Dogecoin is a cryptocurrency, like Bitcoin or Ethereum—although it’s a very different animal than either of these popular coins. Dogecoin was originally created at least in part as a lighthearted joke for crypto enthusiasts, and took its name from a once-popular meme.
What Is Dogecoin?
Software engineers Billy Marcus and Jackson Palmer created Dogecoin in late 2013. Palmer branded the cryptocurrency’s logo using a meme popular at the time that featured the deliberately misspelled word “doge” to describe a Shiba Inu dog.
“Doge was really started to poke fun at Bitcoin,” said Pat White, CEO of Bitwave. In its early days, a community of enthusiasts arranged publicity stunts to raise Dogecoin’s profile, gathering funds to send the Jamaican Bobsleigh team to the 2014 Olympics, for instance, or sponsoring a NASCAR driver.
In early 2021, Dogecoin gained cult status on Reddit’s WallStreetBets message board—the prime instigator behind the GameStop affair in January—where enthusiasts had promised to propel its value “to the moon” (that was before all discussion of crypto was banned on the subreddit).
By May 2021, Dogecoin rose to a high of $0.68 USD, compared to a value of just under one penny at the beginning of the year. Tesla CEO Elon Musk was at least partially responsible for the massive growth after calling Dogecoin his favorite cryptocurrency. By mid 2021, Dogecoin was consistently polling among the top five cryptos by total market cap
Since then, the value of Dogecoin has fallen precipitously, bottoming out around $0.11 USD in March 2022, although it remains among the top 20 cryptocurrencies by market cap.
How Does Dogecoin Work?
Like many other coins, Dogecoin runs on its own dedicated blockchain. Dogecoin’s digital ledger is constantly being updated with all new transactions, and the network uses cryptography to keep all transactions secure.
The Dogecoin blockchain uses a proof of work consensus mechanism, where miners use computers to solve complex mathematical equations in order to process transactions and record them on the blockchain. In exchange for supporting the blockchain, miners earn additional Dogecoin, which they can then hold or sell on the open market.
Dogecoin may be used for payments and purchases, but it’s not a very effective store of value. This is chiefly because there is no lifetime cap on the number of Dogecoins that may be created by mining—meaning that the cryptocurrency is highly inflationary, by design.
The blockchain rewards miners for their work by creating millions of new Dogecoins every day, which makes it very challenging for speculative price gains in Dogecoin to hold up over time.
Dogecoin vs. Bitcoin
Dogecoin has a few significant differences compared to Bitcoin. First, it’s quicker and easier for miners to complete the mathematical equations that complete and record transactions on the transactions, which makes Dogecoin somewhat more efficient for processing payments.
“Where it takes 10 minutes for the process to ratify new blocks on the Bitcoin blockchain, it takes only one minute on the Dogecoin blockchain,” said Gary DeWaal, Chair of Katten’s Financial Markets and Regulation group.
Another significant difference is the absence of any lifetime cap on the number of Dogecoins that can be created, as we noted above. There is a lifetime cap of 21 million Bitcoin that limits the maximum possible number of coins that can be created. This means that miners are forced to work harder and longer over time to earn new Bitcoin, and to a degree it …….
Source: https://www.forbes.com/advisor/ca/investing/cryptocurrency/what-is-dogecoin/