Dogecoin, which debuted in 2013 as a satire of other cryptocurrencies and has a dog as its mascot, has recently attracted a lot of attention. According to Coinbase, the price of the "open source, peer-to-peer digital currency," as it is referred to on the Dogecoin website, has increased by roughly 2,900 percent since January 2021. On August 24, the market value of Dogecoin in circulation was $39.1 billion, ranking it as the eighth-largest cryptocurrency in existence. Two prominent billionaires have promoted the growth of Dogecoin. Elon Musk, the founder of SpaceX, garnered a lot of interest in May 2021 when he announced that his business would launch the Doge-1 lunar mission in 2022, with Dogecoin serving as the payment method.
The owner of the NBA franchise Dallas Mavericks, Mark Cuban, also accepts Dogecoin as payment for team products and just announced a special deal for individuals who do so. Cuban stated that "when the organization lets consumers to use ANY crypto, 95% of sales in are DOGE." He said the same thing in this recent CNBC interview, calling Dogecoin "the people's means to pay."
The Beginnings of Dogecoin
According to a statement made to National Public Radio a few years later, an Australian called Jackson Palmer got the idea to mock the increasing number of "bitcoin copycats" that were entering the market when Dogecoin is said to have started in 2013. One day, he was reading an article on Doge, a well-known internet meme that shows a Shiba Inu dog breed member's internal monologue of absurd English phrases, while simultaneously viewing CoinMarketCap, a website for examining cryptocurrency valuations.
The story is told in this May 2021 article from tech publication CNET. Palmer made a joke on Twitter about buying Dogecoin, a cryptocurrency that didn't exist at the time but was "pretty sure it's the next big thing," and it garnered so much attention that he quickly made a website, Dogecoin.com, and posted a note inviting someone to help make the imaginary cryptocurrency a reality. According to CNET, Billy Markus, a software engineer, decided to take him up on it and produced the code for Dogecoin. Markus had previously made a cryptocurrency parody based on a video game with cute animals.
When Dogecoin was only worth a fraction of a cent, Reddit users started using a bot application to humorously tip one another in the cryptocurrency. This is one of the reasons why Dogecoin became popular. Dogecoin users also donated money to good causes, like a charity that assisted disabled children and veterans of the military in getting service dogs. Dogecoin, however, has changed since then, going from a geeky joke to a cryptocurrency with tens of billions of dollars in market capitalization. Musk's curiosity was one of the factors. In 2019, he started tweeting about it, saying, "Dogecoin might be my favorite cryptocurrency. It's quite cool."
How Dogecoin is Mined and How Investors Purchase It
Dogecoin may be purchased on a number of cryptocurrency exchanges, including Coinbase, Kraken, and Gemini, among others, just like other cryptocurrencies. A cryptocurrency investor must essentially create an account and finance it. Some exchanges, including those that allow transfers from bank accounts, only accept cash. Others permit credit card use. However, due to added costs, purchasing cryptocurrency using plastic can end up being an expensive prospect. An investor can then place an order to purchase cryptocurrencies after setting up an account. This entails looking up the ticker symbol for the cryptocurrency, in this case DOGE for Dogecoin, and entering the desired buy price in dollars or Dogecoins.
In order to store cryptocurrency, a crypto investor also requires a digital wallet. Exchanges also provide hosted wallets, however wallets can also be stored on a dedicated device the size of a flash drive or by downloading and installing a wallet app. Cryptocurrency held by an investor can be held automatically in the hosted wallet, much like a checking or savings account. An investor can also recover a lost password or key using a hosted wallet, which prevents them from losing their investment. Generally speaking, those who invest in cryptocurrencies should be advised that there is a high risk involved.
Dogecoin utilizes blockchain, a decentralized network of ledgers that exists across numerous computers simultaneously, just like other cryptocurrencies. A procedure called mining is required to process transactions and store them on the blockchain. During mining, participants utilize computers and software to solve challenging arithmetic problems, a technique known as proof of work. According to this recent Forbes article from April 20, 2021, the blockchain pays miners with new Dogecoins in exchange for their efforts, which results in the creation of millions of new Dogecoins per day.
In order to produce a "hash" that is equal to or greater than the target value of the new block being added to the blockchain, miners compete with one another until a winner is determined, according to Coindesk.com. While some miners choose to work alone, others choose to join mining pools or choose cloud mining, which involves renting computing resources from a data center. Dogecoin miners frequently employ an ASIC, or application-specific integrated circuit, to locate and download unique software to use in the mining process.
The Pros and Cons of Dogecoin
By way of email, James Royal states that "Dogecoin is genuinely a "meme coin." He is the author of "The Zen of Thrift Conversions," a manual for investing in bank stocks, and a senior reporter on investing for the personal finance website Bankrate. He was also a former stock analyst for The Motley Fool. The fact that Elon Musk tweeted about it and brought attention to a digital currency that was made as a joke to parody Bitcoin's silliness says a lot about cryptocurrencies in general, including the fact that their prices are driven by speculation and traders rather than by some fundamental value or the fact that they are backed by assets.
Jim Liew, an associate professor of finance at the Carey Business School at Johns Hopkins University and a FinTech entrepreneur with expertise in blockchain, the system of distributed digital ledgers used by cryptocurrencies, claims that "Dogecoin appears to have gained cult status with the next generation of investors who are active on Reddit and Twitter." Investors in Dogecoin are drawn in part by "the liquidity and also the low price per unit," according to an email from Liew.
According to this April 2021 Forbes story, Dogecoin also has the benefit of being simpler and faster to mine than Bitcoin, with transactions being verified in just one minute as opposed to Bitcoin's ten. The potential drawback of Dogecoin is that, unlike Bitcoin, it does not have a supply limit. When a result, as new coins are mined, the total supply of the cryptocurrency on the market gradually increases. According to CNBC, this creates the inflationary potential for it to lose value over time. According to Liew, "others have claimed that currencies should increase at the rate of the user base." Dogecoin would be more intriguing if it had a cap or had some tapering growth.
Royal has a slightly different perspective. Remember, he says, that value isn't produced by limiting issuance. Dogecoin and digital currencies like Bitcoin have value only to the extent that people give them value. It doesn't matter how many or how few coins are issued or could be issued; if people don't want a coin, it has no value. But at least a cap creates the potential for scarcity value, and the fact that Dogecoin can be produced infinitely means it really should not have any scarcity value. Why not use grains of sand as a currency?
What's In Store For Dogecoin?
Along with the Dallas Mavericks, NewEgg, a retailer of electronic goods, revealed in April that consumers could purchase with Dogecoin. According to Cyrptwerk.com, there are roughly 1,600 businesses that take bitcoin as payment, ranging from makers of electric car chargers to shops that specialize in personalized T-shirts and pet supplies. However, given the rise of payment apps like Venmo and PayPal and the volatility of cryptocurrency prices, Royal is dubious about the viability of using Dogecoin and other cryptocurrencies for actual purchases.
Why would I invest money now if I believed that my $30,000 automobile payment would be worth $60,000 in a few days?, Royal queries. He sees cryptocurrency's value for sending money as "effectively zero, unless you're trying to do so secretly or rather semi-secretly, since crypto transactions are publicly trackable even if semi-anonymous," and warns of potential tax complications. To the extent that a cryptocurrency is good for traders — that is, that it's volatile — it's unusable as an actual payment system. Will Dogecoin last on its own? It's too early to say, claims Liew. It all depends, he argues, on whether it continues in the crypto community's spotlight. As with any money, widespread adoption is essential. It will also help if Elon continues to have fun with it. Will he take Doge to Mars?