Tuesday, March 28, 2023
No menu items!

Dogecoin: what is it and does it have any value?

Must Read

Elon Musk says it’s to the moon for the Dogecoin community. In his words, “what would be the most ironic outcome that the currency that was invented as a joke in fact becomes the real currency.”

In a world where every alternate cryptocurrency is striving to outdo Bitcoin, it sure is nice to see that a few aren’t taking the competition as seriously. This is what Dogecoin embodies.

It was named after the popular Shiba Inu dog meme; the doge was a deliberate misspelling as a part of the joke.

Dogecoin has a market cap of $85 billion, pitching it to the top ten cryptocurrencies in terms of total market cap.

What is Dogecoin?

First, Dogecoin is a meme cryptocurrency. Created in late 2013 by Billy Markus and Jackson Palmer in mockery of Bitcoin, the leading founder just couldn’t understand the hype around digital assets until he tweeted about it.

And yes, much of Dogecoin’s support and price influences come from tweets – you will find out about that later. The token runs on a proof of work consensus that is actually serious and secure; the joke doesn’t extend to the blockchain.

This is also how more dogecoin tokens are created. Miners or validators of users’ transactions are awarded dogecoin tokens. The decentralized finance system has no central supervisor, which is why miners are indispensable.

The dogecoin blockchain is a close rival and comes second to Bitcoin in terms of transactions. Miners add over 19,000 blocks to the blockchain each day. These are records of buyers’ and sellers’ data, investors, and people who trade with dogecoin tokens.

Dogecoin does not have a limit to the number of tokens that will ever be produced. Markus and Palmer designed the project precisely for this purpose.

The hype around Bitcoin and altcoins was the reason for the creation of Dogecoin. Palmer just couldn’t understand why, so he tweeted about his token, which by the way, didn’t exist yet.

Surprisingly, he got many interactions, and that spurred Palmer into buying the dogecoin.com domain.

Markus was not physically present, nor had he even met Palmer at this stage. It wasn’t until there was a buzz about Dogecoin that Markus and Palmer formed their alliance.

Palmer had just sarcastically tweeted about a non-existent cryptocurrency, and it had gathered a small following in that short period.

Markus wanted to develop a coin because he had heard about cryptocurrencies and wanted to join the trend.

This led to the creation of the perfect partnership, and a year after the token was launched, it reached a market capitalization of $20 million with an even richer fan base.

By 2017, Dogecoin had participated in its first cryptocurrency bubble. The price rose alongside many other tokens, and the community increased too.

The market cap at this period grew past a billion dollars, but it fell after the crypto bubble. Still, the members of the Dogecoin community stay faithful, and the numbers keep growing.

Tweeter and the help of Elon Musk have grown the Dogecoin community. Perhaps without the support of the tech billionaire, Dogecoin would have taken longer to attain its market cap of 31.9 billion in October of 2021.

Shortly before the value skyrocketed, Musk tweeted in May that he would be working with the developers of the coin to improve its transaction performance.

Before that tweet, Musk ran a survey asking if Dogecoin should be accepted as a mode of payment for Tesla. You can guess what happened right after – the price shot up!

But Musk was not the only influence behind the increase in Dogecoin’s value.

AMC Theaters started accepting Dogecoin tokens as a payment form. Twitch, Tesla, Newegg, and Keys4Coins are other large holdings that list Dogecoin as an acceptable form of payment.

What other support could a digital token need?

How Does Dogecoin Work?

Imagine a decentralized financial system like Dogecoin. It needs a way to record valid transactions.

It is different from your conventional bank in terms of intermediaries between you and your money. You interact with bank managers, cashiers, and even the institution’s security staff.

But the Dogecoin network is digital, with no such employees and therefore susceptible to hack attempts.

This is why the protocol must employ people to act as virtual security staff. It works through a hash, the proof of work consensus that challenges interested programmers to solve complex mathematical problems.

The winner is selected to validate users’ transactions and add them to the blockchain.

As a result, millions of Dogecoin are created daily to reward these guys. They, in turn, can choose to save their tokens, sell them, or use them to facilitate payments.

Moreover, the Dogecoin network employs a scrypt algorithm that facilitates interaction with other scrypt-based protocols. The best part is that mining is not as energy-consuming as many other blockchains, especially Bitcoin.

There is also a noticeable improvement in recording and executing transactions. Compared to Bitcoin, which requires ten minutes to create a new block, miners will get it done in a minute on the Dogecoin network.

What blockchain does the Dogecoin network run on? Well, that is a good question.

Like Bitcoin, Dogecoin also has a native blockchain. It was modeled after the Litecoin network, and it has been confirmed that miners can work with both blockchains because of the similarities in how they are run.

Dogecoin Vs. Bitcoin

Dogecoin is the less serious version of Bitcoin. Although the initial essence of the token was to jest and entertain crypto enthusiasts, it has become the ninth in terms of market cap.

It has a notable reputation for fast transactions, faster than the Bitcoin blockchain.

Bitcoin has a limited supply. The amount mined or created every four years is halved to control the distribution and value. Initially, there were 21 million coins in circulation.

As the predecessor of every cryptocurrency, Bitcoin also has miners who secure the network. However, for every 210,000 blocks added to the blockchain, the reward is halved.

It has been estimated that this would happen every four years, thereby limiting the number of coins in circulation.

The same cannot be said about Dogecoin. There was never any attempt to limit the number in circulation, which is okay because Dogecoin is not a store of value.

It is the people’s cryptocurrency because it actually does stuff for you. Look at Twitch, the streaming site that has allowed payment with Dogecoin since 2014.

The token’s price is relatively affordable, and purchasing is not a problem, so it is not surprising that there are so many in circulation.

One of the advantages of Dogecoin over Bitcoin is the lower computing power. In generating tokens or validating data on the network, miners do not use as much energy.

That is one of the reasons Dogecoin has the support of Musk. Bitcoin requires a high computing power that does not have the best impact on the environment.

And since the world is now all about green energy or sustainability, Dogecoin aligns considerably.

Miners will also choose Dogecoin over Bitcoin because it is easier to solve the challenges on the former network. The pay may even be better.

Because of how Bitcoin was designed, miners would need to work harder to solve mathematical challenges. They would be paid less because of the limited number of tokens in circulation.

How to Buy Dogecoin?

Dogecoin has been listed on many crypto exchange platforms, including Binance, eToro, Gemini Crypto, Coinbase, and Robinhood.

This gives you many options when you want to buy the tokens with fiat money. You will simply create an order for Dogecoin.

Depending on your exchange platform, you will be required to buy a central token like USDT, ETH, BNB, or even Bitcoin. Then, you can convert the base token into Dogecoin.

You must create an account with your broker first. You will usually need to verify your identity by providing a government-approved identification card. This is to increase the security of funds on the blockchain.

Once your broker has approved your purchase, the tokens will reflect in your wallet. But if the transaction didn’t go through, you will receive a prompt telling you your order has been canceled. Of course, there will be a reversal of your funds.

It rarely happens, so you should always expect your new Dogecoin to reflect in your wallet. This brings up another important aspect of purchasing Dogecoin or any other crypto. Most of the exchange platforms will store your cryptocurrency for you. Safety may be debatable, though.

People prefer software or hardware wallets that give them absolute control over their digital assets. A software wallet is often a secure storage medium that holds the information needed to access your crypto.

You will get private keys when you download the app or visit the website for an account. Without this personal detail, you will be unable to unlock your wallet. It may be hackproof, too, depending on the broker you choose.

Pay attention to the seed phrase because it is your only other way into your wallet if you forget your password or lose your device.

On the other hand, the big guys use a hardware wallet storage option. It is more secure because your private and public keys are offline. You will need to physically access the hardware device before you can input the private key. If you are buying a huge amount of Dogecoin, a hardware wallet is a great place to store them.

Is Dogecoin a Good Investment?

As of mid-July, there are north of 132 billion doge tokens in circulation. And it does not end there because there is no ceiling for minting these coins.

But that is not a problem; the cult-like members of the community know it.

Unlike Bitcoin, Ethereum, and other digital currencies, Dogecoin was not designed to be a store of value. It makes more sense as a means of paying for things, even items used every day.

So, it is okay that there is an unlimited number of tokens intended to be in circulation. It is a digital form of payment, after all, and fiat money does not exactly have a limited market cap.

This means more tokens can be minted when more users demand them. And since one is under the value of a penny, affordability, and ease of access will not be anyone’s excuse.

The Dogecoin network is transparent and secure or believed so by its cult-like community. Additionally, it is becoming a renowned project, which kind of vouches for its credibility.

However, it was not designed to be a store of value, so don’t expect your portfolio to expand overnight or even over the course of months to years.

Like every other cryptocurrency, even the experts cannot predict the future of Dogecoin. Will it be a store of value as the demand increases? Nobody can really tell.

But it is highly unlikely that you can double or triple your portfolio just by waiting with or without bated breath. Unless you actually trade, that is, buy and sell the little movements in the market, you may not be able to grow your Dogecoin account significantly.

Still, it may be a worthy investment for you. It is just a matter of doing enough research and considering your financial options before making any decision. But to be on the safe side, Dogecoin is best reserved for financing transactions. Should you save your money in it, though? That is a good question.

Dogecoin may have a low price, but it is not a stablecoin. Therefore, it may be ill-advised to consider it a way to save money. Unlike tokens like USDT and USDC, you will hardly meet your funds at the same value.

Summarily, Dogecoin is an inflationary coin, unlike Bitcoin and Ethereum. It is better used for transactions than long-term investments because unlimited tokens are circulated.

What are the chances that a meme cryptocurrency becomes the actual coin of the future? It already meets the requirements – low price, fast transaction speed, and easy access.

What’s more, many reputable merchants are approving payments with Dogecoin. But as with every other cryptocurrency, you must be careful when investing your funds.

Latest stories

Quant crypto: an innovative technique of using a single token to represent multiple assets on different blockchains

Quant crypto is a unique project introduced in 2018 by Gilbert Verdian, Colin Paterson, and Paolo Tasca. These are...

More Articles Like This