Dogecoin Will Soon Get an Upgrade. Can It Beat Shiba Inu?

Dogecoin (CRYPTO: DOGE) is about to become significantly more capable, at least in theory. On Sept. 30, an independent project called DogeOS launched a testnet (like a beta test for a blockchain) for a new Layer-2 (L2) network that's equipped to handle smart contracts, and that settles its transactions back to the Dogecoin main network, incurring transaction fees payable in DOGE crypto in the process.

That marks the biggest shake-up to Dogecoin and its ecosystem in years -- but will that be enough to help it outcompete Shiba Inu (CRYPTO: SHIB), the next-largest meme coin, for good?

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Shiba Inu's history suggests that optimism would be misplaced here

Smart contracts are programs that execute on blockchains, and they're used to power applications for on-chain purposes like lending and borrowing, which Dogecoin's chain can't do on its own.

It's tempting to believe that DogeOS is the big catalyst that Dogecoin holders have waited for since its all-time high was set in mid-2021, as it's currently down by 89% from that level. But the fact of the matter is that Shiba Inu tried this same approach to drumming up demand for its token three years ago, and it didn't work.

Shiba Inu's Layer-2 network with smart contract capabilities is called Shibarium, and for a while, it drew heavy traffic. According to the Crypto Basic, it processed 4.7 million daily transactions shortly after its debut, on Aug. 21, 2025, but by September of this year, it had only processed about 1,680 per day. Similarly, per data from DefiLlama, Shibarium's apps held about $149,851 in deposits from users as of Oct. 6, and the chain collected a trifling $0.09 in fees during the prior 24 hours.

Shibarium allocates 70% of its base fees to purchasing Shiba Inu tokens on the open market and then burning them, removing them from circulation.

Of course, burning pennies' worth on a daily basis does nothing for a coin with a market cap of $3 billion. What makes a cryptocurrency valuable is demand outrunning supply, and Shibarium was never able to create enough demand.

Should you buy Dogecoin or Shiba Inu now?

There is little reason to expect DogeOS will be able to accomplish much for Dogecoin.

Simply bolting on a Layer-2 chain with some new features won't do much of anything to get developers or users on board with using the features, as they already have ample access to those same capabilities in a variety of other, more serious places in the crypto sector.

Therefore, there is still no reason to buy Dogecoin or Shiba Inu. The addition of DogeOS to Dogecoin's very limited set of capabilities does not make it any more or less favorable than Shiba Inu as an investment, as the beneficial economic impact is likely to be zero.

Even if DogeOS launches as planned and gets some utilization, the network activity wouldn't do much for Dogecoin's holders. Users of DogeOS apps are obliged to pay their transaction fees in Dogecoin, but Dogecoin's supply is uncapped, with new coins added to its supply on a constant basis, forever. That means creating a trickle of new demand for Dogecoin via DogeOS probably wouldn't be enough to create the scarcity that would push prices higher.

There is one condition where Dogecoin could become worth buying, and if that happens, it will easily beat out Shiba Inu. If DogeOS apps attracted enough lasting demand for Dogecoin to outweigh the roughly 13.5 million new DOGE mined each day, the picture would change.

Still, a different effort to launch a Dogecoin smart contract chain add-on in 2022 failed to accomplish that, and it's not clear DogeOS is going to be able to succeed where that attempt fell short. So for now, keep avoiding Dogecoin and Shiba Inu, and don't hold your breath for that to change.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.