What Is Dogecoin?
The cryptocurrency Dogecoin was originally born as a joke but eventually found a purpose as a more friendly, approachable alternative to Bitcoin. The unique, vibrant, Dogecoin community has allowed DOGE to achieve something of a cult following.
Read on to find out more about how Dogecoin works and learn about its colorful history.
Dogecoin Is Based on Litecoin
Dogecoin is a cryptocurrency based on Luckycoin (which is, in turn, based on Litecoin). Dogecoin was originally designed to be a more approachable alternative to Bitcoin, Litecoin and other cryptocurrencies. As such, there aren’t any groundbreaking features that set Dogecoin apart from the pack.
The cryptocurrency hasn’t seen any major updates since 2015 (although it is able to benefit from improvements to the Litecoin code). The true value of Dogecoin lies in the strong and vibrant community that sprung up around it.
What’s Different About Dogecoin?
The main thing that separates Dogecoin from most other cryptocurrencies is that it is an inflationary, rather than deflationary, cryptocurrency.
Bitcoin and many other cryptocurrencies are designed with a hard supply cap of coins. The potential problem with this is that once the cap is reached it may no longer be profitable for miners to continue to sustain the system.
This would either lead to unacceptably high fees in order to encourage miners or very long transaction times as there would be no incentive to process network transactions.
Miners Are Rewarded With Dogecoin
Dogecoin’s creator sought to solve this problem by ensuring that miners would always be rewarded with new Dogecoin and so there would always be an incentive to mine more coins. An inflation-based approach was also designed to replace lost coins and keep Dogecoin at a stable 100 billion coins.
The Dogecoin Community
As mentioned previously, the main asset of Dogecoin isn’t the technology behind it but the community that has built up around it. Many of the community members prefer to think of Dogecoin as a currency in its own right, often repeating the refrain “1 Doge = 1 Doge”.
Much of the community, particularly older members, are skeptical of speculation about Doge’s potential prices. Although this skepticism doesn’t stop users from hoping that Dogecoin goes to the moon!
Five Interesting Facts About Dogecoin
- Dogecoin was originally founded as the result of a joke made by Jackson Palmer in November 2013. When he was contacted by programmer Billy Markus, they decided to turn Dogecoin into a reality.
- Dogecoin was designed to be a friendly, more approachable form of cryptocurrency that could reach users put off by the cold complexity of Bitcoin. Even its name is taken from a popular Internet meme.
- Dogecoin has one of the largest and most active communities in the cryptocurrency world. This community has come together to fund a number of charitable efforts and other projects. They even managed to sponsor a NASCAR.
- One of the most common uses for Dogecoin today is as a tipping service. Users will tip other users for posts or contributions that they believe deserve recognition. It’s similar to a “like” but with more impact.
- There have been no technical updates or developments since 2015 when Jackson Palmer left the project by declaring that he was going on an “extended leave of absence”.
Jackson Palmer, Creator of Dogecoin
Even Dogecoin’s own creator, Jackson Palmer, believes Dogecoin’s success demonstrates how far cryptocurrency has strayed from its original goals:
I have a lot of faith in the Dogecoin core development team to keep the software stable and secure, but I think it says a lot about the state of the cryptocurrency space in general that a currency with a dog on it, which hasn’t released a software update in over 2 years, has a $1B+ market cap.
On November 27, 2013, Jackson Palmer made a joke that would lead to the birth of of a new cryptocurrency he said: “Investing in Dogecoin – pretty sure it’s the next big thing.”
The joke caught the interest of many users, including the programmer Billy Marcus who contacted Palmer to discuss the possibility of turning his joke coin into reality. Just over a week later, on December 6th, it was possible to mine and trade Dogecoin. What had begun as a joke about the state of cryptocurrency had become a serious project.
Dogecoin vs Bitcoin
How does Dogecoin compare to the leading cryptocurrency Bitcoin? What are the key differences? See below for our head-to-head comparison:
|Dogecoin (DOGE)||Bitcoin (BTC)|
|Purpose||Started out as a joke but quickly became a community-based crypto||Decentralized digital currency|
|Founder||Jackson Palmer||Satoshi Nakamoto (alias)|
|Market Cap||Over $500 million||Over $250 billion|
|All time High||$0.17 (Jan 2018)||$19,908 (December 2017)|
|All Time Low||$0.000087 (May 2015)||$0.06 (July 2010)|
|How long did it take to hit $100?||N/A||51 months|
|Notable Supporters||Jeff Currie (Goldman Sachs)
Peter Theil (Venture capitalist)
Christine Lagarde (IMF)
Marc Andreessen (Early internet Pioneer)
|Supply Cap||None (Current Circulating Supply: 114,473,409,520)||21,000,000|
|Consensus Method||Proof of work||Proof of work|
|Network Hash Rate*||Nearly 300 TH/s||Over 40 BTC per hour|
How Is Dogecoin Made?
A government or bank is a centralized institution that is able to physically print its own money. In contrast, cryptocurrencies, like Dogecoin, take a decentralized approach to producing new tokens and DOGE is created by its community.
Auxiliary Proof of Work (POW)
The basic technology behind Dogecoin is based on Litecoin and LTC miners are even able to mine Dogecoin using Auxiliary Proof of Work (POW). The switch allows Litecoin miners to process Dogecoin transactions by using their computing power in order to solve complicated equations.
Once the equation is solved, a new block is added to the Dogecoin network and the miner is rewarded with DOGE.
This reward system serves two purposes. The first is to encourage miners to devote computing power in order to complete transactions on the Dogecoin blockchain, while the second is to regulate the creation of new DOGE, which is then distributed by miners.
What Drives the Price of Dogecoin?
Dogecoin is a cryptocurrency, and like all cryptocurrencies, it is highly volatile and prone to large surges and big dips. Dogecoin, in particular, has experienced a fairly turbulent history and is prone to quite abrupt price changes.
Like other cryptocurrencies, the primary price driver for DOGE is media attention. The meme-based coin saw a surge in value in early 2018 as a number of media outlets began to pick up the story that Doge had hit a market cap of over $2.0 billion dollars.
These kinds of stories tend to lead to new traders pouring money into a currency. However, these surges are often followed by sharp crashes as traders engage in profit-taking. It can be possible to try and predict those crashes but it is risky and it may result in you losing money, rather than making it.
Rumors About Updates
Dogecoin has not seen any major updates since 2015, so any rumour of new features could well lead to an increase in prices. You should keep your eye on the Dogecoin Reddit account in an attempt to anticipate any new features or services of Dogecoin that plan to utilize Dogecoin as a payment method.
These kinds of announcements tend to lead to an increase in a cryptocurrency’s value.
With Dogecoin, in particular, it is worth keeping an eye on their active (and often hilarious) subreddit. In between all of the memes and jokes, the community occasionally attempts to organize serious events such as fundraisers.
If Dogecoin users successfully complete a fundraiser, it will garner media attention which is likely to result in a positive price rise for DOGE.
What Is the Price Outlook for Dogecoin?
Even by cryptocurrency’s standards, Dogecoin has experienced particularly pronounced price shifts.
The cryptocurrency market is still developing and in the short-term, you should expect an unstable market with lots of peaks and troughs.
On a medium- to long-term basis, Dogecoin has been on a general upward trend, like many other cryptocurrencies. As more mainstream traders become involved in cryptocurrency trading you should expect to see prices broadly moving upward with some slightly rocky periods.
That being said, you should not bet on Dogecoin reaching $1 any time soon.
Comments From Dogecoin’s Creator
Despite the community’s broad optimism, experts are generally more bearish toward Dogecoin’s future prospects. Even Dogecoin’s own creator, Jackson Palmer, has expressed his concern about the forces driving Dogecoin’s success.
In January, he argued that, while Dogecoin is technically sound, it shows that traders aren’t doing their due diligence:
John McAfee’s Comments About Dogecoin
John McAfee is also bullish about the prospects of Dogecoin in his coin of the week Tweet:
Other Comments About Dogecoin
Others have argued that Dogecoin could be one of the few cryptocurrencies capable of being used as a practical currency rather than simply as a speculative asset.
The fact that Dogecoin is fixed inflationary currency it allows it to more closely mimic real-world currency. This discourages users from holding onto the asset and encourages high liquidity as users actively trade and use their coins.
As James Angel summarized:
In order for a currency to survive, it’s got to be useful. One of the problems we learned with gold standard was that it’s too inflexible—it takes too long for gold miners to dig it up out of the ground. Having a nice, steady, predictable money supply is actually a good thing.