Many recent articles have appeared in important publications such as MarketWatch reporting that Dogecoin is surpassing Bitcoin in the total number of transactions per day. Following is the now famous chart of the Dogecoin versus Bitcoin transaction volume as reported by BitInfoCharts:
This data, and the reporting of it was responsible for a sizable runup in Dogecoin values from less than 0.000001 BTC to more than 0.000002 BTC Per DOGE. Looking into the data at BitinfoCharts for a more detailed analysis we find that the total dollar value for one day of Dogecoin transactions is currently $102 million. At one point $436 million dollars worth of Dogecoin were sent within a 24 hour period. This by far surpasses the total market cap of Dogecoin by a factor of eight. Following is a chart of the Dogecoin and Bitcoin transaction volumes in USD:
A more careful analysis, however, reveals that the number of Dogecoins traded each day by far surpasses the total number of Dogecoins in existence. For example, at one point, when there were 36,362,442,575 DOGE in existence 166,173,597,594 DOGE had been sent within a 24 hour period. In fact the number of Dogecoins sent every 24 hours still exceeds the total number of Dogecoin, now only by a factor of two, but at one point by a factor of 4 times more Dogecoin sent within 24 hours than actually in existence. Comparing to other currencies such as Bitcoin or Litecoin, or any coin for that matter: this behavior is not normal. For example, less than 1/20th of the total value of all Bitcoins are sent every 24 hours and less than 1/5 of all Litecoins are sent every 24 hours. It is unlikely that the entire market cap of Dogecoin would be spent more than four times a day, at least in any sense of ‘normal’ economic behavior. In other words the network is being spammed with meaningless transactions.
One can speculate as to the reasons. It is possible to rule out exchanges because their trading volumes do not approach these values. For example, Cryptsy the biggest exchange for Dogecoin has only about a billion transactions per day, nothing near the quantity of 166 billion Dogecoins sent in one day. It is clear that Dogecoin does have fairly aggressive even bordering on propaganda like advertising. One might wonder if they thought massive transactions might raise the price. In any case it is not good for Dogecoin that the transaction rates do not appear to reflect any actual economic reality. Some analysis of what addresses are sending this money, most likely in circles, would be well advised.
All the data mentioned is coming from https://bitinfocharts.com/
One of the comments below mentions the idea of ‘change’. When a transaction is sent it is similar to a real world cash transfer. For example, with a cash transfer if you buy a 0.30 cent drink with a $20 bill you will pay $20.00 and receive $19.70 in change. Evidently this also happens in Bitcoin transactions. There was a good description in the Armory wallet FAQ. Now, I was not at first convinced by this alone as all cryptocurrencies have this same issue, and as I mentioned they do not have the same turnover of as much as four times market cap PER DAY. However, if we combine this with two other conditions: 1. Wallets with substantial amounts of coins say more than $1,000 equivalent, and 2. Lots of tiny tip transactions, then we may have a possible explanation. This could be a bit of a stretch as on average each wallet would still have to make several transactions a day. Unfortunately the ‘change’ issue makes it harder to discover the actual transaction amounts. It is best to keep in mind that most of the transaction amounts could be change.