What is Dogecoin (DOGE)?
You've likely heard of Dogecoin (DOGE) before. While it may look like just a meme coin, there's actually more to it than that.
Technically speaking, Dogecoin is a cryptocurrency like any other. It is created digitally, stored in a globally distributed ledger (a.k.a. blockchain), and it holds value, like Bitcoin, Litecoin, and Ethereum.
Of course, if you ask a group of cryptocurrency enthusiasts, you’ll probably get an answer that is somewhere along the lines of “dogecoin… is an entirely different animal”. Find out why in today’s article on dogecoin, or DOGE as the ticker says in the exchange.
- Dogecoin is an open-source cryptocurrency that features the Japanese Shiba Inu as its logo.
- Regarded as one of the first altcoins with a loyal community of supporters who actively use it as medium of exchange on social media and the internet.
- Uses the same Proof-of-Work (PoW) consensus protocol that is based on Litecoin’s technology.
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What is Dogecoin?
Most cryptocurrencies were developed to support decentralised networks and projects. Dot was made for Polkadot, an interoperable network of blockchains. Ether was made for Ethereum, the pioneering blockchain that supports smart contracts.
Dogecoin was made for fun. Yes, you read that correctly.
On 6 December 2013, software engineers Billy Markus and Jackson Palmer got together to work on a new cryptocurrency that is based on bitcoin, with some alterations that took them just a few hours to make.
In the early days of blockchain technology, bitcoin and many other cryptocurrencies were still shrouded with mystery, as public knowledge, not to mention the ownership, of cryptocurrencies were very limited. According to economist Usman Chohan, the creators of dogecoin wanted it to be open to the masses.
To add familiarity to the new cryptocurrency, the creators purposely used the popular internet meme, Doge, as a mascot and the coin’s namesake.
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Why is Dogecoin gaining popularity?
Dogecoin was made to poke fun at the mysterious and technical world of cryptocurrencies, and the creators made it approachable to buy for most young people. This strategy seems to have worked to give Dogecoin its first breakthrough in market popularity.
From most of its early days, Dogecoin has been used as a social symbol to represent a community’s enthusiasm for a specific Internet culture. Having Dogecoins could make a social group feel good about themselves, but not in the sense that not having it would be a problem at all.
Dogecoin also gained positive light by the press when it was used as a medium for charity events. For example, in January 2014, a community consisted of Dogecoin miners and holders pooled together to raise more than $30,000 to help send the Jamaican bobsled team and several other teams from India to the Sochi Winter Olympics.
Dogecoin’s founders’ non-profit entity, the Dogecoin Foundation, did a fundraiser campaign with charity: water in March 2014 to raise 40 million dogecoins (which was worth about $50,000).
The group ended the campaign with more money raised, as hundreds of volunteers pooled together their dogecoins on top of a 14 million Dogecoin tip ($10,000 at the time) by an anonymous donor using Twitter’s bot.
Towards 2020 and 2021, Dogecoin evolved into somewhat of a crypto celebrity, owing to an increasing level of endorsement by celebrities, such as Elon Musk, Snoop Dogg, Mark Cuban, Vicky-Lee Valentino, and Gene Simmons among others.
These people would make announcements on social media about their plans around Dogecoin, such as allowing customers to pay for certain products, access to shows, NFTs, and more. For each time one of the celebrities mentions Dogecoin on social media, the price of Dogecoin rises sharply.
In the first week of April 2021, the price of Dogecoin blew up by 100% within 24 hours, and about 500% within seven days.
There may have been similar cases with Dogecoin in the past eight years of its existence, but it hasn’t gained as much of a media spotlight as it does now.
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Is Dogecoin a good investment?
With Dogecoin’s price hitting a new record high at $0.69 per coin from less than 1 cent in 8 years, you might be thinking that the creators are patting themselves on the back for having launched a successful cryptocurrency.
However, in a letter to Bloomberg, Billy Markus wrote:
“I’m half detached, but it’s weird that something I made in a few hours is now part of internet culture …. It’s amusing to see Elon Musk talk about it. It feels silly, but there’s this huge upwelling behind it.”Billy Markus
This is because as Dogecoin was made for fun and (unintentionally) charity, he had not expected it to be valued as high as many retail investors are willing to pay for it.
No doubt that the entire bull run is highly speculative at best and the coin’s valuation is backed up by nothing but the spirit of the Internet community.
As always, before investing in any cryptocurrency, especially for the long-term, some due diligence in research is expected. Any investment asset should be analysed under two lenses — fundamental and technical analysis.
Like ether, Dogecoin is an inflationary crypto asset. It initially had a 100 billion coin supply cap, but since 2014, the creators decided to have the coin’s supply to be infinity with a predictable supply rate at five billion Dogecoins every year.
The consistent supply rate also means that over time, the inflation rate approaches 0%, starting at 4% in 2019 and estimated to be 2% by 2035. This means the price of Dogecoin would fundamentally rise, however not as steeply as bitcoin once all bitcoins have been mined.
Some would argue that this is best to keep the trade volume of Dogecoin at a healthy level, as inflation encourages users to exchange Dogecoin rather than hoarding it like bitcoin.
Development and governance
Crypto assets are rarely perfect as final products, and active development is often required to keep the blockchain running efficiently and making the asset a usable daily commodity.
Ross Nicoll is one of the few people who maintain the code behind Dogecoin, ensuring that scalability issues will be solved to allow even more people to use the crypto. However, in terms of project leadership, there really is no leadership, nor there is an active forward-looking project.
The founders withdrew from the project. There have not been many (if any) updates on the core code, making Dogecoin a lagging cryptocurrency that has very limited capabilities — for peer-to-peer transactions, and that is almost all.
Price movement and market capitalisation
In terms of price movement, for a high-market cap coin (placing 4th just in front of Ripple XRP), Dogecoin is quite volatile. Dogecoin’s price hikes have been driven primarily by herd mentality.
High market cap coins like bitcoin are now far more resistant to pump and dump schemes because there are more individuals who hold a portion of the entire bitcoin economy.
However, when it comes to Dogecoin, a report on February 2021 reveals that the biggest wallet accounts for 28% of the entire supply of Dogecoin so far in that year.
Meanwhile, another report reveals that 1% of wallets own 55% of all bitcoins, but you have to remember that these could very well be the wallets of large institutions, and those that offer bitcoin ETFs, which are tradable derivative assets whose investors don’t necessarily hold any bitcoin.
Thus far, large institutions have revealed that bitcoin is part of their corporate balance sheet. Dogecoin ownership structure, on the other hand, is largely a mystery.
Regular and organised buys on social media such as Reddit and Twitter have repeatedly pumped the prices to levels that don’t make sense to most serious investors in the crypto space.
A study has shown that price hikes have been driven by the same retail buyers who drove the Gamestop stocks’ short squeeze — demonstrating how powerful herd psychology can be in any market.
How to buy Dogecoin (DOGE)?
With that said, Dogecoin is truly a unique cryptocurrency that seems to obey its own rules and is highly influenced by the sentiment of its holders, the market, and how the community perception. It is best to exercise caution and conduct your research beforehand.
Mark Cuban, the man behind Dogecoin’s additional use case for purchasing NBA tickets, remarked in an interview with Coindesk, “It’s not necessarily the best investment you can make… but that’s a better bet than buying a lottery ticket.”
He referred to the fact that lottery winning chances aren’t as significant and equal as the chances for Dogecoin holders to strike huge profits from holding Dogecoin. In addition, Dogecoin’s prices could go up, unlike a lottery ticket.
So, how can you buy Dogecoin?
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated February 21, 2023