Dogecoin and Litecoin Transactions Rise as Memecoins Take over the Regulate

What Happened?

Hoping to ride the memecoin wave and the ensuing speculative frenzy, established layer-one blockchain developers Dogecoin and Litecoin launched their own semi-fungible token standards. The DRC-20 and LRC-20 token standards, derived from Ethereum’s ERC-20 and Bitcoin’s new BRC-20 token standards, spurred the launch of new memecoins and NFT collections such as Dogewow, Cheems, Litecoin Punks, and Degen.

Broader Context

The Ordinals protocol allowed users and developers to create embedded tokens in Bitcoin transactions, taking the form of non-fungible and semi-fungible tokens. This prompted the launch of a wave of new tokens, inciting a speculative frenzy among cryptocurrency traders.

Dogecoin, one of the first memecoins in its own right, and Litecoin, often referred to as “the silver to Bitcoin’s gold,” were created primarily to be ultra-cheap cryptocurrency payment networks. Bitcoin enthusiasts discovered early on that transaction fees could become prohibitively expensive during times of heavy use and might be better suited for higher-value payments. For example, the value of daily transactions flowing on these networks equates to about $1 billion and $400 million for Litecoin and Dogecoin, respectively. Bitcoin is about $3.4 billion.

Since memecoins began launching on Dogecoin and Litecoin in early May, the number of transactions has increased rapidly, reaching new all-time highs for both networks. Dogecoin daily transactions increased 6900 % from 20 000 to 1.4 million, and Litecoin daily transactions increased 485 % from 100 000 to 585 000 in the last 30 days. Right now, Bitcoin processes about 532 000 transactions per day, so they are catching up on that metric.

Litecoin and Dogecoin Transaction Counts are Increasing

Remarkably, while average transaction fees increased significantly for Bitcoin with the introduction of Ordinals, transaction fees remained low for Dogecoin and Litecoin transfers, with both remaining below a penny per transaction. While average fees on Bitcoin and Ethereum increased from $2 and $10 to $30 and $20 respectively, Dogecoin and Litecoin fees have leveled off around half a cent per transaction.

The fact that fees have not increased significantly on both networks implies ample block space for more activity. Litecoin and Dogecoin process transactions much faster than Bitcoin, increasing transaction speeds on both chains, but fees would increase if demand for crimson usage were to increase dramatically.

Litecoin and Dogecoin Transaction Fees Remain Stable

However, the launch of the DRC-20 and LRC-20 memecoins does not seem to have positively affected the price of Dogecoin or Litecoin, as both traded down for the month -by 10% and -2.6% respectively. This is likely due to market-wide weakness in May with Bitcoin and Ethereum falling 7% and 2% respectively. Markets in common have moved away from risk in recent weeks due to the pending debt deadline as well as ongoing regulatory issues in the space.

Viewpoint and Implications

Speculative activity is inseparable from new innovations, as investors and traders pile into new narratives before the technology can mature. In their current form, these memecoins have no utility and traders are piling in only to sell them to the next highest bidder. It is worth noting that the pseudonymous developer behind the BRC-20 unique standard said that tokens should be worthless.

However, it may not always remain that way. Inscriptions could prove to be a powerful mechanism for enshrining timeless images, documents, and archives that require the immutability, security, and perpetuity of resilient blockchains. There is also the potential for more infrastructure to be developed around these new tokens on networks that could make them easier to maintain, transact and provide more utility, but that is still a long way off.

By Marina Meza