Shiba Inu. Photo: AP
Another day, another cryptocurrency clusterfuck. This week, the creator of the tipping bot "dogetipbot" — a service that let Reddit users "tip" each other in Dogecoin — announced that his company is broke, he's broke, and the bot is broke because he spent all the coins, after he himself ran out of money.
Dogecoin was originally conceived as a joke featuring a popular Shiba Inu dog meme. As an "alternate bitcoin," it used tweaked versions of the code that runs Bitcoin (a decentralized, peer-to-peer online currency that uses public-key cryptography). Dogecoin went big in 2014, largely because of dogetipbot. It worked similarly to how Reddit users can give each other Reddit Gold. As dogecoins were initially worthless, people threw large amounts of them at each other with little regard. It was fun.
However, Bitcoin and altcoin exchanges soon added dogecoin to begin trading them for real money. (The exchange rate on cryptocurrency fluctuates wildly. At the moment, a single dogecoin is worth around a tenth of a penny — $US0.0012 — three times what it was worth a month earlier.)
Dogecoin tipping allowed the currency to fail upwards to such heights as sponsoring the Jamaican Olympic bobsledding team and a Nascar car (yes, that actually happened, twice). Dogecoin currency enthusiasts also raised money for charitable causes, including donating $US25,000 ($33,872) to a UK service dog organisation and $US30,000 ($40,646) to support clean drinking water in Kenya.
In 2014, the creator of the Dogetipbot, Josh Mohland, told Money & Tech that his bot was the most popular cryptocurrency tipping service on the internet. At that point, according to Mohland, 56,000 Reddit users had traded the equivalent of $US150,000 ($203,231) in Dogecoin tips.
Later that year, Mohland decided that the free service dogetipbot offered was a feasible business. He set up a company named Wow Such Business Inc. to run it. Shockingly, the company was not a success.
The dogetipbot website emphasised that the service was always free. Yet, somehow Mohland believed his creation could support a business model. He tried to get investors, but who would want to invest in dog meme tokens with no path to monetisation?
This week, Mohland suddenly announced to Reddit, in a post entitled "[Important] I'm taking dogetipbot to a server farm upstate" that Wow Such Business Inc. was bankrupt, the bot was dead, and Mohland had emptied everyone's digital wallets.
According to Mohland, in 2015, all Wow Such Business employees were laid off, including himself, and he began pouring his personal funds into the service to keep the bot alive. "With $US500 ($677) in the bank account, all of my personal funds spent, and all of my personal credit cards maxed out to pay for the business, I had to make a case to potential investors as to why cryptocurrency tipping wasn't going anywhere and why they should back us," Mohland wrote. After he ran out of his own money, he "made the decision to cash out the cold storage funds", meaning secretly using customer funds and stealing the users' coins in an attempt to keep the dream of cryptocurrency tipping alive.
In finance, customer funds are supposed to remain segregated from the business's funds. They live in a separate legal universe, and this rule is meant to insulate the business and customer from each others' failures. In the Wild Stupid West of cryptocurrencies, this rule is not always respected, and it's why Bitcoin, Dogecoin, and other altcoins suffer such devastating failures so often. (Moreover, even though the grifted Dogetipbot users could have a claim in court when Wow Such Business goes formally bankrupt, cryptocurrency exists in a largely unexplored legal limbo, so good luck to them getting a single dogecoin back.)
Dogecoin attracted the same intersection of government-hating libertarians and get-rich-quick schemers that liked Bitcoin. They were ballooned by credulous, sympathetic and wildly optimistic media coverage. Similarly, Dogetipbot had big dreams. In reality, Mohland failed to secure more funds for Dogetipbot, and was forced to declare bankruptcy. "Unfortunately, there's no bailouts in crypto," he wrote. Now, Mohland admits that the cryptocurrency community is delusional and he was blinded to it.
In order to deal with this debt, Mohland decided to completely erase the dogecoins held by all of his tipbot's users. "As of right now, everyone's dogetipbot balance is set to 0 — the slate has literally been wiped clean. There are no Dogecoins left in the dogetipbot hot wallet. This is literally the nuclear option," Mohland wrote in his post. "I personally hold no cryptocurrencies nor do I have any desire to in the future. I have one piece of advice for anyone considering starting a crypto business: don't."
"Dogecoin used to be fun, back when it wasn't worth anything. We were the coin that made fun of people looking for a quick profit. Over time, it turned into everything I hate about crypto," Mohland lamented. "I just didn't see it happening since I was in the middle of it." He closed the post with a YouTube link to a video titled "Fight Club Ending."
In response to Mohland's post, many in his community — known as "shibes" — began thanking him for robbing them blind and desperately trying to cobble together funds to keep the charade going.
I'm really not mad, although I understand the anger coming at you. Just one question, for the sake of transparency. How many doge were in the hot wallet that you cashed out? I think we have a right to know the scale of the mistake, and what it costs to fuel a failed moon shot.
How much does the hosting plan cost for a year? I will chip in.
Others were not so understanding.
I wouldn't give Mohland a leftover turd dropped from my arse after his theft. No credibility or trustworthiness at all. If you can get your coins back, take them as far away from this shitstain as you can.
We should be looking into prosecution and litigation rather then [sic] lapping this pseudo hero's arse. The fucking nerve of this guy to steal all of our money to start his own business, expand beyond his means and then come back here like a wounded puppy dog. Had he struck it rich with our seed money do you think we would have been profit sharing? No of course not. This is about as shady as it gets, premeditated, calculated and I'm certain it's illegal.
Very lies, such betrayal, WOW.
Mohland has since added the option to let him keep the dogecoins he already stole or get an IOU for your vanished dogecoins some time in the future. He wrote, "I'll have to buy them over time when I get paid, so this might take a while." (Yesterday, dogetipbot's cofounder posted a similar update.) And yet, some loyal shibes are even open to only getting a percentage of their dogecoins back.
Dogetipbot's failure is also most likely the death knell for Dogecoin in general. The currency has been slowly disintegrating since vape enthusiast Alex Green — formerly Ryan Kennedy, who stole millions in customer funds in another cryptocurrency scam — pushed out the original creators and moderators for Dogecoin in a soft coup to the benefit of his new dogecoin exchange, Moolah. Moolah has since declared bankruptcy after a "hack". Kennedy has subsequently been imprisoned for abusing and raping three women.
Now, Dogecoin will likely meet the fate of other altcoins, such as Titcoin, Auroracoin, or Namecoin. The greedy holders have no reason to ever divest, so the currency will be kept alive by the weird true believers in some godforsaken corner of the internet, where forgotten botnets and graphics cards mine blocks for the benefit of no one, until all the wallet passwords are finally forgotten. Though the currency began as a spoof of crypto culture, it was the same greed and delusional idiocy that has plagued more serious ventures like Bitcoin that struck the final blow.
Additional reporting by Sophie Weiner.
Correction: Previously, we listed Zcash in place of Auroracoin. We regret the error.