Dogecoin

Software engineers Billy Marcus and Jackson Palmer created Dogecoin in late 2013 as an alternative to Bitcoin. Palmer branded the cryptocurrency logo using a then-popular meme that deliberately misspelled the word "doge" for the Shiba Inu.

“Doge is really starting to joke about Bitcoin,” said Bitwave CEO Pat White. In its early days, a group of enthusiasts staged publicity stunts to raise Dogecoin’s profile, such as raising funds to send the Jamaican bobsled team to the 2014 Olympics or sponsoring a NASCAR driver.

In early 2021, Dogecoin achieved cult status on Reddit's WallStreetBets message board - the main instigator behind January's GameStop debacle - with enthusiasts promising to "shoot its value to the moon." Unlike Bitcoin, which is set to be scarce, Dogecoin is plentiful — 10,000 new coins are mined every minute, and there is no set maximum supply. 

Dogecoin History

Jackson Palmer, a product manager at Adobe Inc.'s Sydney, Australia office, created Dogecoin in 2013 as a way to satirize the hype surrounding cryptocurrencies. After receiving positive feedback and interest on social media, he purchased the domain name dogecoin.com.

Billy Markus, a software developer at IBM, wanted to create a digital currency but was having trouble promoting his efforts. Markus worked with Palmer to build the software behind Dogecoin. The code of Dogecoin is based on Luckycoin derived from Litecoin. It initially used random rewards for block mining, and later changed to static rewards in March 2014. Dogecoin uses Litecoin's scrypt technology and is a proof-of-work (PoW) coin.

Palmer and Markus officially launched the token on December 6, 2013. Two weeks later, on December 19, Dogecoin’s value jumped 300%, fueled by China’s policy of banning its banks from investing in cryptocurrencies.

Features of Dogecoin

No Maximum Supply

Unlike other cryptocurrencies such as Bitcoin, Dogecoin does not have a maximum supply. Dogecoin miners create one block every minute and earn 10,000 Dogecoins per block, so 14,400,400 new coins are added every day, which are then sold to the market or stored in the miner's wallet. 

Decentralization

Decentralization is the part that governs the security of most cryptocurrencies, meaning security is in the hands of a group of users around the world. The degree of decentralization of a cryptocurrency is often measured by the number of nodes and miner distribution on its network. Dogecoin has around 1,090 nodes, while Bitcoin has 10,000 nodes in 97 countries. This makes the Dogecoin network vulnerable to attack. 

A Very Small Number of People Own Most of Dogecoin

Most Dogecoin wallets contain a large number of coins in circulation, which is a risk because of their control over the price volatility and liquidity of the market. An estimated 0.002% of Dogecoin wallets hold around two-thirds of the total supply of Dogecoin. This is in stark contrast to the situation with Bitcoin, where wallet holdings are evenly distributed.

How Does Dogecoin Work?

The Dogecoin cryptocurrency operates on blockchain technology, which uses a distributed, secure digital ledger to store and add all transactions made on its network, much like how most cryptocurrencies work. The Dogecoin network also uses cryptography to secure all transactions on its blockchain network.

Dogecoin’s mining uses a “proof-of-work” concept, where miners use computers to solve complex mathematical equations to process and record transactions on the blockchain network. Miners are rewarded for their mining operations by earning Dogecoins, which they can sell on cryptocurrency exchanges or store in their wallets.

Dogecoin can be used for payments and purchases, but is not an effective store-of-value cryptocurrency. This is due to the fact that an unlimited number of Dogecoins can be created, making the cryptocurrency highly inflationary by design.

It is relatively faster and easier for DOGE miners to complete mathematical equations and record transactions. This makes Dogecoin more efficient at processing payments. It takes an average of one minute to process and approve a new block on the Dogecoin blockchain, compared to an average of 10 minutes for Bitcoin. However, in part, this differentiation helps Bitcoin maintain and increase its value over time by forcing miners to work longer and harder on each block reward.

Advantages of Dogecoin

• Confirmation times for transactions completed using Dogecoin are faster.

• Dogecoin has low transaction fees.

• The Dogecoin network has a loyal and friendly community of creators and followers.

• Dogecoin’s relatively low value has helped many social platforms underwhelm their content creators, and it can also be used as an in-game currency.

• Dogecoin is widely accepted by the public.

Disadvantages of Dogecoin

• Mining Dogecoin is unprofitable due to its relatively low value and the large number of coins it produces with no maximum supply.

• Dogecoin is an inflationary currency, which limits Dogecoin’s potential as an investment vehicle.

• Dogecoin has limited functions, such as no smart contract function.

• Dogecoin has fewer purchasing options.

• Dogecoin is considered less secure compared to other top cryptocurrencies.

Uses of Dogecoin

Compared with holding Dogecoin for a long time and waiting for its value to rise, Dogecoin is more suitable for consumption purchases. Dogecoin holders can use Dogecoin to spend at merchants or businesses that support Dogecoin payments. Many different types of businesses accept Dogecoin, including Musk’s SpaceX and the Dallas Mavericks. Many Dogecoin holders use their tokens to tip content creators on Reddit and other social media platforms.

How to Mine Dogecoin

Dogecoin mining is largely unprofitable due to its low value. However, the recent increase in DOGE price has provided an opportunity for miners. When trying to start mining DOGE, it is crucial to keep in mind the volatility of DOGE.

The hardware used to mine Dogecoin is called a Dogeminer. It is simply a node in the Dogecoin blockchain that performs calculations of mathematical equations to check and verify incoming transactions on the network. Nodes determine which verified transactions are included in the Dogechain (Dogecoin blockchain) and merge them into blocks, which are then immutably recorded on the shared ledger.

Miners are rewarded with DOGE for performing these complex mathematical calculations. Dogechain releases 10,000 DOGE every minute, which is received by the fastest miners to confirm incoming transactions.

Difference Between Dogecoin and Bitcoin

Dogecoin positions itself as a “fun” version of Bitcoin, with its logo being a Shiba Inu. Dogecoin’s casual introduction fits the mood of the burgeoning crypto community. Its scrypt technology and unlimited supply is a faster, more adaptable, and more consumer-friendly version of Bitcoin.

Dogecoin is considered an “inflationary coin,” whereas cryptocurrencies like Bitcoin are deflationary because there is a cap on the number of coins that will be created. Every four years, the number of Bitcoins released into circulation through mining rewards is halved, and its inflation rate is subsequently halved until all coins are released.

Is Dogecoin a Good Investment?

Since there is no maximum limit on the number of Dogecoins, and millions of new Dogecoins are put on the market every day, there is little room for profit from holding Dogecoin long-term and waiting for it to rise. But because the system places a cap on the number of Bitcoins that can exist, the value of Bitcoin continues to rise. Doge is indeed less like Bitcoin and more like DASH or Bitcoin Cash, which have the explicit goal of spending money.

Historically, Dogecoin’s per-coin value has been low, around $0.003 per coin for much of 2020, so people are more likely to give away Dogecoin. Users on social platforms such as Reddit, Twitter, Facebook, etc. can use Dogecoin to reward or ‘tip’ content posted by each other.