Dogecoin

What is Dogecoin (DOGE)?

Derided by critics as nothing more than a joke or a meme, that is exactly what Dogecoin began as. Created as a joke for crypto enthusiasts in the early days of the technology, Dogecoin hit the headlines with various publicity stunts, including a fundraiser aimed at sending the Jamaican bobsled team to the 2014 Olympics.

Despite being the OG meme crypto, Dogecoin does in fact run on its own dedicated blockchain. Similarly to Bitcoin, Dogecoin remains a proof-of-work (PoW) blockchain, but it also has an inflationary economic model. This characteristic has seen trials of its use as a cash alternative since it is not as good a store of value as many other cryptocurrency tokens.

When Was Dogecoin Launched?

Dogecoin was launched in December 2013 as a hard fork of Litecoin, which had previously forked away from Bitcoin. This makes Dogecoin a spiritual descendant of Bitcoin itself, even if its original purpose was to poke fun at the original.

The concept of Dogecoin was created around the then-popular internet meme of a Shiba Inu and the word ‘dog’ being misspelled by adding the letter e.

Along with the humor inherent to its concept, the creators of DOGE also intended to advertise the benefits of cryptocurrency. They did this by staying light-hearted and unconventional, while also making sure it actually worked as a form of digital cash.

Who are the Founders of Dogecoin?

Dogecoin was created by Billy Markus from Oregon, WA and Jackson Palmer from Sydney, Australia. Unlike many blockchain founders, however, the original creators of the memecoin aren’t quite as associated with their creation today as certain other personalities.

Tech entrepreneur Elon Musk is often considered Dogecoin’s main evangelist now, with his routine social media posts about the coin reaching tens of millions of followers. Many of his tweets on DOGE led to or coincided with major rallies in price, although he has also addressed the risks involved with the currency on several occasions.

In February 2021, DOGE co-creator Billy Markus expressed his disbelief at the price action and valuation of the meme currency. In his open letter, Markus pointed out that a $1 DOGE would send its ‘market capitalization’ higher than some of the world’s most valuable companies.

Markus is part of the Board of Advisors to the Dogecoin Foundation, which aims to support the Dogecoin Ecosystem and see to the future of the blockchain. Also on the board advising the foundation are the project’s core developer, Max Keller, Ethereum founder Vitalik Buterin, and Jared Birchall, the head of the Musk family office and representative of Elon Musk to the board.

How Does Dogecoin Work?

Like its pre-fork predecessors, Litecoin and Bitcoin, Dogecoin has its own proof-of-work blockchain where consensus is achieved by computers (called miners) solving complex mathematical puzzles to create blocks. These blocks are batches of transactions and are recorded on the blockchain every minute.

Miners are rewarded with additional Dogecoin for their role in supporting and securing the blockchain. Unlike Bitcoin and Litecoin, there is no cap on how much DOGE can be created in this manner.

What Makes Dogecoin Unique?

Starting right from its launch, Dogecoin has branded itself as a fun, laid-back, community-oriented cryptocurrency that aims to do good in the world. Along with headline-grabbing stunts, like raising 27 million DOGE to send Jamaica’s bobsled team to the Olympics in 2014, the Dogecoin community is well-known for its philanthropy.

In the years following its launch, Dogecoin was used mainly as a currency with which users of social media sites could tip each other. Nonetheless, some have also used the token as a medium for the exchange of real goods and services.

Following DOGE’s rally and rise to prominence in 2021, several major brands, including the fashion giant Gucci, have announced their acceptance of Dogecoin as a method of payment in stores.

How is Dogecoin Secured?

Dogecoin, being a hard fork of Litecoin which forked off Bitcoin, is based on the same extremely safe SHA-256 cryptography that Bitcoin is. It’s a PoW blockchain where miners dedicate their computing power to solving mathematical riddles to create new blocks and add them to the blockchain.

DOGE is mined using the Scrypt algorithm, which is a relatively fast form of mining. The blocks, which are mined every minute, have a block reward of 10,000 DOGE.

The often wild popularity and rallies in the price of DOGE often work in its favor safety-wise, as when the price rises, so does the profitability of mining. This causes more miners to start mining DOGE, meaning more computational power is dedicated to the network’s security.

What is the Use of Dogecoin?

One of Dogecoin’s greatest criticisms is the general perception that it lacks a real use case, which along with its infinite supply tends to provide plenty of ammunition for critics.

In May 2022, creator Billy Markus reinforced the early usage of DOGE in tipping as its best possible utility going forward, stressing that this aligns with the mission of Dogecoin of bringing happiness. He also suggested that its usage as currency as well as the creation of a Dogecoin/Ethereum bridge to enable its use in Web3 applications would cement its future.

In response, Elon Musk voiced strong agreement for the idea that DOGE could be used as a currency and noted that its tipping utility would be nice to have. However, the billionaire seemed to show no support for Markus’ Web3-based proposal, and not much development work on it has been seen.

DOGE’s use as a currency remains especially viable given that its infinite supply makes it much easier to spend than Bitcoin. BTC’s scarcity leads to it being an excellent store of value and teases the potential for appreciation, which disincentivizes spending.

Dogecoin’s supply is also predictable in its inflation via mining, unlike fiat currencies which are largely dependent on the whims of central bankers.

Who Controls Dogecoin?

The Dogecoin Foundation is currently in charge of supporting the Dogecoin Ecosystem and overseeing the community. It was originally founded in 2014 but dissolved over time due to inactivity.

With DOGE back in the eye of the public, the non-profit Foundation was relaunched in 2021.

On its board are Gary Lachance, Jens Wiechers, Michi Lumin, and Timothy Stebbing. The foundation’s manifesto was signed by each of them, in addition to Ross Nicoll (Dogecoin Technical Advisor), Max Keller (Dogecoin Core Developer), and Billy Markus himself.

How Much Dogecoin Is In Circulation?

While both Bitcoin (21 million) and Litecoin (84 million) have a cap on how many tokens may ever be in existence, Dogecoin doesn’t feature any such limitation. Thus, the exact figures will change over time with more DOGE being created every minute. At the time of writing, there are more than 130 billion DOGE in circulation.

As of June 2022, over 23% of this (more than 30 billion DOGE) is held by one wallet. This same wallet held over 36 billion DOGE a year previously.

Meanwhile, the top 10 holders of DOGE have over 48% cumulatively and the top 8 wallets each hold over 1% of the currency individually.

This is in stark contrast to Bitcoin, where only one wallet holds over 1% of the currency and the top 10 holders have only 5.5% of the circulating supply between them.

How Do You Buy Dogecoin?

As one of the most popular cryptocurrencies available, almost every major exchange lists DOGE and provides trading pairs with other major cryptocurrencies, stablecoins, and fiat currencies.

Centralized exchanges remain one of the most popular means to purchase DOGE but peer-to-peer purchases are also possible as long as participants have the right wallets set up.

Dogecoin is also often listed by various neo-brokers and other miscellaneous trading platforms. Nonetheless, suspicions remain around those that do not allow the actual withdrawal of DOGE to the user’s private wallet. 

Given the lack of regulation of cryptocurrencies and auditing culture around Wall Street, many of these platforms haven’t been called upon to prove their ownership of the underlying assets.

Is It Possible to Buy Dogecoin Instantly?

Purchasing DOGE on a centralized exchange or other trading platforms can seem instant, but that’s because the user hasn’t actually had any Dogecoin move to their wallet. Rather, the CEX simply changes balances in the user’s account to reflect any trades they have carried out.

Transferring this purchased Dogecoin out of an exchange account and into a private wallet may also not provide an accurate view of DOGE’s settlement speed. This withdrawal step often entails various AML (Anti Money Laundering) procedures and other checks which can delay the transaction from being initiated.

A peer-to-peer purchase or transfer of DOGE from one wallet to the other, however, will highlight Dogecoin’s speed. With a block mining time of just one minute (compared to Bitcoin’s ten and the multiple days needed by traditional finance), transactions actually settle very quickly.

How Do You Store Dogecoin?

As suggested above, Dogecoin HODLers need wallets if they are to take full custody of their DOGE. These wallets can come in several forms, including:

• Cold wallets. Referring to ‘cold storage’, these wallets keep private keys offline and thus safely out of the reach of hackers. These can be devices not connected to the internet or simply paper copies of the private key.
• Hot wallets. Unlike cold wallets, these are connected to the internet. They can be desktop clients or online/web wallets that store credentials with the online wallet provider rather than the user’s hardware.
• Exchange wallets. These are forms of online or web wallets. However, a user’s exchange account isn’t necessarily a fully functioning DOGE wallet and may just reflect a notional balance. As such, when sending cryptocurrency to an exchange account, there may be some form of identification system or memo in place to ensure that the funds reach the correct user account.

Dogecoin Energy Consumption

According to the Digiconomist, Dogecoin draws approximately 4.26 TWh of electricity per year. They liken it to the annual consumption of a country like Namibia.

As a proof-of-work blockchain that requires computing power to run, Dogecoin’s electricity consumption is high in comparison to proof-of-stake cryptocurrencies. Still, it is lower than Bitcoin’s (204 TWh according to the same source).

Additionally, it is noted that the greater the market value of a PoW cryptocurrency, the greater its impact. That’s because when mining becomes more and more profitable, there is a rush of new miners wanting a piece of the pie.

While 4.26 TWh is a lot of power for a meme, it nevertheless pales in comparison to the global banking system, which was estimated by Galaxy Digital to guzzle an astounding 263 TWh of energy every year.

Is Dogecoin a Good Investment?

With 2021 and 2022 prices taken as a reference, Dogecoin has been an excellent investment for those that took long positions in previous years. As recently as 2020, DOGE traded for as little as $0.003, before reaching an all-time high of $0.75 in 2021.

An investment into Dogecoin is seen by some as a bet on its potential to grow into a real cash alternative. However, others dismiss it as a get-rich-quick scheme or an attempt to ride the coattails of market movers like Elon Musk.

And for some, owning a little DOGE just means becoming part of the community and having a laugh.

What are the Risks of Owning Dogecoin?

While DOGE has proved lucrative and even life-changing for many in the long term, risks to holders that view it as an actual investment remain.

Many cryptocurrencies point to the utility for their value. For example, Polkadot is staked to secure the ecosystem, whereas Ethereum is burned to confirm transactions. Dogecoin, however, is yet to truly find a real use case, although its adoption as a medium of exchange is growing.

Other cryptocurrencies, like Bitcoin, serve as excellent stores of value thanks to their scarcity, but Dogecoin remains risky since its economic model is one of constant supply growth without an upper limit. While very similar to fiat money in this regard, DOGE cannot serve as a store of value considering this lack of scarcity.

Great potential for destabilization also exists within the concentration of Dogecoin among ‘whales’, or the wallets with the greatest holdings. A single wallet holds almost a quarter of the DOGE in circulation at the time of writing, and close to half of that amount is held by the top 10.

This is a significant risk. If one or more of these ‘whales’ were to dump their holdings on the open market, the DOGE price would be very adversely affected.

Lastly, Dogecoin doesn’t have massive organizations and teams of developers that are hard at work developing its protocols. For this reason, the code-level scrutiny around the Dogecoin codebase isn’t regarded as highly as that of the very best projects in the space.