Introduction
Cryptocurrency has achieved so much in the past years that no one expected. It started with Bitcoin as the largest cryptocurrency, and within a few years, several cryptocurrencies came into the market.
With hundreds of coins present, consumers considering getting cryptocurrencies may find it hard to understand what they are dealing with, especially with prominent names like Bitcoin and Ethereum. Dogecoin was created in 2013 by two software developers. However, it has evolved into a sweetheart in the crypto industry.
Despite being invented as a joke, Dogecoin acquired traction in 2021 with significant price hikes. It joined the top crypto market ten cryptocurrencies after a rise in 2021. Several people are eager to buy Dogecoin after seeing the price increase in 2021.
But before you plan to invest in Dogecoin, you should thoroughly grasp the basic information about it. This guide will explain all you need to know about Dogecoin, including its history.
Understanding Dogecoin
Dogecoin is one of the thousand cryptocurrencies that later emerged. It is an open-source and P2P (Peer to Peer) system. It initially began as a silly joke among crypto enthusiasts, but it swiftly grew to become one of the most popular cryptocurrencies present. It was founded in December 2013. Just like other cryptocurrencies, it is built on the same fundamental concept.
The Dogecoin trade mark is based on a well-known meme of the time Shibu Inu dog. Furthermore, Dogecoin provided certain benefits, such as quicker access speeds and lower transaction fees. It also has the backing of a strong community centred on the DOGE, dubbed the “Doge Army”.
Scrypt is a simpler variation of the hashing method used by Dogecoin. It also employs the PoW consensus, allowing it to accept work from several other Scrypt-based platforms. Dogecoin mining uses less electricity than the Bitcoin algorithm SHA-256.
History of Dogecoin
Two software developers, Jackson Palmer and Bill Marcus, who worked at Adobe Systems and IBM, developed Dogecoin in 2013. It was built with open-source code derived from Litecoin. The primary goal of its construction was to enhance public understanding of the potential of blockchain innovation.
1n 2021, cryptocurrency alone made a growth of 4000%. All thanks to the backing of a massive online community that includes Elon Musk, famous American entrepreneur Mark Cuban, and American rapper Snoop Dogg, with some experts projecting the price to hit $1 before the year ends.
Several publicity stunts have been involved in the notable headlines, like the $50,000 campaign to take the Jamaican Bobsled Squad to the Winter Olympics of 2014, as the team couldn’t afford to participate further after qualifying for the next round.
By 2021, all these marketing stunts had elevated Dogecoin to near-cult status. It received traction on Reddit’s WallStreetBets discussion forums and via Elon Musk’s tweets. All these raised its worth “to the moon”.DOGE’s price has stayed remarkably stable since its introduction, but it began significantly growing in April 2021. It touched the highest price of $0.7376, while the lowest was $0.00008547.
How does Dogecoin Work?
Dogecoin is a blockchain-based cryptocurrency that works on a safe digital ledger system that saves records of all the transactions conducted on its network. Its working is similar to other cryptocurrencies. Dogecoin also uses cryptography to safeguard all activities taking place on its network.
Dogecoin employs the “proof-of-work” principle, in which miners utilize computers to tackle complicated mathematical problems to execute and verify transactions. In return, miners get incentives in the form of cryptocurrency for their work and efforts with Dogecoins. It Is up to the miners whether they want to keep it in their crypto wallets or sell it.
Dogecoin may be employed to make payments and transactions, but it is not employed as a store of value. This is because Dogecoins may be manufactured indefinitely, rendering the cryptocurrency extremely volatile by nature. DOGE miners can complete complex computations and verify transactions more quickly and easily.
This renders Dogecoin highly effective for processing transactions. It takes approximately 1 min to process and verify a new block on the blockchain in the case of Dogecoin, whereas Bitcoin takes about ten minutes to do the same job. However, this distinction helps Bitcoin preserve and build in value as time passes, requiring miners to work harder to verify each block.
Characteristics of Dogecoin
Decentralization
Decentralization is a component of the safety that governs various cryptocurrencies, which means that safety is under the control of a global user base. Decentralization in the crypto world is often determined by the presence of nodes over its chain and the dispersion of miners.
As per Blockchain, Dogecoin comprises 1,090 nodes, contrasted to the 10,000 nodes well of Bitcoin, which is spread around 97 countries worldwide. As a result, the Dogecoin system is vulnerable to a 51% assault, in which a single individual or organization commands more than 50% of the system.
Token Supply
Dogecoin has no limited supply like other cryptocurrencies. Miners get 10,000 DOGE for every block. Every minute, a new block is generated, requiring the creation of 14,400,400 additional DOGE coins daily. These coins are subsequently traded on the market or held in miners’ wallets.
Several Dogecoin wallets have a large number of DOGE in use, which poses a danger since they have a disproportionate influence over price volatility and liquidity. Approximately 2/3rd of the entire Dogecoin supply is in 0.002% of Dogecoin wallets. It is a completely different situation when it comes to Bitcoin. Bitcoin has a uniformly dispersed wallet ownership.
Pros of Dogecoin
Increasing User Base
One of the benefits of Dogecoin is its well-established and rapidly developing user base and advocates. Regarding market value, it is among the top 10 cryptocurrencies worldwide. At one point, it even came in fourth place. Cuban and Musk argued that its rising community of users makes it a suitable means of trade.
Available on Decentralized Exchanges
Dogecoin may be transacted and exchanged on decentralized exchanges. The Ren Project, in particular, has allowed it to function on the Ethereum blockchain network and utilize the decentralized finance system. This implies that it is interoperable with the bitcoin market’s burgeoning decentralized finance trend.
Furthermore, since it has its own blockchain, it cannot interact directly with a smart contract. Instead, it has a built-in smart contract functionality, which may be “wrapped,” which locks it in a state compatible with a contract until its release.
Volatility
Because of their vulnerability to speculation-related happenings, growing competitive rivalry, and shortage of global consensus as a group of assets, cryptocurrencies are very volatile by nature. Their past record has seen tremendous peaks and dramatic price decreases in a brief period of time. The same may be said about Dogecoin.
Still, volatility can have certain benefits, particularly for day traders who purchase and trade assets in a single day. Price changes in a single day might enable cryptocurrency investors to profit significantly through day trading.
Availability
Dogecoin is more widely available on different exchange sites compared to other cryptocurrencies. This maintains a steady supply and demand of the coin, which in turn leads to an increase in the total worth of the coin.
Several people are interested in Dogecoin for its fame and online community support, but it also offers features that make it user-friendly compared to other popular cryptocurrencies such as Ethereum.
Cons of Dogecoin
No Supply Limit
One of the main drawbacks of Dogecoin is that there is no supply limit, unlike other cryptocurrencies such as Cardano and Bitcoin, as their supply is predetermined. This makes them deflationary in nature and is thought to create scarcity leading to an increase in the price of the token. Cryptocurrencies without supply caps are poor choices for inflation protection.
Moreover, the ever-increasing supply will necessitate more extensive blockchain mining operations in the future. Since Dogecoin cryptocurrency employs a PoW process to obtain consensus, it will need to enlarge its group of miners and improve its computational skills to accommodate a rising volume of transactions.
Dogecoin’s Detractors
Many media persons and financial experts were sceptical about this coin. As stated above, the creators of this cryptocurrency also created it as a joke. A few experts have regarded it as an exceedingly risky investment, marked by heightened susceptibility to predictions and craze fueled by herd mentality. Others refer to it as a pyramid scam.
avid Gerard stated in a 2021 essay printed by Foreign Policy that there is no practical application for cryptocurrency other than trading. He went on to say that these “assets” don’t have much use. Individuals who are unaware of actions just jumping on the bandwagon are frequently victims of personal finance and investing fads.
Inadequate Technical Support
Despite its increasing network of Investors and advocates, Dogecoin has inadequate technical assistance. The core tech is smaller than that of other cryptocurrencies. Additionally, the product plan is not as well defined as these bitcoin industry titans.
No significant technological improvements or breakthroughs have occurred since 2015. It is also worth noting that it lacks any distinctive selling point in regard to technology. In comparison to the prominent participants, the declared aims or ambitions of Dogecoin and the overall blockchain system are not as lofty.
Limited Availability on Exchanges
Several exchanges do not widely accept Dogecoin. This forces investors must utilize an exchange like Poloniex to swap their Dogecoins for other cryptocurrencies or Dollars. This signifies that the currency has a low level of liquidity in many trading systems.
Delayed Transactions
Dogecoin requires a longer processing time to carry out a transaction since they are generally crowded. This is because of the fact that most exchanges do not offer the currencies, and there is insufficient liquidity to sustain vast volumes of trading.
Value Limited to its Own Network
Dogecoin possesses value only inside of its own network. It has little to no worth outside of its system and hence cannot be utilized to purchase products or goods from other marketplaces, making it basically worthless beyond its own network.
Major Differences Between Dogecoin and Bitcoin
Dogecoin differs significantly from Bitcoin in several ways. Firstly, miners may finish the complex computations that solve and verify transactions faster and more straightforwardly, making Dogecoin, therefore, more efficient for verifying a transaction. Dogecoin takes 1 min to ratify a transaction and generate a block, while in the case of bitcoin, it takes at least 10 mins to validate a new block.
Another critical distinction is that there is no lifelong limit on the amount of Dogecoins that may be generated. Whereas in the case of Bitcoin, only a limited amount of 21 million tokens were generated, and there will not be any tokens for a long time. This implies that miners must work harder for long periods to earn a Bitcoin, which aids in ensuring Bitcoin’s capacity to retain and increase in value with time.
How to Purchase Dogecoin
Dogecoin may be bought on a variety of cryptocurrency exchanges. Firstly, you must create an account by registering online with an exchange supporting the currency. The account must be financed with US cash or cryptocurrency.
The next step is to fill the crypto wallet and begin making purchases. Purchases can be made via a broker. If successful, the Dogecoin will appear in your crypto wallet. If unsuccessful, the order might be canceled and another placed in the next trading session.
Another alternative is to purchase a crypto wallet that includes private keys for storing your DOGE away from the exchange. A crypto wallet will provide additional protection for your coins in the event of a breach or assault on the exchange. Two types of Crypto wallets exist Hot wallets and cold wallets.
A hot wallet is normally free but necessitates the use of the internet to work; therefore also called an online wallet. Cold wallets are independent of internet connection but may incur a price based on the supplier. Dogecoin, a wallet that is accessible for both desktop and mobile use, is the finest to use.
Dogecoin as an Investment
There is virtually little motivation to keep Dogecoin for longer because there is no lifespan restriction on the quantity of Dogecoins that may exist. Every day millions of Dogecoin are launched in the crypto market. Bitcoin’s value keeps rising due to the supply cap, and only a limited amount is present. That is why it is called a deflationary cryptocurrency.
White said that Dogecoin works more like Bitcoin Cash than Bitcoin itself, and its only purpose is to spend money. As a result, it is better suited as a trading currency rather than an investment like other cryptocurrencies. Dogecoins have gained popularity as a “tip” or incentive for publishing material on social networking sites like Twitter.
Despite the aforementioned obstacles, DOGE saw a significant increase in 2021. Some cryptocurrency specialists believe that the surge will not last in the long run. Other disadvantages of Dogecoin include its significantly poorer safety and privacy examination, as well as its absence of a substantial mining community when compared to rivals like Bitcoin. These tasks expose you to an attack.
Is It Wise to Invest in Dogecoin?
This question does not have a straightforward yes or no response. Dealing with Dogecoin may be appropriate for certain people, while it may not be appropriate for others. There is danger associated with any kind of investment.
Cryptocurrency values may fluctuate dramatically in a matter of seconds. If you’ve been following market headlines, you’ve probably heard of folks who became billionaires in a few days while others lost huge amounts of money in just a blink of an eye.
Generally, Dogecoin might be considered an investment since it has been in the market for a while and has a dedicated community, and its price has risen over time. That being stated, you must be prepared to resist price decreases that take place regularly. Earning money in Dogecoin is not a piece of cake.
You must be willing to accept difficulties and watch the price fluctuate in unpredictable ways. Finally, conduct research to identify the best wallet to store your Dogecoin and compare exchanges to pick one that suits your requirements. If you are ready to take the challenge and resist the hazards, then, of course, Dogecoin can give promising returns.
Conclusion
Dogecoin was created as a joke but gained traction with several cryptocurrency users in no time. It gained support from the social media community and famous people like Elon Musk, who contributed to its popularity. Though it works like other cryptocurrencies, it provides a faster transaction rate of one minute and low transaction fees.
Obviously, it bears the critiques leveled at cryptocurrencies, the dangers of variables influencing the marketplace and the drawbacks of the blockchain. One of its key disadvantages is that it may not be a good asset to buy in or sell due to its social media-driven value and vulnerability to speculation-related happenings. Ultimately, investing in Dogecoin can provide benefits, but it also requires the investor to be risk resistant.