- Dogecoin has lower transaction charges compared to most other crypto coins.
- Its block creation speed is quite fast.
- Dogecoin has a thriving online community which offers active social media support.
- Since its inception, it has been making headlines for community fundraising for great causes.
- It has garnered support of Elon Musk which has helped in raising it’s per coin price.
- Dogecoin is now supported by the major crypto exchanges.
- It was created with no serious intentions and so the fundamentals are not much robust.
- There is hardly any active development team behind it.
- The unlimited token supply may lead to inflation effect in future.
- Dogecoin price is more volatile than other ones.
- Its network is not as robust and secure as the leading contenders in this sector.
- It has witnessed a sharp rise and fall in prices in recent times
Dogecoin is a cryptocurrency similar to Bitcoin and Ethereum, but it’s not the same as either of these prominent coins. Dogecoin was named after a once-popular meme and was designed at least in part as a light-hearted joke for crypto fans. Despite its strange genesis story, Dogecoin has exploded in popularity in 2021, becoming the fifth-largest cryptocurrency by market capitalization as of this writing.
What is Dogecoin?
In late 2013, software programmers Billy Marcus and Jackson Palmer invented Dogecoin. Palmer created the cryptocurrency’s logo by misspelling the word “doge” to describe a Shiba Inu dog, which was a popular meme at the time.
“Doge started to make fun of Bitcoin,” Pat White, CEO of Bitwave, remarked. In the beginning, a community of Dogecoin supporters organized publicity stunts to raise the currency’s popularity, such as raising cash to send the Jamaican Bobsleigh squad to the 2014 Olympics or sponsoring a NASCAR driver.
Dogecoin attained cult status in early 2021 on Reddit’s WallStreetBets message board—the primary catalyst for the GameStop incident in January—where supporters promised to push its value “to the moon” (that was before all discussion of crypto was banned on the subreddit).
Dogecoin is no longer a joke, with its value skyrocketing by more than 5,000 percent in 2021. Tesla CEO Elon Musk is a supporter, calling Dogecoin his favorite cryptocurrency. Musk also dubbed Dogecoin the “people’s crypto” and stated that a physical Dogecoin token would be planted on the moon.
How Does Dogecoin Work?
Dogecoin is a cryptocurrency that, like Bitcoin and Ethereum, is based on blockchain technology. Blockchain is a decentralized digital ledger that stores all transactions conducted with a decentralized digital currency in a distributed, secure manner.
The Dogecoin blockchain record, which is frequently updated with all new transactions in the cryptocurrency, is carried by all holders in an identical copy. The blockchain network of Dogecoin, like those of other cryptocurrencies, uses encryption to keep all transactions secure.
Miners are people who use computers to solve complex mathematical problems in order to execute transactions and record them on the Dogecoin blockchain—a mechanism known as “proof of work.” Miners receive more Dogecoin in exchange for processing transactions and supporting the blockchain ledger, which they may then keep or sell on the open market.
Dogecoin can be used to make payments and purchases, but it isn’t a particularly good store of value. This is primarily due to the fact that there is no lifespan limit on the number of Dogecoins that may be mined, making the cryptocurrency highly inflationary by design. The blockchain compensates miners for their efforts by creating millions of new Dogecoins every day, making speculative price rises in Dogecoin difficult to sustain over time.
Dogecoin vs. Bitcoin
When compared to Bitcoin, Dogecoin has a few key differences. First, miners can finish the mathematical calculations that complete and record transactions faster and more easily, making Dogecoin slightly more efficient for payment processing.
“On the Bitcoin blockchain, the procedure to ratify new blocks takes 10 minutes, while on the Dogecoin blockchain, it takes only one minute,” said Gary DeWaal, Chair of Katten’s Financial Markets and Regulation group.
Another notable distinction is that, as previously mentioned, there is no lifespan limit on the number of Dogecoins that can be created. The maximum amount of coins that can be minted is limited by a lifetime limitation of 21 million Bitcoins. This forces miners to work harder and longer over time in order to earn new Bitcoin, which helps to ensure Bitcoin’s ability to hold and grow in value over time.
Is Dogecoin a Good Investment?
There is very little incentive to keep Dogecoin for the long term because there is no lifetime restriction on the quantity of Dogecoins that can exist, and millions of new Dogecoins are put onto the markets every single day. Because of the system’s lifetime cap on the number of coins that can be minted, Bitcoin’s value continues to climb.
“Doge is more like DASH or Bitcoin Cash than Bitcoin,” White explained, “where the express objective is a spending currency.”
Dogecoin’s per-coin value has historically been quite low, hovering around $0.003 for most of 2020, therefore individuals were more likely to give them away. “Users on social media networks such as Reddit, Twitter, Facebook, and others may use Dogecoin to reward, or “tip,” one other for submitting content,” Gray explained.
The advances in Dogecoin that occurred in 2021 may not be sustainable in the long run. It remains to be seen whether the cryptocurrency tipping and donating culture can survive.
Should You Buy Dogecoin?
Those that purchased Dogecoin at the beginning of 2021 were rewarded handsomely. White is still hesitant to acquire Dogecoin, especially as an investment. The steady influx of fresh coins onto the market kept the coin’s value under constant downward pressure.
In comparison to other prominent cryptocurrencies, White also warned about greater security dangers for Dogecoin. “It simply hasn’t been subjected to the same amount of security and code analysis as Bitcoin or Ethereum. Plus, because there isn’t much of a mining community around Doge, the risk of a mining-level attack is far higher than it is for something like Bitcoin.”
Purchasing any cryptocurrency, including Dogecoin, entails some risk. It’s always a good idea to buy a few coins and get to know the system, but it’s definitely better not to invest more than a little amount of your hard-earned cash in a cryptocurrency that began out as a joke.