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Crypto dogfight: Why is Shiba Inu winning over dogecoin?

Dogecoin and Shiba Inu cryptocurrency logo
Shiba Inu, which is officially promoted as 'a dogecoin killer', superseded dogecoin's position as crypto’s leading meme coin last week. Photo: Jakub Porzycki/NurPhoto via Getty

A bitter "dog-fight" is taking place within the crypto-sphere between meme tokens dogecoin (DOGE-USD) and Shiba Inu (SHIB-USD).

In early September Californian crypto-exchange Coinbase elevated the reputation of Shiba Inu by listing the coin, a surprise jab that rocked the dogecoin community. Since then, Shiba Inu has soared 1000% in value throughout October to overtake dogecoin and take the place of ninth largest cryptocurrency by market value.

However, the jockeying for position continues unabashed and a single tweet from Elon Musk on Sunday evening saw dogecoin, the internet's "fun and friendly currency" recover its lost ground, albeit for a brief period.

Musk's tweet cited his plans to start a university and that tution fees will be "in dogecoin, and u get a discount if u have a dog".

Shiba Inu then revealed its fragility to Musk's Twitter activity when a sudden sell off occurred, causing the meme coin's market cap to drop from $37.4bn to $35.7bn in less than an hour, resulting in a fall to tenth place.

However, Shiba Inu supporters rallied to the cause and capital flowed in to see it regain ninth place on Monday. Shiba Inu is sitting in eighth place on the list of largest cryptos at the time of writing, with a market cap of $41.91bn, according to CoinDesk.

Read more: Battle of the blockchains: Binance Smart Chain versus Ethereum

The rabid battle between the two canine tokens reached a climax on 28 October when Shiba Inu, which is officially promoted as “a dogecoin killer", superseded dogecoin's position as crypto’s leading meme coin.

The shib-doge flip in late October came on the back of speculation that Shiba Inu would be listed on US investing app, Robinhood. The trading platform has yet to respond to a petition from approximately 445,000 Shiba Inu acolytes who urge the company to host their alternative to dogecoin.

Watch: What are the risks of investing in cryptocurrency?

Speculation that a listing with Robinhood is on the verge of being realised has kept a multitude of retail investors buying and a consistent flow of capital pouring into Shiba Inu. News that one investor whose purchase of $8,000 SHIB in August 2020 is now worth $5.4bn has reinforced the belief that Shiba Inu can turn a tiny amount of capital into a fortune.

Neither Shiba Inu nor dogecoin have specific use cases, they are both peer-to-peer digital currencies named after a breed of Japanese dog, but there the similarity ends.

Dogecoin was started as a joke in 2013 by its founders Billy Markus and Jackson Palmer. Its popularity has been catalysed by Elon Musk’s tweets and it is deployed on its own blockchain with over one thousand peer nodes.

Dogecoin. Chart: Yahoo Finance UK
Dogecoin's popularity has been catalysed by Elon Musk’s tweets. Chart: Yahoo Finance UK

Shiba inu has no blockchain of its own and is instead deployed as an ERC20 token on the Ethereum (ETH-USD) blockchain.

This is why a side-effect of the capital that has flowed into Shiba Inu throughout October has increased the value of ether, which is burned every time there is an onchain purchase of the meme coin. Shiba inu also benefits from advanced smart-contracting profile capabilities inherent on the ethereum network.

The link between Ethereum and Shiba inu has at times assisted and hindered the meme coin's meteoric rise. In May 2021, Shiba Inu made headlines after 50% of the coin's quadrillion supply was airdropped into Ethereum founder Vitalik Buterin's digital wallet. Much needed publicity was garnered after Buterin then announced that he burned 90% of the Shiba Inu he received and gave the remainder to various charities. Although, when the charitable donations were cashed in Shiba Inu experienced a brief crash.

Read more: Blockchain and NFTs: How to make sense of crypto terminology

The connection between Shiba Inu and Ethereum became more entwined when a photograph emerged on Reddit of Buterin allegedly walking with enigmatic Shiba Inu founder, Ryoshi, at the Devcon convention in Japan in 2019.

Shiba Inu was created in August 2020 by a developer known as Ryoshi, who has referred to himself as "a guy of no consequence tapping at a keyboard and I am replaceable".

The coin's price lay stagnant for many months until February 2021 saw it piggyback on a resurgent dogecoin, helped in no small part by Elon Musk's tweets. In May 2021 the price of Shiba Inu pumped by over 300% after Musk mentioned he was planning to get a Shiba Inu puppy.

Shiba Inu price. Chart: Yahoo Finance UK
In May 2021 the price of Shiba Inu pumped by over 300% after Musk mentioned he was planning to get a Shiba Inu puppy. Chart: Yahoo Finance UK

In July 2021 the “Shiba Inu ecosystem” welcomed the launch of its own decentralised exchange, called Shibaswap. In contrast, dogecoin does not have grand schemes of decentralised exchanges, stablecoins and hedge.

Dogecoin has long relied upon the Tesla CEO's endorsements, who tweeted in October that he only holds three cryptocurrencies, bitcoin, ethereum and dogecoin.

Whilst dogecoin can leverage the support of Elon Musk and Mark Cuban for its popularity, Shiba Inu’s progress relies on its "Shib Army", a growing multitude of small retail investors who prosthelytise from their headquarters on Reddit page r/SHIBArmy that the coin will one day reach a price of one dollar. However, because of its supply of quadrillion coins, a price of one dollar per SHIB would see its market capitalisation increase to over $400bn, which is close to that of Ethereum. This is very unlikely to happen.

Longterm, Shiba Inu has a loftier vision than dogecoin. From the anonymity of cyberspace Ryoshi describes his ambitious strategy for the final destruction of dogecoin. This includes a layer two blockchain solution for Ethereum called Shibarium, a stablecoin called Shi, that is pegged to one cent, and the creation of an annual crypto conference for Shiba Inu enthusiasts called Shibicon.

Layer one of a blockchain is the main network where monetary settlements are recorded, however, this can be a slow process and in the case of Ethereum can cost a lot in transaction fees. To handle a large number of transactions per second that would usually slow down the main network, layer two solutions have been created for micropayments that can be done at high speeds and with a fraction of the usual gas-fees. The transactions processed on layer two are then validated on the main blockchain network in a singular bundle at a later time

Ryoshi wants his stablecoin Shi to "slowly but surely become the immutable globalised exchange of value". He encourages his "Shib Army", described in his mission statement as one "organic organism", to set "the proper financial foundations for the future".

Meanwhile, dogecoin takes itself much less seriously, and still references its origins as "a joke currency" with the singular aim of maintaining an ease-of use online payment system.

Watch: What is bitcoin?