Dogecoin: The Essentials to Dabble in Doge
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What Is Dogecoin?
Dogecoin is a cryptocurrency that was launched in 2013. Recognizable thanks to the image of a Shiba Inu dog, created from meme lore of the time, Dogecoin has seen an almost meteoric rise in popularity over the last few years, but what exactly is it?
A cryptocurrency is a type of digital currency that is created and held online. Unlike traditional (fiat) currency, cryptocurrency is not backed by local governments or held by banks – it is decentralized and not accountable to any country or financial institution.
The original cryptocurrency is bitcoin, but now there are thousands of altcoins available for investments, and as the market grows there is more and more attention being focused on the idea of a new type of currency.
A Brief History of Dogecoin
Dogecoin was never created to be a serious contender in the cryptocurrency market.
It started from a silly tweet made by an Australian marketer taking a swipe at the newly developing meme culture and the bizarre world of cryptocurrency.
Combining the popular ‘Doge’ meme – a Shiba Inu dog with a rather skeptical look on its face that included various poorly-written words in Comic Sans font – and the burgeoning craziness of the ‘nerds’ investing in digital currency, the tweet seemed to be just a bit of fun.
“Investing in Dogecoin, pretty sure it’s the next big thing.”
This tweet soon began to garner some interest, so to extend the fun, Jackson Palmer bought the domain Dogecoin.com, photoshopped the image of the Doge meme dog (nicknamed Shibe) onto a digital coin and left a cryptic message for anyone who wanted to invest to get in contact with him.
Billy Markus, an IBM engineer, had already created a silly cryptocurrency based on the money used in Animal Crossing, a Nintendo game.
It could be mined in the same way as other cryptocurrencies, but the rewards were random, and the cryptocurrency was designed to be a joke – that serious crypto investors just didn’t get.
After seeing the Dogecoin, Markus decided that this would be a fun thing to create.
Between Palmer and Markus, they took the bitcoin open source code and changed it in certain fun ways – just changing the name from bitcoin to Dogecoin, changing the font of the code to Comic Sans and replacing all references to mining with digging – and a new cryptocurrency was born.
The joke became more popular than either of the creators could have comprehended, for a joke cryptocurrency based on a meme.
They didn’t even pre-mine their currency before it went live – they only held $5,000 worth between them – and created 100 million Dogecoins to be ‘dug’.
Thanks to a Dogecoin Reddit thread, where users started sending Dogecoin as tips to other users, Dogecoin became a hot topic. Following the idea that Dogecoin was used to make people happy, it became more usual for Dogecoin to be used for charity donations rather than investments.
Aside from the tipping, Dogecoin was used to fund water wells in Kenya and pay for training assistance dogs for autistic children.
Perhaps the most well-known donations made by Dogecoin was to fund the Jamaican bobsled team to go to the Winter Olympics in January 2014 – more than $25,000 was raised from the Dogecoin subreddit community in just a few hours.
Despite the joke beginning of Dogecoin, people had started becoming invested in Dogecoin – figuratively, thanks to the charity work and feel-good vibe, and literally, spending thousands of dollars to buy the Dogecoins.
This made the founders uncomfortable, and alongside some problems with a crypto exchange that was meant to be developed for Dogecoin collapsing (and taking investor funds with it), both Palmer and Markus walked away.
This ‘joke’ currency is now worth more than $5 million and has seen enormous growth in the last few months – and much of that is thanks to the attention it has garnered on social media and through a strong, invested community following.
Dogecoin in the Media
The Reddit community has had a big impact on the workings of financial machines in the last year.
A subreddit for amateur investors was given a tip that GameStop, the popular ‘90s game shop, was about to take a dive in price and a hedge fund was set to make billions from shorting the stock.
These amateur investors bought vast amounts of the stock, and made the value skyrocket, bankrupting the hedge fund and causing a strong backlash from the 1%.
These Redditors, as well as those from the original Dogecoin subreddit, have now become invested in Dogecoin – and this following is growing thanks to the backing of some well-known faces in the celebrity and industrial world.
The first of these is Elon Musk – the leader of an industrial revolution.
Musk was a vocal supporter of the GameStop activity and continues to be interested in digital currency – so when he named Dogecoin ‘the people’s digital currency’ to his hundreds of thousands of Twitter followers, the value of the currency grew by at least 50%.
Tesla, the flagship company of Elon Musk, has invested more than a billion dollars in bitcoin and is set to accept it as a payment method for their vehicles – making it more obvious that there is a deep support for cryptocurrency in general.
Other celebrities like Snoop Dogg, Gene Simmons and Mia Khalifa have been loudly vocal about their support of Dogecoin, putting this joke currency at the forefront of every discussion around cryptocurrency in the media – even if most cryptocurrency investors still will not take it seriously.
Dogecoin Versus Bitcoin
While Dogecoin is almost a direct replica of the bitcoin source code, there are some deeper differences than just a change in name and font.
Bitcoin was anonymously created to be a viable alternative to the current financial system. Bitcoin has a serious purpose.
Dogecoin, on the other hand, was created as a silly joke based on a meme and gained popularity because of the good feeling and charity work that was a real part of the Dogecoin community.
Mining bitcoin (creating new currency) is an important part of the cryptocurrency ecosystem, and it takes a lot of computing power to do it.
Efficient and effective bitcoin mining needs powerful (expensive) equipment, and this has led to a centralization of the mining operations to those who can afford the rigs.
The bitcoin mining operation is based on an algorithm known as SHA-256. Bitcoin miners approve blocks in 10-minute intervals.
Dogecoin mining still requires a powerful machine, but thanks to the script-based Proof of Work (PoW) algorithm, it can be completed by anyone, which means that it has levelled the playing field for those who want to ‘dig’ for Dogecoin.
The Dogecoin blocks are approved every minute.
Bitcoins are definitely scarcer. Only 21 million coins are available, and the final issuance won’t be until 2140.
The Dogecoin had a much larger initial issuance, and by 2015 there were more than 100 billion coins already in circulation.
To keep up with demand, there is a protocol to issue another five billion coins a year.
Although the price constantly changes for cryptocurrency, as it stands, there is a very large discrepancy in price and value.
One bitcoin is worth more than $50,000.
One Dogecoin, on the other hand, is worth approximately five cents ($0.05).
Bitcoin is well-known throughout both the cryptocurrency world and in other markets too. Major financial investors and businesses support bitcoin and even accept bitcoins as payments for goods and services.
Dogecoin is also well-known, but perhaps more so in the social media and celebrity world.
Not only is it backed by people like Elon Musk and Snoop Dogg, but it is also a figurehead for standing against the unfair trading practices of the 1%.
How Is Dogecoin Mined?
Each cryptocurrency is based on a digital database called a blockchain, stored across a network of computers known as ‘nodes’.
Each node can put together a block – a group of transactions – and add them to the blockchain, but all the nodes must confirm the transaction.
It is this transaction confirmation that is mining.
The action of mining requires a lot of computer power and electricity, and as blockchains do not have employees, they are reliant on miners to create the new blocks and check the transactions.
The reward for this is new cryptocurrency, and it is earned by the first node to complete the complex mathematical equation first.
The complexity of the equation and the technological power needed to solve it means that cryptocurrency mining is expensive – and those who are most successful are the ones who can afford the special equipment needed.
How Is Dogecoin Mining Different From Bitcoin?
Dogecoin mining (or digging) is different from bitcoin mining because it is generally easier – with a one-minute block time and bigger rewards.
A block creation is worth about 2.5 BTC, whereas a block created on the Dogecoin blockchain is worth 10,000 Dogecoins.
How to Mine Dogecoin
Mining by yourself is a possibility if you have the time. This can take weeks or months of waiting to confirm a transaction, but the whole reward is yours.
You can share resources and mine as part of a pool – there is a fee for joining a pool, but there is an increased chance of confirming a transaction more regularly.
You will have to share the reward with other pool members.
Cloud mining allows miners to rent computer power from a data center for a monthly or yearly fee.
When any reward is generated, your share will be sent to you and all you need is a Dogecoin wallet.
This is usually much cheaper than setting up your own mining operation and you can receive a steady monthly supply of currency – but if the coin you are mining takes a dive in value you will have to pay for the contract.
What Equipment Is Needed?
To mine for Dogecoin, you need a PC running Windows, OS X or a Linux operating system, as well as an internet connection and a wallet for the Dogecoin.
The wallet is like an email account, with a public address for sending and receiving Dogecoin as well as a private key for you to use to access them.
The wallet is safest when kept offline, and there are software and hardware wallets available for this.
It is possible to mine (or dig) Dogecoin using just your computer’s CPU. This can be a problem for less powerful computers, as the power needed can cause them to overheat.
The next upgrade for your Dogecoin mining should be a GPU (graphics card) – the best ones can cost upwards of $500.
For the serious miners, there is a Scrypt ASIC miner that can be programmed to mine – it is very expensive, very loud and uses a lot of electricity.
Each piece of hardware is capable, but it depends on how serious you are about your mining operation.
To effectively manage the hardware for your mining operation, you need appropriate software. The software you choose depends on the hardware, but there are several options available for each type.
cpuminer is a multi-currency mining software.
If you are mining using a GPU, then EasyMiner is a simple option that is suitable for beginners.
If you are using a Scrypt ASIC miner then MultiMiner can be used for multiple currencies and different mining techniques.
Should You Invest In It?
Pros of Cryptocurrency Investment
When cryptocurrency launched, initial investments were laughed at. In fact, in the early days of bitcoin, uptake was so slow that they were giving it away as rewards for completing simple CAPTCHA puzzles.
Now, traditional firms and serious investors are piling into the world of cryptocurrency – and with 1 BTC worth more than $50,000 it seems that those who got in early would be making a large profit right now.
In October 2020, PayPal introduced a new service for users to be able to buy, sell and hold cryptocurrency – and this means that it can now be used to pay for products and services that accept PayPal both online and in physical shops.
Investing in cryptocurrency offers a wide range of choice, independence and opportunity thanks to the access given by the decentralized, open source nature of the currencies.
Cryptocurrency represents the most liquid investment assets, and by investing now, users could be getting in on the ground floor while cryptocurrency is still in its infancy.
A much-quoted Citibank leaked report suggests that digital currency could increase exponentially in value, becoming worth more than $300,000 per coin by the end of 2021.
Cons of Cryptocurrency Investment
Cryptocurrency is incredibly volatile. As an example, one Litecoin was worth more than $300 in December 2017 – but by January 2019, just over a year later, the value had dropped to just $30 each.
The online, decentralized nature of cryptocurrency is what sets it apart from fiat currency, but there is much more potential for fraud and hacking. The usual mobile and internet use as well as the lack of regulation in exchanges make it a tempting option for criminals.
In the opinion of traditional financial leaders, investing in cryptocurrency is speculative at best.
Is Dogecoin a Good Cryptocurrency to Invest In?
Dogecoin has seen an enormous rise in popularity – at one point, it climbed more than 400% in a matter of days, then a couple of weeks later, it fell by more than a third.
This volatility gives it the potential to be a lucrative short-term investment option.
The rise in Dogecoin value has been based on popular and celebrity support rather than the backing of serious cryptocurrency investors, and the fact that the entire currency was created as a joke based on a meme gives it less credibility than other altcoins.
As an example of this, the most popular place to buy, sell and trade Dogecoin is Robinhood – the exchange that was a major part of the Reddit GameStop trades.
Dogecoin is not supported by well-known exchanges like BlockFi or Coinbase, which adds to the lack of credibility that might put investors off.
Dogecoin does not have the artificial scarcity of the other cryptocurrencies like bitcoin, and it relies on the interest of non-traditional investors like the Reddit community and celebrity endorsement.
However, when important figures in business like Elon Musk claim that Dogecoin is the internet currency of the future, it seems like a great idea to get involved.
Dogecoin represents the convergence of popular culture and digital currency. This intersection and the fact that what was meant to be a fun, silly and rather ridiculous meme currency has become a valuable crypto asset for some investors is beyond belief – not least for the creators.
If you are considering investing in Dogecoin, it could be a fun investment and something a little bit different, but it is probably too much of a gamble to stake more than you are willing to lose on it.
Whether Dogecoin is the internet currency of the future, or a big joke, depends on how you view the Doge meme and what it means to our social media world.
WikiJob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
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