Dogecoin, despite being one of the older blockchains based on Bitcoin technology, continues to encounter challenges that are common to all Bitcoin-derived blockchains. These issues include the high computational power required for Proof of Work, vulnerability to reorganizations, slow transaction confirmation times, an inability to efficiently handle high volumes of transactions, and lack of support for complex smart contracts.
While Dogecoin attempts to increase transaction throughput and reduce network congestion by utilizing shorter block times, this strategy increases the likelihood of reorganizations. These frequent reorganizations can negatively impact standards like Inscriptions (especially DRC20), by slowing them down and sometimes even compromising their security due to the growing reliance on centralized indexers to process and interpret blockchain data. This reliance can lead to different interpretations of the data on the blockchain, resulting in inconsistencies between various indexers in adverse cases. Thus, although DRC20 has brought a second wind to Dogecoin on-chain activity, the limitations of the standard and the network design limit its impact.
Indeed, Dogecoin has seen very few innovations since its inception, in stark contrast to Bitcoin’s ecosystem, which continuously evolves with new applications, standards, and protocols. As a result, Dogecoin network predominantly host wallet applications, relegating $DOGE to a role of poorly utilized value transfer, mostly held off-chain on centralized exchanges, without a dynamic and innovative ecosystem.
Decentralized applications (dApps) are notably missing from Dogecoin, yet they could usher in a new era for on-chain activity. However, the level of dApps infrastructure that is available on Ethereum and other chains cannot be directly replicated on the Dogecoin Blockchain.
To address the challenges previously mentioned, adopting a Layer 2 solution is highly recommended. Laïka facilitates transactions and the creation of smart contracts independently from the underlying Dogecoin network while the proofs of all blocks and transactions on the L2 are periodically recorded on Dogecoin. This structure ensures network reliability by maintaining the security of Laïka, where each transaction and block can be verified through data on Dogecoin.
L2 solutions are designed not to compete with L1 chains but to enhance their utility and enable more users to engage with the underlying cryptocurrency and blockchain. Laïka exemplifies this approach with Dogecoin, striving to augment the value of the Dogecoin blockchain through enhanced capabilities and utilities.
