It makes mining more addictive, which increases the number of people who are willing to mine, even if the financial rewards for doing it drop. Same reason why people by lotto tickets even though it's a net economic negative.
I'd argue that the Dogecoin creators are actually quite brilliant, because they manage to exploit several known cognitive biases in humans to drive adoption. Design for the world as it actually is, not for how you would like it to be.
It is an incentive to keep around gear that can't normally pay for its electricity. Mining gear that isn't online 24/7 but can come online when the need arises is useful to counter a temporary 51% attack.
Interesting point. So miners would stay online and only mine blocks that they know would be profitable to them?
Presumably there would be a lot of such miners, which would increase competition for those more profitable blocks, which would essentially dampen out the expected value of the rewards. I wonder how the math works out.
