Elon Musk's view on base layer functionality
For the CEO of Tesla, Elon Musk, base layer transactions of the Dogecoin (DOGE) chain are far more superior to Bitcoin and Ethereum’s.
Recently he commented on his support for Dogecoin, saying the token actually has “a much higher transaction volume capability than Bitcoin, and the cost of doing a transaction, the Dogecoin fee, is very low".
"Right now, if you wanted to do a Bitcoin transaction, the price of doing that transaction is very high. So, you could not use it effectively for most things," he said.
In his latest pubic speech at the Qatar Economic Forum, Musk reiterated his support for DOGE although the meme-based cryptocurrency plunged from an all-time high of $0.76 in 2021 to a price of $0.068 at the time of writing.
Musk is currently facing a $258 billion lawsuit over allegations his companies SpaceX and Tesla are part of a racketeering scheme to back Dogecoin. He explained his love for the currency by saying he met many people who were not rich but who encouraged him to buy the token. “I am responding to those people,” he said.
He also clarified that while Bitcoin and Ethereum “are pursuing a multilayer transaction system”, their base layer transaction rate is slow and transaction cost is high.
“There is merit to Doge maximizing base layer transaction rate and minimizing transaction cost with exchanges acting as the de facto secondary layer,” he elaborated.
Dogecoin more scalable than Bitcoin according to Mr Musk
When talking about the differing monetary policies between Bitcoin and Dogecoin, Musk said that low issuance rate could result in hoarding and discourage spending.
Bitcoin cuts the issuance rate in half roughly every four years, while Dogecoin has an unchangeable issuance rate.
“It won’t need to reach visa speed, as regulated exchanges will act as de facto second layer. But the perfect should not be the enemy of the good – it is still good to increase base layer transaction speed & lower base layer transaction cost,” Musk concluded.
The thing is straightforward, after all - Dogecoin is more scalable because of its layer-one protocol that doesn’t need one more network. The term layer-one is used to define the primary blockchain architecture. Layer-2, on the other hand, is a network that appears at the top of the underlying blockchain.
Even though Bitcoin advocates have been slamming Musk's tweets, saying he's making a groundless admonishment of the widely-adopted cryptocurrencies, the cost and speed of the Bitcoin blockchains have actually been problematic in the past. However, recent upgrades have improved both.
Author: Teuta Franjkovic
A sincere writer with a strong will to share knowledge on all things blockchain, crypto, metaverse and DeFi. Starting out as a writer with Cosmopolitan, Teuta has risen through the ranks of business journalism, editing newspapers and websites within the fintech industry for over 15 years. She holds a double MA in Public Politics and Entrepreneurship.