Dogecoin is a typical cryptocurrency which can be used to easily transfer value across different cryptocurrency wallets and exchanges around the globe. Dogecoin going originated from the Shiba Inu meme, and features it as well. The dog meme was used to keep the cryptocurrency project light-hearted.
The main purpose of the introduction of this cryptocurrency is to allow for decentralized transactions and censorship free transfer of value between different parties.
Dogecoin has recently made lots of hype in the media, and has considerably appreciated in value as well. There are ups and downs in its value, but over the years, Dogecoin has successfully retained its value.
Fundamentally speaking, Dogecoin is your typical cryptocurrency with little to no functionality. The main reason for this is when the Dogecoin was created, there were no smart contracts or staking, or any smart features which are popular in the cryptocurrency market these days.
So, the main purpose of this coin was to create a secure network to allow hassle free transactions. Dogecoin actually did great as a basic type of cryptocurrency. However, it had its fair share of ups and downs as well.
One of the biggest features of Dogecoin was the spirit its developers expected the coin to showcase. Dogecoin was not created as an alternative to Bitcoin, nor was it made to disrupt the fiat market and transfer everyone to cryptocurrency.
The main purpose of Dogecoin was to spread goodwill and fun across the cryptocurrency market by celebrating a meme.
Benefits of Dogecoin
Like any other cryptocurrency, Dogecoin has its fair share of benefits and drawbacks. Let’s take a good look at the considerable pros and cons of this meme cryptocurrency.
A Growing Investor Base
If you’re looking to invest in Dogecoin, one of the most important things you should know is that the coin is still gaining more popularity, and more people are getting onboard by buying and holding these coins.
The fact that the more holders and traders and getting interested in this cryptocurrency provides you with a guarantee of good return on investment, given that you sell it at the right time.
Since Dogecoin is used as absolute value medium, its community support continues to rise with every passing day. People who have invested in this cryptocurrency also share memes related to it on social media, and create more hype in order to attract more investors and drive the price up even more.
Unlike many other smaller cryptocurrencies, Dogecoin has been listed on some of the major cryptocurrency exchanges. For example, eToro, which is one of the biggest cryptocurrency brokerages in the world, has recently listed Dogecoin.
This has proved to be one of the best reasons why many new investors are willing to invest in the cryptocurrency, and trade it to gain more profit. The exchanges also accept the viral status of Dogecoin, and attribute the surge of new users to the popularity of Dogecoin.
Compatibility with Decentralized Exchanges
Currently, you can make transactions and trade Dogecoin on any decentralized cryptocurrency exchange in the world. This simply means that Dogecoin meets the latest cryptocurrency standards, and can keep up with the latest advancements in the field of cryptocurrency to maintain its functionality.
Some of the unique features of Dogecoin include it’s connection with Litecoin, it’s mining abilities, and it’s inflationary status. These features are regarded highly by investors.
Dogecoin depends on the proof-of-work consensus mechanism, in which a miner (the mining rig) has to solve complex problems in order to mine Dogecoin. This process is necessary to allow transactions on the Dogecoin network.
Hassle Free Transactions
Since Dogecoin is built on the same infrastructure as Bitcoin, its benefits resemble the benefits of Bitcoin as well. Even the code of Doge (short for Dogecoin) is similar to Bitcoin’s code. This means the same level of security and safety are available in the case of Dogecoin as well.
So, an investor can easily trade Dogecoin to make profit in the long run without worrying about its security. This is true for both the short term and long term investors.
Drawbacks of Dogecoin
No Supply Cap
One of the biggest drawbacks of Dogecoin is the absence of a supply cap. That’s because cryptos with no maximum supply cap don’t work well against inflation.
Since there is no supply cap in place and Dogecoin works on the proof-of-work mechanism, the increasing number of transactions will require more miners to join the network in order to keep processing the transactions in real time.
Bad Technical Support
The technical support behind Dogecoin is almost nonexistent despite it being one of the most well-known cryptocurrencies with a huge community of investors.
The development team is also very small as compared to other cryptocurrencies with almost the same market cap as DOGE. As a result of this, there has been no major updates from the DOGE development team since 2015.
There’s also nothing unique offered by Dogecoin in terms of technological features.
Low Transactional Value
Cryptocurrencies like Ether are the best ones when it comes to transactional cryptocurrencies. On the other hand, Dogecoin can only be used as a digital currency, and does not perform well as a transactional currency. Even cryptos like Bitcoin and Ethereum have more transactional value than Dogecoin in the market.
Although Dogecoin introduced a lot of people to a unique future of cryptocurrency, investors should still analyze the market and make their Doge investment decision after careful consideration.
Frequent Pumps and Dumps
Pump and Dumo schemes are a very common thing in the cryptocurrency market. Many cryptocurrency exchanges have introduced features to limit the existence of these schemes, but they still successfully target cryptocurrencies like Dogecoin.
Pump happens when a group of investors uses a huge sum of money to buy many coins. This causes the value of that crypto coin to increase due to the shortage in the market.
These people wait for the value of the pumped cryptocurrency to increase significantly before selling it back into the market with a huge return. Pump and dump schemes are very common in the case of Dogecoin.
Little to No Innovation
Dogecoin was originally made as a joke cryptocurrency to mock other cryptos like Bitcoin and Ethereum. Due to this very concept behind Doge, it is very hard to introduce updates, and to make it a perfect medium for trading or investment.
So, the fun nature of Dogecoin is a drawback on its own.
How Does Dogecoin Work?
Just like any other cryptocurrency, the transactions made on the Dogecoin network are recorded on the blockchain ledger. This is one of the key characteristics of any cryptocurrency, and this is what makes them so valuable for investors and traders around the globe.
Here is how Dogecoin differs a bit from other cryptocurrencies in the market.
Since this cryptocurrency has a shorter block time, it can process transactions very faster as compared to the cryptocurrencies like Bitcoin and Ethereum, which has a larger block size and time. The transactions can be confirmed within the blink of an eye in the case of Dogecoin.
There is a huge community of traders and investors interested in the Dogecoin. They use the cryptocurrency for many good purposes. This includes tipping an artist for their great work, or even buying a Tesla since the company supports payments in Dogecoin.
Since the cryptocurrency has lower market capitalization as compared to cryptocurrencies like Ethereum, its price is less volatile. This means you can trust and use the Dogeoin as a short term store of value.
Since Dogecoin is made after a meme, it has a young community. Also, the Dogecoin community is one of the most active cryptocurrency communities on the internet. You can use Doge to tip people online, or in charitable causes as well.
As far as mining Dogecoin is concerned, it uses the proof-of-work or PoW mechanism in its operations. This means miners can mine Doge just like they mine Bitcoin, or any other PoW cryptocurrency for that matter.
However, in order to prevent the use of extremely powerful Bitcoin mining rigs, Doge uses the Scrypt technology in PoW. This means that only ASIC and FPGA devices can be used to mine Dogecoin, instead of SHA-256 system used by Bitcoin. This makes Bitcoin rigs incompatible with Dogecoin.
Unlike many other cryptocurrencies which have a maximum supply limit, Dogecoin has no hard cap. At the start, Dogecoin had around 100 billion coins in circulation. However, because the block time for Dogecoin is only 1 minute, all of these coins are mined by the end of 2015.
After this, its developers decided to release additional 5 billion Dogecoins into circulation every year to keep the mining activity alive.
Doge calls terms its mining process as digging. Nodes are embedded into the Doge network, and are used to validate transactions and create new blocks. As it is apparent, Dogecoin mining process is relatively easier as compared to Bitcoin and other such cryptocurrencies.
Dogecoin developers never pre-mined the cryptocurrency. Pre-mining is a process which allows developers of a cryptocurrency to build their reserves before launching the cryptocurrency into the market.
A Brief History of Dogecoin
The developers of Dogecoin, Jackson Palmer and Billy Markus, had experience of working in the tech field before they developed and launched Dogecoin. They worked for IBM and Adobe prior to working on this project. The cryptocurrency was originally introduced as a joke.
The DOGE network first went live on December 6, 2013. The coin first got the attention of only a limited Reddit community. The people in that community started to buy Dogecoin in order to exchange tips. However, the Dogecoin website had over 1 million visitors on the very first day of its launch.
After 13 days on December 19th, the value of Dogecoin surged almost 300% in a matter of only 3 days. This is when the coin emerged as a hot investment for aspiring cryptocurrency investors. The price surge was short-lived as the value depreciated about 80% in the following 3 days.
After a few days, the native Dogecoin wallet was hacked by an unknown individual. The hacker was able to modify the send/ receive page of the native Dogecoin wallet, and successfully transferred millions of Dogecoin to a static wallet address.
A Proud Community Moment
Instead of ending the Dogecoin forever, the hacking event proved to be a major glueing point for the Dogecoin community. The community started a Dogecoin donation campaign termed as “SaveDogemas”. This campaign was meant to secure donations and replace the stolen funds, and it was successful.
In early 2014, the Dogecoin community also successfully secured an investment of $25,000 for the Bobsled team of Jamaica. This turned out to be the start of a huge sum of donation events which followed the first successful donation.
The community also raised funds to ensure a clean water supply in Kenya. There were countless donation events after this which transformed the Dogecoin community, and provided the cryptocurrency with global recognition.
Getting Listed On Moolah
Due to its high exchange volume and growing community, the cryptocurrency exchange Moolah was the first ever exchange to list Dogecoin. This listing provided Dogecoin with more liquidity in the market, and added to its credibility as well. Apex Green, a Reddit user started a campaign and used the Reddit handle Moolah_, which caused the cryptocurrency to be listed on the exchange.
At the start of 2018, every cryptocurrency saw a huge surge in value because of the huge inflow of investments. This was when Dogecoin saw its all-time high price of $0.017 per coin. Another such spike occurred in 2020 when a group of TikTokers started a campaign to push the value of Dogecoin up.
A Huge Price Hike
In late 2020, Dogecoin saw another huge 800% increase in its price. This increase happened only in a matter of 24 hours. This happened because of a campaign launched against hedge funds. This campaign also started on Reddit, and involved a community of credit users headed by our user named WSBChairman.
This strategy was also approved and endorsed by the founder of Tesla Motors and SpaceX, Elon Musk, who is now the richest man on earth as well.
The whole things started when a group of Redditors noticed that a hedge fund has openly started short selling the GameStop stocks. Due to this activity, the price of GameStop stocks started to decrease significantly.
Shorting a stock can provide you with great returns if the market goes down. However, of the stock price goes up, you’ll have to buy the same stocks that you sold for a higher price, and this results in a loss of money. This is why the Reddit group stared to push against the hedge fund by pumping the stocks of GameStop.
As a result of this battle, the hedge funds lost billions of dollars. The hedge fund quickly contacted some of the most popular trading platforms and made them stop the buying activity of GameStop stocks. This again caused the price of GameStop stocks to decrease greatly. This also resulted a legal battle in the following weeks.
When the same group of Reddit users realized that cryptocurrencies are immutable as compared to stocks, which can be halted easily, they started investing in Dogecoin instead. This campaign was so successful that it increased the price of Dogecoin back to $0.08, which was another all-time high for the cryptocurrency.
Dogecoin: Things to Consider Before Investing
After knowing more about Dogecoin in this guide, you might be wondering whether or not you should invest in this cryptocurrency.
If you are curious, here are some of the most important things you must consider before investing in Dogecoin.
The first thing you should keep in mind is that the price of Dogecoin is very volatile. It is one of the most volatile cryptocurrencies, in fact, its price can even fluctuate by 50% in less than 24 hours. This is a double edged sword, meaning that you can either lose or gain 50% in 24 hours by making an investment in Dogecoin.
So, if you are daring enough to invest in Dogecoin, you should also be ready for the involved risks.
Zero Intrinsic Value
You should also note that Dogecoin does not have any intrinsic value. This means it is not physically associated to any valuable item, like gold. Dogecoin is created by the mining process, and there is no government or central organization controlling its supply or demand.
Lack of Widespread Acceptance
Unlike big cryptocurrencies like Bitcoin and Ethereum, Dogecoin is still not widely accepted. However, there are still lots of things you can buy with the help of Dogecoin. There are lots of major exchanges which accept Dogecoin transactions. So, although Dogecoin is not widely accepted, there are still lots of places to spend it.