Remember when one coin blew up because Elon Musk posted about it, and it pumped by about 800% in 2021? That coin is Dogecoin. Dogecoin is a coin that originally started as a meme coin but grew into something more after the Tesla and SpaceX founder took an interest in it.
Because of Musk’s influence, the Dogecoin ecosystem boomed into something much greater as investors keyed into it, and the price skyrocketed and then crashed. Dogecoin’s rise and fall are not uncommon in cryptocurrency, as volatility is a huge part of crypto trading. However, it is not the end yet.
Keep reading to learn more about Dogecoin, its history, and how it works. By the end of this article, you’ll be informed enough to know whether Dogecoin is a worthwhile investment.
What Is Dogecoin ($DOGE)?
Dogecoin ($DOGE) is a peer-to-peer, open-source cryptocurrency that originally started as a meme coin and was created by Billy Markus and Jackson Palmer. The name and logo are based on a meme that was trending at the time, which features a Shiba Inu dog. Dogecoin and Shiba Inu coin might be alike due to the dog specie they share, but in no way should they be mistaken for each other.
DOGE is considered an altcoin built on a Bitcoin-based protocol, similar to Litecoin, and some of its notable features are; low price, infinite supply, and use of scrypt algorithm. Dogecoin uses a peer-to-peer network for transactions, and there is no controlling body for the currency. The major use cases of this cryptocurrency are for purchasing online goods and services, tipping social media creators, and trading for other currencies, whether crypto or fiat.
History Of Dogecoin
As mentioned, Dogecoin was formed in 2013 by Billy Markus and Jackson Palmer. Jackson noticed a growing wave of altcoins with little to no unique value propositions. He then attacked the issue with a joke tweet that read: “Investing in Dogecoin. Pretty sure its the next big thing”, and then added a photo of the trending “Doge” meme as at then, which was a picture of a Shiba Inu dog.
His tweet went viral, and to keep the joke going, Palmer bought the dogecoin.com domain and uploaded a picture of the “Doge” dog on a coin as the logo. Markus, on the other hand, had always been wanting to launch his cryptocurrency. So, upon seeing what Palmer did, he reached out, and they worked together to launch what is now known as Dogecoin today.
The coin had already gained a community of raving fans due to the viral tweet, and by December 2013, DOGE’s value had risen by about 300%. The price gained stability for a while, and the community continued to grow, with many utilizing the altcoin for small-scale payments and tipping Reddit and Twitter creators.
In late 2021, Dogecoin experienced a massive surge for two major things; the “Reddit rally” and Elon Musk’s tweet. The Reddit rally was formed by users on sub-Reddit communities like r/wallstreetbets to push the value of Dogecoin by about 140%. Musk then made a tweet clearing up speculations about him owning the Shiba Inu coin due to his posting a live Shiba Inu pet dog and people thinking it meant he owned or was affiliated with the Shiba Inu Coin. He stated, instead, that he only owned Ether, Bitcoin, and Dogecoin.
This led to a massive boom for Dogecoin, as many people started investing in it. Fortunately, it peaked at an all-time high of $0.73 and eventually crashed due to market volatility. Recently, it gained 35% due to the Twitter takeover by Elon Musk. While no concrete plans have been made yet, there have been talks of Musk incorporating it into what he calls “Twitter 2.0.”
How Does Dogecoin Work?
Dogecoin is an open-source cryptocurrency that is decentralized, using blockchain technology. It is based on a modified protocol of Bitcoin and is considered a Bitcoin alternative, or more appropriately, altcoin. Dogecoin uses a proof-of-work (PoW) consensus mechanism to secure its blockchain and create new coins. It also uses an algorithm called Scrypt.
Scrypt is a simpler hashing algorithm that uses a proof-of-work protocol to accept work from other similar networks. As a result, it uses less mining power than the SHA-256 algorithm that Bitcoin uses. The process of creating new coins is done by mining. In mining, advanced computers perform mathematical calculations to add new transactions to the blockchain and create new blocks.
Miners are rewarded with a certain number of Dogecoin (about 10,000 per minute) for each block they mine. In addition, the mining process helps secure the network by making it difficult for anyone to alter the historical transactions recorded in the blockchain. Dogecoin also has a faster block time than Bitcoin, meaning that transactions are processed more quickly.
Additionally, Dogecoin has a much higher maximum supply than Bitcoin. The current supply of Dogecoin is around 150 billion, and there is no maximum supply limit, while Bitcoin has a limit of 21 million.
A key feature of Dogecoin is its low transaction fees, making it a suitable option for small transactions or micropayments. It is also often used for tipping content creators on social media platforms. Furthermore, Dogecoin has a large and active community, which has organized charitable fundraising events and sponsored events such as Nascar and E-sports tournaments.
For a coin that started as a joke, Dogecoin has amassed quite the support from a large number of people, including public figures like Mark Cuban and celebrities like Snoop Dogg. It also has gained a reputation for being stable and has seen significant growth in value over the years. However, like other cryptocurrencies, Dogecoin is highly volatile.
In a nutshell, Dogecoin is a digital currency that uses blockchain technology to secure its blockchain and create new coins through mining. As a result, it has a fast confirmation time, low transaction fees, and a large, active community. Dogecoin can also be traded on various cryptocurrency exchanges and stored in a digital wallet, just like other digital currencies.
Dogecoin vs. Bitcoin
Dogecoin is commonly regarded as a Bitcoin alternative, and rightfully so, as its protocol is derived from Bitcoin, though slightly modified. For one, Bitcoin is older. Bitcoin was created in 2008, while Dogecoin was formed in 2013. Bitcoin was also formed with a use case; to be used as a store of wealth or payment alternative, while Dogecoin started as Bitcoin’s parody.
Bitcoin is also the first of its kind, i.e., a native coin being built-in as the digital currency of a blockchain. While both have similar use cases and payments, Bitcoin goes up a higher notch, as it’s used to seal sports contracts, real estate, automobiles, etc. It also makes a great investment and is good for portfolio diversification when trading in the crypto markets.
On the other hand, Dogecoin is used for small-scale payments like tipping social media creators, paying small businesses, or trading purposes. Bitcoin has more advantages in terms of a higher market value, advanced security setup, uniqueness, etc.
Despite this, Dogecoin also has its advantages, as it rewards miners more than Bitcoin, has lesser transaction fees, has higher transaction speed, and has unlimited market supply. With all these comparisons, it is safe to say that Bitcoin may be older, more valuable, and more secure. Still, Dogecoin shows more technological advancement regarding faster transaction processes and less energy consumption while mining.
Is Dogecoin A Good Investment?
From Dogecoin’s nature, you can tell that it doesn’t hold long-term value, as it is in infinite supply. This means that no matter how high the demand is, it can always be met because there’s enough to go around. Coins like Bitcoin will always be valuable, as there’s a limit to the number of coins that can be mined, thus causing scarcity and demand.
While Dogecoin is known for making big gains, it is still advised to be wary when investing, as the value fluctuates too much due to the constant flow of new coins in the market. Security risks are also attached, so if you’re investing, avoid sinking huge amounts of funds and employ the principle of dollar-cost averaging to help you hedge against losses.
Ebiere Watchman is a prolific writer specialized in web 3.0 and finance. Ebiere’s experience includes research projects, sales copywriting, and storytelling. She prides herself in crafting impeccable content to drive mass adoption in cryptocurrency.