralized in the sense there are no “core team”. It’s abandoned.
Binance (@cz_binance) February 4, 2021
Amid recent mania that saw the likes of Gene Simmons and Elon Musk endorse the cryptocurrency, Zhao felt it prudent to mention some potential risks for DOGE investors. Based on its distribution, he suggested that the more-popular-than-ever crypto was “kinda centralized.”
Zhao stated that he has no idea who owns the addresses. He added that it could be exchanges or even mining pools. The latter would make sense, particularly given that Dogecoin shares hash power with Litecoin (LTC). Through a process called merge mining, Litecoin miners provide security for the Dogecoin network.
Merge mining requires essentially no additional electricity expenditure. Therefore, it’s entirely possible that at least some of the wealthiest DOGE addresses are actually Litecoin miners or pools who have just never sold their DOGE mining rewards.
Zhao went on to note that the project had been “abandoned.” Yet, even after its founder left the cryptocurrency community, Dogecoin has continued to gain fans.
Growing Celebrity Following
Zhao also presented some pros. He said that the lack of a “core team” could be argued as a positive since development is distributed.
He also alluded to one of Dogecoin’s most influential promotors. As BeInCrypto has reported previously, SpaceX and Tesla CEO Elon Musk has made numerous light-hearted mentions of the meme-inspired digital currency.
ur welcome pic.twitter.com/e2KF57KLxb
— Elon Musk (@elonmusk) February 4, 2021
Zhao jokingly called Musk the PR manager of Dogecoin. Previously, Musk had claimed the fictional title of “former Dogecoin CEO” on Twitter.
Musk isn’t the only high-profile DOGE fan, though. Kiss bass player Gene Simmons has also become a fan of the crypto.
DOGE price Pump
There are also other forces at play. The GameStop stock (GME) short squeeze and subsequent coordinated DOGE price pump has encouraged new investors to take a look.
On Jan. 28, Robinhood and other retail-focused applications paused trading of GME stock. The move was widely interpreted as a scheme to protect short hedge funds from further losses. A trading subreddit called WallStreetBets orchestrated the squeeze thanks to the careful study of hedge fund short positions.
Wall Street Bets does to the suits what the suits have been doing to main street for a century. Then one call to Reddit, one call to Discord, one call to Robinhood…
It there anyone out there who still doesn’t think the system is rigged against the little guys?
— Tyler Winklevoss (@tyler) January 28, 2021
With GME trading suspended, retail traders have turned their attention to DOGE. Borrowing from the WallStreetBets playbook, a crypto-focused version of the group, SatoshiStreetBets, coordinated their own pump. This sent the DOGE price soaring more than 800%.
While the pump was less politically motivated than GME’s, the coin was likely chosen because of its fair launch and strong community. DOGE went live in 2013 with no pre-mine, and there’s supposedly no central development group that the pump would enrich.
However, DOGE’s perceived fairness and high-profile endorsements may well mask the network’s wealth concentration. With a single address controlling around 27% of all DOGE, whale price manipulation is entirely possible. Indeed, the crypto’s history is marred with such allegations.
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