This Is How Shiba Inu Works and Why It’s Popular

Key Takeaways:

  • Based on the Shiba Inu dog, Shiba Inu (SHIB) is a meme token built upon the Ethereum blockchain network that has smart contract capabilities.
  • The native cryptocurrency, SHIB coins, is a type of ERC-20 token that helps execute smart contracts and facilitates decentralized applications, including staking to validate transactions.
  • Apart from the SHIB token, BONE and LEASH coins form the other components of the Shiba Inu ecosystem.

The past 24 months have seen a burst of animal-based meme coins come to the fore of crypto culture. While Dogecoin was the “original”, many of the newer “joke” currencies were inspired by the success of Shiba Inu. So far, no other token has managed to compete with Dogecoin in terms of popularity and market cap the way SHIB has.

Shiba Inu has dubbed itself the “Dogecoin killer” and has soared to become one of the top meme coins based on market cap. Whereas Dogecoin’s blockchain was based on a fork of Bitcoin and Litecoin, Shiba Inu utilizes the Ethereum network. This makes Shiba Inu better positioned to excel in the evolving world of decentralized finance.

The Basics of Shiba Ini (SHIB)

Shiba Inu is a relatively new cryptocurrency, coming to life in 2020 on the back of anonymous developer “Ryoshi”. The coin is like a new-generation Dogecoin – a meme token with smart contract capabilities. Smart contracts are programs or codes built on a blockchain that automatically execute when certain conditions are met. SHIB coins have this function due to being built atop Ethereum’s infrastructure, which supports integration with decentralized applications. This allows Shiba Inu to play a major role in decentralized finance, helping investors leverage their assets with earning opportunities like yield farming, liquidity provision and more.

Shiba Inu official website
Shiba Inu official website.

Shiba Inu’s whitepaper (fittingly named the “woofpaper”) outlined the coin’s intention to mirror Dogecoin and become a community-focussed and controlled cryptocurrency. The coin’s development, features and use-cases will therefore grow alongside the community, who have dubbed themselves the “ShibArmy”.

A key feature of Shiba Inu, much like other meme coins, is its high supply, low price and inflationary nature. However, the community developers have recognized the limitations of unlimited circulation and added a cap on the amount of SHIB that can be minted (1 quadrillion SHIB). Regular burns from high-profile investors are also completed to prevent the token from devaluing too much.

This Is How Shiba Inu Works

Shiba Inu is built atop the Ethereum network, and SHIB coins take the form of ERC-20 tokens. Because of this, SHIB tokens can execute smart contracts, which allows them to be used in a variety of decentralized applications.

Shiba Inu originally began life as a Proof-of-Work cryptocurrency – just like Dogecoin. Proof-of-Work protocols usually allow “mining”, where computers solve complex algorithms to validate network transactions. It’s interesting to note that Shiba Inu was never actually mineable though, as the entire supply of 1 quadrillion was minted upon SHIB’s launch.

Shiba Inu runs on Ethereum’s blockchain, which uses a Proof-of-Stake mechanism that occurred with Ethereum 2.0’s upgrade. Like ETH, SHIB can still be staked to validate transactions and earn a reward. For more information, read our detailed guide on where and how to stake Shiba Inu.

\The Pros & Cons of Shiba Inu?

Shiba Inu is a new player on the crypto scene, with only a brief two-year history. In that time, SHIB has grown dramatically, fostering an invigorated community, developing multiple decentralized applications, and experiencing massive price rises. Like most crypto—particularly meme coins—Shiba Inu’s value is prone to wild swings, which can turn off investors.

Shiba Inu Pros:

  • Shiba Inu has a large development team comprising its devoted community. It has received celebrity interest from the likes of Elon Musk and Kai Greene. Unlike some competitors, the Shiba Inu ecosystem is constantly evolving, with new features and applications being proposed and integrated frequently.
  • SHIB tokens do not have an unlimited supply. While they are inflationary, community token burns are regularly committed to keep the price from becoming too unstable.
  • Shiba Inu is an ERC-20 token which gives it smart contract capabilities. The use of Ethereum’s code has allowed Shiba’s network to work alongside NFTs, decentralized exchanges and gaming applications. This has expanded the potential scope for SHIB tokens’ use-case.
  • Shiba Inu’s community has partnered with Amazon smile to donate a portion of all purchases made on Amazon to the Shiba Inu Rescue Association.

Shiba Inu Cons:

  • SHIB tokens are low value and have a very high supply. This can result in price volatility, especially from whales who purchase large portions of SHIB only to flip them and tank the coin’s value soon after.
  • Although Shiba and Doge are seen as competitors, their price movements are often inextricably linked. For example, positive Elon Musk tweets regarding Dogecoin will often see the price of SHIB rise too. However, the opposite is also true, and bad press regarding Dogecoin or meme coins as a whole may have a negative impact on SHIB’s price.
  • Shiba Inu has a lot of skeptics who remain unconvinced regarding the token’s use-case and real-world application.
  • As Shiba Inu uses the Ethereum blockchain, it is subject to the same drawbacks – low transactions per second, mediocre scalability and high gas fees. It is hoped the upgrade to Ethereum 2.0 will help resolve these issues.

This Is What You Can Use SHIB For

The SHIB token is just one part of the broader Shiba Inu ecosystem, which comprises three coins:

  1. SHIB – The primary medium of exchange for the Shiba Inu community, and the most common way to interact with decentralized applications on the network.
  2. BONE – The governance token of the Shiba Inu community, which allows its holders to vote on development proposals. It can be earned by providing liquidity to Shiba Inu’s native DEX.
  3. LEASH – Used to reward those staking SHIB tokens and validating transactions on the network.

Like most other meme coins, SHIB’s low value and high supply lend itself to making small payments online. This can occur on message boards (like Discord and Reddit) to “tip” someone for a funny or insightful post, or actual donations to charities, particularly those supporting the actual Shiba Inu dog breed. Certain merchants around the world also accept SHIB as a medium of exchange.

Shiba Inu’s smart contract capabilities give its native token a much wider scope of use compared to certain other meme coins. The community has developed a fairly comprehensive and evolving ecosystem that SHIB owners can interact with and gain value.

The ShibaSwap Platform

ShibaSwap is the primary platform for the entire Shiba Inu network. It is a hub for everything SHIB – staking, voting on governance, providing liquidity, and more. To participate, users need to be holding a portion of SHIB.

Aside from earning and voting protocols, the key purpose of ShibaSwap is as a decentralized exchange. The platform supports swapping between coins, including ETH, AAVE, SHIB, SUSHI, SNX and a number of stablecoins.

At the time of writing, ShibaSwap has a total value locked (TVL) of $73.19M on the platform. This is not a huge figure (by comparison, Curve has a TVL of nearly $19b), but it does suggest a growing level of interest within the crypto community towards Shiba Inu’s ecosystem.

Shiboshis & The NFT Marketplace

Shiboshis are the native NFT collection released exclusively for the Shiba Inu community and its token holders. There were only 10,000 released on launch, and owning one of these NFTs provides holders with a number of perks.

The release was intended to expand the use-case of Shiba Inu’s network and bring new people to the community. Shiboshis are the ticket to access the “Social Club”, which gives its members a private space to communicate, exclusive news on SHIB development (particularly in the NFT Gaming space) and more.

Shiboshis regularly sells on OpenSea for more than USD $1,000.

Investing In Shuba Inu

Shiba Inu’s rise to prominence over the past couple of years has made it fairly easy to invest in. The coin can be purchased on a wide number of platforms, although it is not as widespread as the likes of Bitcoin, Ethereum or even Dogecoin. However potential investors shouldn’t have any issues finding a suitable place to purchase SHIB.

  • Centralized exchange. Centralized exchanges (CEX) are regarded as the easiest way for investors to purchase cryptocurrencies like SHIB, especially for beginners. These platforms essentially match bids (buyers) for offers (sellers) and take a fee for organizing the trade. Users can deposit fiat currency into their CEX account and then use that to instantly purchase cryptocurrency. Alternatively, most exchanges come with a native wallet that supports the swapping, sending, and receiving of various digital currencies. Most CEXs are government regulated, making them a safer option than some alternatives. Examples of top crypto exchanges include Binance and Coinbase.
  • Decentralized exchange. Decentralized exchanges (DEX) are a relatively new phenomenon in the crypto industry, vaulting in popularity at the dawn of the new decade. ShibSwap has its own native DEX, which allows users to connect their third-party wallets (like Metamask) to the platform. From there, users can swap their pre-existing crypto tokens for SHIB (as long as they are supported). Read our list of the best-rated decentralized platforms.
  • Brokers. Brokers look and operate quite similarly to centralized exchanges. The key difference is what goes on behind the scenes. When using a broker, all of your trades are matched and supported by the company operating the platform – unlike a CEX which is person-to-person. Brokers often have higher barriers for entry than CEXs, but this is not necessarily true for all. Examples include eToro and Robinhood.
  • Peer-to-peer (P2P) is the final way to invest in Shiba Inu. This can be accomplished by directly paying cash or another crypto to someone else’s wallet in exchange for SHIB. Platforms exist to facilitate and ensure the safety of these transactions, but they are still riskier than most alternatives. Investors must ensure they are trading with a trusted seller before buying SHIB P2P.

Ways To Store Shiba Inu

All digital assets (cryptocurrencies and NFTs) are stored in wallets. Shiba Inu investors can store their funds in a number of different wallets, though the most common will be exchange wallets.

Exchange wallets

Exchange wallets are “hot” wallets (connected to the internet) native to a specific platform. For example, SHIB purchased on Binance will be stored on the platform’s supported wallet. From there, investors can easily swap, sell, send, or receive SHIB inside the wallet.

Exchange wallets are by far the most convenient way to store cryptocurrency like SHIB. They are easily accessible, and many platforms will have insurance funds in place in case assets are stolen. However, these wallets are typically not recommended as a long-term method of storing cryptocurrencies. The rationale behind this is two-fold. Firstly, exchange wallets are custodial, which means stored assets are actually in the custody of the company behind the exchange, not the investor. This leaves their cryptocurrency susceptible to wide-scale attacks. There are several examples of exchange hacks resulting in permanently lost crypto funds.

Secondly, investors who hold SHIB on an exchange miss out on potential earning opportunities. This is particularly prevalent for Shiba Inu tokens, as the community behind the network is largely driven by participation in the ShibSwap platform, which requires a third-party wallet.

Non-custodial hot wallets

Non-custodial hot wallets are another popular way of storing SHIB. These third-party wallets come in the form of browser extensions, mobile applications and software downloads. Like exchange wallets, they are connected to the internet. This uptime does mean they are also at risk of being hacked or exploited, although less so than exchange wallets.

As Shiba Inu runs on the Ethereum network, SHIB can be stored in any top Ethereum wallet that supports ERC-20 tokens, including Metamask, Atomic Wallet and many, many more. The wide range of wallets available makes non-custodial hot wallets a good choice for storing SHIB.

Cold wallets

Cold wallets are probably the least-used wallet type, but also the most recommended. These wallets are not connected to the internet, and thus at the least risk of exploits. This is a little inconvenient, but the security trade-off is worth it for most. Cold wallets typically take the form of a hardware device like a USB dongle. This hardware can be plugged into a computer to access SHIB and other cryptocurrency assets. The most popular cold wallet is the Ledger Nano, which supports a wide variety of digital currencies, including SHIB.