Elon Musk’s decision to buy Twitter (if the deal goes through) could be huge news not just for Twitter shareholders, but also for Dogecoin (CRYPTO: DOGE) investors. In fact, within minutes of the news that Musk had agreed to buy Twitter, Dogecoin rose 8%. This is not a coincidence: Musk has been a huge supporter of Dogecoin for the past few years, and made comments earlier this year about integrating Dogecoin with the Twitter platform.
On the surface, Musk buying Twitter seems to be exactly the type of catalyst that Dogecoin needs for it to rebound. After all, Dogecoin is still down more than 90% since Musk famously made his appearance on Saturday Night Live as the “Dogefather.” In the ensuing months, doubts have grown about whether Dogecoin could ever be anything more than a joke meme coin. So will a Twitter-Dogecoin collaboration change everything?
The Dogecoin payment option
The one feature that Musk has specifically suggested adding to Twitter is a Dogecoin payment option for Twitter Blue subscribers. Making “Pay with Dogecoin” a viable option for different actions on Twitter could immediately make this crypto more mainstream, given that Twitter has 237.8 million monetizable daily active users around the world. Basically, any premium action on Twitter, such as making a non-fungible token (NFT) your profile photo, could be integrated with a Dogecoin payment option. And, if this payment option becomes popular on Twitter, other social media platforms might also decide to integrate Dogecoin.
But just how realistic is a universal “Pay with Dogecoin” option? Well, until now, accepting payment in Dogecoin has primarily been a public relations stunt. The Dallas Mavericks NBA basketball team, for example, accepts Dogecoin for both tickets and merchandise. This is mostly because billionaire owner Mark Cuban is a big Dogecoin fan. That being said, there are signs that Dogecoin has started to become more than just a joke payment method. You can now walk into a high-end Gucci retail store and pay for your new purchase with Dogecoin. You can purchase airline tickets to the Baltics with Dogecoin. You can pay for AMC movie tickets with Dogecoin. And, of course, you can buy one of Musk’s new $60 Cyberwhistles exclusively with Dogecoin.
Although Dogecoin is still a relatively slow proof-of-work blockchain, Musk has made a number of salient points about why it is actually superior to other cryptos, including Bitcoin. From the perspective of both transaction fees and throughput capacity, for example, Dogecoin is actually superior to Bitcoin. And, as Musk has pointed out, Dogecoin encourages people to spend rather than to hoard. So if Bitcoin can be used for payments, why not Dogecoin?
Mainstream adoption of Dogecoin
However, payments are just one part of the puzzle. The bigger picture is that people are starved for any real utility for Dogecoin. A Dogecoin payment option on Twitter would help to solve this problem. However, Dogecoin still has not yet caught up to other blockchains in terms of smart contracts, NFTs, decentralized finance (DeFi), or blockchain gaming.
That’s one big reason Dogechain, which describes itself as a Layer 2 scaling solution for Dogecoin, made a big splash earlier this year. It was a proof-of-concept for how Dogecoin could expand into NFTs, DeFi, and decentralized applications. These are all options that are not available on the current Dogecoin blockchain.
So one major implication of Dogecoin being integrated with Twitter is that developers might look for other ways to bring real utility to Dogecoin beyond just payments. This is important because expanding the ecosystem will increase the value of Dogecoin. A combination of Twitter and Dogecoin could be the first step in unlocking this value. Doing so would transform it from a pure meme coin to more of a utility token.
Should I buy Dogecoin?
However, if you are thinking about investing in Dogecoin, just remember that it was created purely as a joke. Some might argue that Dogecoin has already had its chance to prove its worth, and it has not delivered. When Dogecoin jumped from $0.01 in January 2021 to $0.74 in May 2021, it looked like it was going to change the lives of small retail investors overnight. But then it all came crashing down. While Dogecoin did get an immediate bounce in price from the Twitter acquisition news, the rally seems to be fading.
For that reason, I’m passing on Dogecoin right now. There are plenty of other dog-themed meme coins out there. When Dogecoin can show that it has real utility, and that it has created an ecosystem of developers and users interested in building a world-class proof-of-stake blockchain, that’s when I might plunk down a few bucks on it.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Twitter. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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