The Shiba Inu Coin (SHIB), a Dogecoin-inspired meme currency, has attracted a lot of attention in the past week. By now, what was originally created as a joke is forming a billion-dollar project. A look beyond the price action of the Dogecoin competitor.
Like Dogecoin (DOGE), which is one of the ten largest cryptocurrencies by market capitalization, Shiba Coin (SHIB) has the Japanese dog breed Shiba Inu as its mascot. Although there are some technical differences between the tokens, both were developed without a well thought-out use case. Despite its origins as a parody currency, a substantial community has rallied around the Shiba Inu Coin, which has grown to become a serious Dogecoin competitor in terms of market capitalization.
The Shiba Experiment
From a technical perspective, Dogecoin and Shiba Inu Coin differ significantly. While Dogecoin is an adapted variant of the cryptocurrency Litecoin (LTC), the Shiba Inu Coin is an ERC-20 token and is thus based on the Ethereum blockchain. At the very beginning, the SHIB token became famous for three things: its liquidity, which was locked into Uniswap, an Indian Covid relief fund, and a token burning by Ethereum founder Vitalik Buterin.
Shiba Inu can be seen as an experiment in decentralized, spontaneous community building - comparable to this spring's GameStop debacle. Neither the team nor the project's administrators kept coins for themselves when creating the tokens to ensure the highest possible degree of decentralization. The project aims to prove that the power of collective decentralization can build something stronger than a centralized team could ever create.
Ryoshi, the creator of the experiment, established three rules in August 2020 to achieve this goal. The first two govern the fair distribution of tokens and ensure that neither the team nor a marketing campaign should receive money. The third rule makes it clear that neither influencers nor exchanges can get rich from free tokens either. Apparently, Ryoshi was contacted in advance by various crypto personalities and exchange representatives.
The 1 quadrillion tokens were created after Ryoshi revealed his crypto philosophy to a friend in 2019. Together, they created the Smart Contract, which launched Shiba Inu. Half of them were given to the open market at the decentralized exchange Uniswap paired with 10 Ether (ETH). The key to liquidity was destroyed and the second half, at a later date, was sent to Vitalik Buterin's wallet.
How did the hype about Shiba Inu begin?
The hype surrounding the meme coin was triggered by Tesla founder Elon Musk, among others. He tweeted a picture of his puppy, also a Shiba Inu. But Ethereum co-founder Vitalik Buterin also fueled the hype when he gave his SHIB tokens to a fundraising project. He donated 10% to an Indian crypto relief fund and burned the remaining 90% of the tokens, removing almost half of the supply from the market. Currently, there are just over 549 trillion tokens still circulating. Buterin is thus the largest donor to the Covid Relief Fund, which the crypto scene had set up for India to deal with the Covid crisis.
The total proceeds for converting 10,139,544,347,612 SHIB are 76,215,526.65 USDC.@wintermute_t would be transferring the said amount to our ETH wallet in the next few hours.
— India's Crypto Covid Relief ?? (@CryptoRelief_) September 24, 2021
Rapid rise of the meme coin
For the SHIB network, Buterin's handling of his tokens was no easy feat: The token's price had dropped 50% after the donation to the Covid Relief Fund. There was a lack of liquidity and probably also a lack of trust. However, the shock was immediately followed by the realization that Vitalik had acted relatively smartly. By burning the remaining tokens, he halved the amount in circulation, which removed some selling pressure from the market.
In September, SHIBA was listed on top exchanges like Coinbase and Robinhood, which reignited the hype. Coupled with Bitcoin's recovery, $870 million was invested in the meme coin within just 24 hours of its listing on Coinbase. Today, SHIB is among the top 10 cryptocurrencies by market capitalization, temporarily overtaking Dogecoin.
What makes SHIB so interesting for some investors?
One of the main differences of the meme coin compared to other cryptocurrencies is the total amount of 1 quadrillion. Due to the enormous number of tokens, the individual price of a single SHIB is extremely small and has several zeros. Thus, one dollar can be converted into a few million tokens. Especially for crypto newcomers, this can make an investment more attractive - a psychological phenomenon known as "unit bias". Fictitious scenarios of a price rise to one dollar make many wish for an early retirement, regardless of how gigantic the demand would have to be for such a rally.
— Shytoshi Kusama (@ShytoshiKusama) October 6, 2021
But it seems that the founder has further plans for the token to move away from its cult status as a meme coin. Ryoshi recently published a roadmap for the following SHIB developments. Recognizable in it is that Shiba Inu is to become deflationary by destroying tokens with every purchase. Also, the future of the project is to be put in the hands of the community by establishing a decentralized autonomous organization (DAO). Whether SHIB can actually develop a use case or continue to be traded as a meme coin remains to be seen.