One researcher warns users against betting life savings on a meme. Elon Musk warned about the level of centralization that exists around the Shiba Inu dog asset.
Elon Musk is not only praising DOGE through Twitter, but The CEO also criticized the cryptocurrency ecosystem that has been inflating for months. He unleashed a Twitter recently claiming that: “Too much concentration is his only real problem.”
The warning from the CEO of Tesla received the confirmation of Coin Metrics, which, in its latest newsletter, indicated that 1% of addresses own 94.2% of the total supply of the crypto asset.
In its 90th report on the network’s state, the data provider also highlights that only 100 addresses contain 68.1% of the DOGE supply. To understand the level of massive concentration around the meme-born cryptocurrency, Musk compared it to Bitcoin. “The 100 largest BTC addresses only contain 13.7% of their total supply.”
Analysts also say that the concentration of capital in DOGE is high, considering that at least 2.7 million addresses own at least one currency.
Musk Tweeted on Sunday: “If the Main Dogecoin Holders Sell Most of their Coins, they Will Get my Full Support.”
They also point out that many DOGE owners are likely to hold their properties on centralized exchanges and brokers. This behavior would explain why there are so few addresses with a considerable percentage of their market capitalization and ensure that the Dogecoin offering appears in larger concentrations in large owners.
Musk tweeted on Sunday: “If the main Dogecoin holders sell most of their coins, they will get my full support.” This tweet is pointing that his constant pumping of the cryptocurrency price has benefited a small group above the rest.
One user pointed out that Whales will have to consider Musk’s request because “if they comply, DOGE becomes the currency of the Internet. If they don’t or cheat by distributing their coins in multiple wallets, they lose Elon’s backing. Easy decision for Whales. Do the right thing”, as he wrote on Twitter.
However, this is not the first time that DOGE’s centralization has raised concern. Weeks ago, Changpeng Zhao from Binance raised the issue when he highlighted that around 27% of current assets are housed in a single address, while the top 20 lessons with the most funds capitalize more than 50%. Of the tokens in circulation, which makes the project much more centralized than the community believes.
At that time, Zhao also pointed out that Dogecoin does not have a central development team, so the project would practically disappear without the possibility of innovating or incorporating improvements in its operation.
The problem with Dogecoin Goes beyond Capital Centralization
Coin Metrics researcher Lucas Nuzzi explains that another threat looms over the DOGE network. Nuzzi said on Twitter that the hash rate, which is an indicator of network security, is well below all-time highs.
His concern revolves around the fact that the price of DOGE has risen 1,200% since its founding in 2014, while its hash rate has grown only 15% so far. This factor potentially makes the network a target of attack because it cedes all processing power to Litecoin.
By: Jenson Nuñez