Piggybacking on the hype of dog-themed cryptocurrencies, Shiba Inu emerged in 2020 as yet another memecoin, mainly appealing to retail investors looking for low-priced tokens.
Known by its ticker SHIB and branded as a “Dogecoin killer” by its pseudonymous founder, SHIB drastically outperformed Dogecoin’s 3100% price increase in 2021, with a yearly growth rate of 49,000,000%.
But after SHIB’s parabolic growth and subsequent retraction, the crypto market is wondering whether the memecoin’s time in the spotlight is over, or whether it adds up to a pioneering experiment in community governance and decentralization?
We aim to answer this question by diving into Shiba Inu’s ecosystem, tokenomics, underlying technology, and its future roadmap. This Forkast.News explainer will explore:
Shiba Inu’s beginnings
Shiba Inu is a relatively new project, as the first version of its white paper, also known as a “WOOF paper”, was released in April 2020, just three months before the SHIB token was released in August. Shiba Inu was an intriguing project for multiple reasons.
Firstly, akin to Bitcoin, Shiba Inu was created by a pseudonymous developer known as Ryoshi. The project’s original whitepaper was initially published on Github, as the first technical document describing the Shiba Inu ecosystem.
Despite the healthy skepticism that surrounded the memecoin due to its anonymous founder, Ryoshi seems to be motivated by the ethos of decentralization. Ryoshi didn’t take a cut from the initial token supply, as verified on Etherscan.
Ryoshi also stated in the first-ever Shiba blog post, that he started the project as a volunteer, without spending any funds.
“I Ryoshi spend 0 on the project…because I want to know if something can start from zero from someone with zero,” he wrote.
Ryoshi says that any potential SHIB holdings in his possession were bought on the open market.
“Since I spend 0 on the project, any $SHIB token I own has to be bought from the free market like anybody.”
During the launch, about 50% of the SHIB token was sent to Ethereum founder, Vitalik Buterin’s wallet, potentially as a publicity stunt. Buterin claimed that he didn’t have previous knowledge of the transaction, and proceeded to burn, or permanently remove from circulation, 90% of the gifted tokens. They were worth about US$6.7 billion at that time. In the transaction, he specified that he burned the tokens to reward long-time holders, as he was “ impressed by how the dog token communities have treated the recent donations”. Buterin donated his remaining share of SHIB to Indian CryptoRelief and other charity organizations.
What is Shiba Inu?
Branded a “Doge killer” by its founder, Shiba Inu was launched as an experiment on decentralized spontaneous community building. The premise of the project is to create a better project with the power of collective decentralization.
“We believe through the power of collective decentralization we can build something stronger than a centralized team ever could create. A community-run token is nothing without the united individuals who give it purpose,” Ryoshi said in the WOOF paper.
On the technical side, SHIB is an ERC-20 token built on the Ethereum blockchain, meaning that Shiba Inu doesn’t have its own blockchain network., This makes SHIB a token that is subject to the development decisions of Ethereum. Heightened demand for the token will consequently increase network traffic and gas fees.
Ryoshi chose to build on Ethereum because it was already secure and established, and “to ensure that his project was free to change and evolve with zero outside regulations impacting it.”
While not having its dedicated blockchain may be a deal-breaker for some investors, building on an established network has its advantages. For one, Shiba Inu benefits from Ethereum’s robust security, performance, and active team of developers. It also allows Shiba Inu to inherit all the advanced smart contract functionalities of the Ethereum network. Ultimately, this will make it easier for Shiba-themed DeFi applications to be implemented.
Shiba Inu is already leveraging these advanced DeFi capabilities with Shibaswap, a DeFi platform that enables users to earn passive income by providing liquidity, staking, and token swapping. Shibaswap also offers access to upcoming NFTs and crypto market-specific tools like portfolio trackers.
Shiba Inu’s multi-token economy
The Shiba Inu ecosystem has three cryptocurrencies, all of them ERC-20 tokens built on Ethereum:
- Shiba Inu ($SHIB)
- Leash Dogecoin Killer ($LEASH)
- Bone ($BONE)
SHIB is the flagship token of the Shiba Inu ecosystem and had a huge initial supply of 1 quadrillion before Vitalik Buterin burned 410 trillion tokens. SHIB holders can stake, or bury, their tokens to earn BONE as a reward. SHIB stakers also earn 0.1% of all ETH swap transaction fees on ShibaSwap, as per the project’s WOOF paper.
LEASH is the second token in the Shiba Inu ecosystem. LEASH, which is an ERC-20 token, has a high dollar value owing to its relatively low supply of 107,646 tokens. LEASH holders can stake the token and use it to provide liquidity for the LEASH-ETH pair to earn BONE tokens.
BONE, which has a fixed supply of 250 million tokens, is the third token of the ecosystem. BONE will function as the governance token of the network, giving voting rights on future proposals on the Doggy DAO expected in 2022. BONE will also be given as a reward for staking and liquidity providing on ShibaSwap. Moreover, BONE can also be staked for more BONE token rewards and used to provide liquidity for the BONE-ETH trading pair – rewarding liquidity providers with 0.1% of all DAI and USDT swap returns.
What makes Shiba Inu different?
The first thing that makes Shiba Inu stand out is that it started as an experiment in decentralized spontaneous community building to test the ethos of collective decentralization. Moreover, the development team had no percentage of allocated tokens, making it one of the first cryptocurrencies with a decentralized token supply. Whether Shiba Inu will become superior to the projects built by centralized teams is yet to be seen, but it has already proven to be more than just another fading memecoin.
Another factor that makes the ecosystem stand out is its community governance via the Doggy DAO. This allows users holding a minimum of 30,000 BONE to submit proposals that the community can vote on. Doggy DAO is a significant step for Shiba Inu towards complete decentralization.
Thirdly, the upcoming ShibaNet aims to be a decentralized marketplace introducing “a methodology to collect, trade, buy and sell in a fully decentralized manner.” The marketplace will feature the ability to split residual or royalty payments between parties using non-fungible tokens. The system will also eliminate complicated contract work between multiple parties, enabling royalties to be automatically distributed through the blockchain.
ShibaNet will also introduce a stablecoin known as SHI, pegged to 1 US cent, that will be used to purchase goods and services.
Criticisms of Shiba Inu
Shiba Inu started as a memecoin with a pseudonymous founder, which isn’t a promising combination in an industry riddled with rug pulls and scammers. Still, the project has gained credibility through its democratized token allocation and a system that gradually transfers governance to the community via the DoggyDAO.
Secondly, Shiba Inu is an ERC-20 token, which means it does not have its own blockchain and is affected by the same market congestion and gas prices as Ethereum transactions. As a result, settlement lags due to Ethereum’s growing popularity will likely limit Shiba’s performance.
To address these shortcomings, Shiba Inu is developing its own blockchain network called Shibarium. Besides increasing network throughput, Shibarium aims to lower the transaction fees and “ensure other products and services have a simple, cheap and easy platform to build on.”
Ben Caselin, the Head of Research and Strategy at AAX, says he’s worried about the sustainability of Shiba Inu’s recent price gains over the last few months.
“Shiba Inu has thrived on hype, crowd dynamics, and the same inflationary pressures at the macro level that have been driving prices across asset classes,” Caselin said. “ShibaSwap and such applications allow the meme coin to tap into demand for utility, but considering Ethereum’s high gas fees, staking Shiba, or using its features is hardly economically sound.”
Caselin also expressed concern that Shiba Inu may fail to gain entry into the club of mainstream crypto assets.
Shiba Inu has a number of projects underway, including its own blockchain network Shibarium, and SHI stablecoin. There is no predetermined timeline for Shibarium’s release, but a successful deployment would add various new use cases to the network, boost overall transaction throughput, and lower transaction fees.
The Shiboshis Social Club is for owners of SHIBOSHIS, a collection of 10,000 Shiba Inu-generated NFTs that sold out shortly after the launch in October 2021. Holders of the NFTs will eventually be able to participate in strategic play on Shiboshis The Game, although no timeline has been given for its release.
The SHIB token has seen huge price gains during the past year. It’s likely that its humble profile as a low-price, relatable meme coin appealed to crypto investors who had grown weary of other technically dense and often confusing crypto projects.
Shiba Inu is also working on a metaverse coined Shibverse.