Goodbye spare change? Musk’s DOGE says penny is too pricey

Elon Musk’s Department of Government Efficiency, known as DOGE, is set to launch an unconventional initiative aimed at cutting trillions from federal expenses.

On Tuesday, DOGE, an agency established during the Trump administration, highlighted a striking fact: it costs the U.S. Mint approximately 3 cents to produce each penny, which is only valued at 1 cent. The agency claimed that in fiscal year 2023, taxpayers bore the brunt of this cost, totaling around $179 million to mint 4.5 billion pennies.

Is the penny on its way out?

The penny is not alone in its costly production. Minting a nickel currently incurs a cost of 14 cents, and as zinc prices climb, the penny’s costs have also increased, now exceeding 3.7 cents per coin, according to CBS News referencing 2024 data from the U.S. Mint.

The U.S. would not be making an unprecedented move by ceasing penny production; Canada abolished its one-cent coin in 2012 due to production costs. At that time, making a penny cost approximately 1.6 cents, while its value remained just one cent.

To account for the absence of the penny in cash transactions, prices were rounded to the nearest five cents. This rounding applied only to cash transactions, leaving electronic payments unaffected.

In the meantime, Musk is reportedly looking to trim government costs by incorporating Dogecoin (DOGE), the meme-inspired cryptocurrency after which his cost-reduction agency is named, into the federal budget.

However, there’s a catch…

The expenses involved in mining Dogecoin can, at times, surpass its market value. Various elements, such as electrical expenses and the efficiency of mining hardware, can make the mining of this meme coin more costly than its actual worth.

Mining Dogecoin, similar to Bitcoin, requires significant energy, although some miners utilize less intensive technology compared to Bitcoin’s SHA-256. In high electricity cost regions, mining a Dogecoin can become more expensive than its market value.

Additionally, using outdated or inefficient mining equipment can inflate the costs associated with DOGE mining beyond current price levels.

Moreover, in contrast to pennies and nickels, Dogecoin has minimal utility, and its market price can be highly volatile. During downturns, the cost of mining may exceed the revenue generated, causing some miners to pause their operations.

Alternatively, when prices surge, mining can become quite profitable.

Ultimately, the economics surrounding the mining of any cryptocurrency is highly unpredictable, shaped by local conditions and evolving market trends.