Dogecoin Mining Explained
Dogecoin (DOGE) started as an internet joke. In December 2013, Software engineers Jackson Palmer and Billy Markus founded Dogecoin to be as ridiculous as possible, and they used the image of a Japanese dog called a Shibu Inu. But from such a lighthearted beginning, somehow, Dogecoin developed a band of loyal global fans, and today, DOGE is the #12 listed crypto coin with a market cap of $20 billion.
Dogecoin made a spectacular headway in 2021, with an increasing number of miners joining the network. But how easy is it to mine DOGE, and how do you mine Dogecoin?
Cryptocurrencies are reactive to media coverage. Earlier last year, Elon Musk, CEO of Tesla, wrote a tweet implying support for Dogecoin. He said, "Working with Doge devs to improve system transaction efficiency. Potentially promising."
Musk has made no secret of his interest and intended involvement in Dogecoin, and, as a significant investor, followers responded to his tweet. DOGE price increased by 40%, and indeed, over the last year, the price of DOGE grew by 3,200%. In April 2021, DOGE hit a high of $0.64 before plummeting to a low of less than $0.17.
Most of the cryptocurrency market dropped by 50%, at least during this period. But DOGE fell and stayed there. It didn't help that Jackson Palmer publicly announced that the cryptocurrency market is false, created by and for the rich fat cats. He suggested the public is being taken for a ride and losing money by falling for what he considered a crypto scam.
Jackson Palmer's outburst temporarily affected DOGE prices, but Dogecoin has experienced a six-year high in mining profitability.
This guide will look at how to mine Dogecoin and if it is worth mining Dogecoin. You will learn three ways to profit from mining Dogecoin and what equipment you need to mine Dogecoin.
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Contents
- What is Dogecoin?
- How is Dogecoin Mined?
- How to Mine Dogecoin
- What You Need to Mine Dogecoin
- How to Set up a Dogecoin Wallet
- How to Join a Dogecoin Mining Pool
- How to Cloud Mine Dogecoin
- Recap of How to Mine Dogecoin
- FAQ
What is Dogecoin?
Dogecoin is an open-source digital currency for peer to peer low-cost transactions with Dogecoin. Dogecoin was a derivative of Luckycoin (no longer in existence), a fork of Litecoin (#15 on the list of cryptos by market cap). Dogecoin is the network, and DOGE is the token.
Dogecoin rewards content creators for sharing content. Musicians, for example. It's a valuable service because existing mainstream platforms for content providers can be expensive.
If you join a Dogecoin community, you can receive DOGE rewards, and the Dogecoin community is growing.
How is Dogecoin Mined?
Dogecoin uses proof of work (PoW) consensus for mining, which requires independent miners to validate transactions to secure the Dogecoin network.
There is speculation that Dogecoin may transition to proof of stake (PoS) consensus in the future. Alex Mashinsky is a Co-founder, Chairman and CEO of the Celsius Network. Earlier last year, he commented, "I'm going to make a prediction," declared Mashinsky, "in the next two years, Dogecoin is going to migrate from proof of work to proof of stake."
Unlike Bitcoin, which requires vast computing resources, you can still mine Dogecoin on a decent Windows system with a GPU (graphics processing unit). You can also mine DOGE on a Mac or Linux system.
Mining Bitcoin is energy-intensive with huge electricity requirements. But, Dogecoin has low usage, with an average of 0.12 kWh (Source: TRG Datacenters). Low energy requirements equal lower running costs, which is why mining DOGE has become attractive to crypto miners.
It takes 10-minutes to mine one Bitcoin, but one DOGE takes 1-minute to mine. DOGE blocks are discovered faster than Bitcoin. The rewards are significantly higher for mining DOGE than Bitcoin. Bitcoin rewards are 6.25 BTC, and DOGE rewards are 10,000 DOGE.
One could argue that Bitcoin is $43k (6.25 x $43k = $268,931) and DOGE is $0.15 (10,000 x $0.15 = $1,500) so the rewards are inconsequential by comparison.
Dogecoin has no maximum cap, so there are no limits on the number of coins mined.
The process of mining DOGE is the same as Bitcoin. DOGE miners aim to create a fixed length of code called a hash, using a hashing algorithm called Scrypt. Bitcoin uses a more complex SHA-256 hashing algorithm. But more complex equals slower, which is why Dogecoin can produce a block faster than Bitcoin.
The value of a hash is equal to or lower than the target hash. The miner who gets closest to the hash value is the one to get the DOGE rewards. The value doesn't have to be correct, simply the closest to the target.
When a DOGE rig generates a value, it will spit out a random solution. There is no skill in predicting the value of the target hash, which means it's trial and error if you win. In effect, crypto mining is a bit of a lottery with no set winning numbers.
Check Out: 5 Reasons Why Dogecoin Could Double Your Money
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
How To Mine Dogecoin
In later years, it has become more challenging to mine Dogecoin. The more miners in the network mean increased difficulties. DOGE was a simple process in the early days of mining, and anyone could become an independent Dogecoin miner.
As DOGE became more popular, more miners joined the network, and it became harder to mine DOGE as an individual. DOGE mining pools then sprang up, allowing DOGE miners to combine resources and share DOGE rewards.
It may seem counterintuitive to split your DOGE rewards with other miners. But, in reality, combined computing power means more chances of solving the hash problem, quicker results and higher levels and consistency of rewards.
Solo mining cryptocurrencies is challenging, especially now as more DOGE mining pools are working together. Considering the low price of DOGE, you might spend a significant amount of money on expensive computers and then have the electricity running costs.
Whether you solo mine DOGE or join a DOGE mining pool or cloud mine DOGE, you will need a secure Dogecoin wallet, which you can download from the Dogecoin website.
What You Need To Mine Dogecoin
If you decide to solo mine Dogecoin or join a Dogecoin mining pool, you still need to set up a DOGE mining rig.
Hardware Equipment for Mining Dogecoin
The better your computing power, the greater your chance of solving the hash problem and receiving DOGE rewards.
There are three options for hardware for mining DOGE.
- CPU (Central Processing Unit) – a CPU is the lesser option, but you could find issues with your PC or laptop overheating, which could cause irreparable damage.
- GPU (Graphics Processing Unit) – a GPU provides more computing power than a CPU and is likely what most solo miners are using to mine Dogecoin.
- ASIC (Application-specific integrated circuit) – an ASIC is explicitly for generating hashes. For mining DOGE, look for a Scrypt-based ASIC miner. The downside of ASICs is the price. You can expect to pay between $1000 and up to around $10,000
Software Equipment for Mining Dogecoin
To mine Dogecoin, as well as sufficient hardware, you also require operating software.
- CPU Hardware – use CPU miner by Pooler.
- GPU Hardware –the options are to use EasyMiner for beginners. If you have an Nvidia GPU, try CudaMiner. Alternatively, you can use CGminer, which works well for all types of GPUs.
- ASIC Hardware – EasyMiner and CGminer work with ASICs. But the most popular software for mining Dogecoin with ASICs is MultiMiner.
If you decide to cloud mine Dogecoin, you do not need hardware or software as you are not directly involved in mining DOGE.
How to Set Up a Dogecoin Wallet
A secure Dogecoin wallet is vital to protect your Dogecoin rewards. When you sign up for a crypto wallet, you have a unique, private key to access your wallet and a public key address to receive DOGE. Never share your private key address.
You can download the dogecoin wallet from the Dogecoin website. There are two options for a Dogecoin wallet:
- Multidoge – for Windows, Linux and macOS
- Dogecoin Core – for Windows 32-bit, Windows 64-bit, Linux 32-bit, Linux 64-bit and macOS
You may prefer to use a third-party software wallet, which you keep on your mobile device, laptop or PC.
If you join a Dogecoin mining pool, your DOGE rewards are paid directly to your Dogecoin wallet.
How to Join a DOGE Mining Pool
If you want to profit from mining DOGE, joining a mining pool is a good option. The mining pool founders are likely to be experienced at mining cryptocurrencies. Mining pools vary in size, some with thousands of members working together to solve the hash problem.
If you are brand new to mining DOGE, solo mining could be a steep learning curve, which you can avoid by joining a mining pool.
Most mining pools charge a small monthly fee of between 1% - 3%. Each mining pool has different terms and conditions, so it's always worth reading these before joining a DOGE mining pool.
Top Dogecoin Mining Pools:
- AikaPool - low commissions of 1%
- Multipool – the pool mines other cryptocurrencies as well as DOGE, and there are no withdrawal fees
- Prohashing – the pool mines DOGE, but you can receive payment in other coins. The level of computational power factors your reward levels.
Read Also: Could Dogecoin be a Millionaire-Maker Coin?
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
How to Cloud Mine Dogecoin
Although described as mining, cloud mining isn't like solo mining DOGE or mining DOGE with a mining pool.
The process for cloud mining Dogecoin is:
- You rent computing power from a data centre
- You pay an annual or monthly fee (under contract)
- The data centre mines your DOGE via a mining pool
- You receive rewards based on how much you paid for the level of computing power
Cloud mining Dogecoin seems like the easy option to mine DOGE. But most of these data centres time-lock your contracts, meaning that if the price of DOGE falls, you could lose money because operational costs could exceed rewards.
The pros of cloud mining Dogecoin are that you don't have the financial commitment to setting up a DOGE mining rig and don't have the associated energy costs of running a Dogecoin mining rig. All you need is to sign up with a cloud mining centre and set up your Dogecoin wallet.
Two cloud mining pools that support DOGE are:
Recap of How to Mine Dogecoin
Mining Dogecoin is easier than mining Bitcoin, and the rewards are higher at 10,000 DOGE compared to 6.25 BTC. The problem with that equation is the current low price of Dogecoin. $0.15 x 10,000 is only $1,500.
Although less complex than Bitcoin, mining Dogecoin is still challenging. As a solo Dogecoin miner, you are competing with Dogecoin mining pools and Cloud mining data centres.
The combined computing power of a Dogecoin mining pool means it is likely to solve the hash problem quicker and more often than a solo Dogecoin miner. Joining a Dogecoin mining pool doesn't resolve the costs of setting up a Dogecoin mining rig. Nor does it reduce the running costs of mining Dogecoin. But if there's a possibility of increased rewards by sharing resources, joining a Dogecoin mining pool seems like the smart option.
The monthly fees of joining a Dogecoin mining pool are reasonable, typically between 1% and 3%.
Alternatively, if you don't want the expense of setting up a Dogecoin mining rig, the other alternative is to sign up with a cloud mining data centre. You have no set-up costs or electricity costs. But you are handing over the responsibility of mining Dogecoin to an external source. There are fees to pay, and you are time-locked into contracts, which means you can lose money if the cloud mining running costs exceed the Dogecoin rewards.
Whichever option you choose, you require a Dogecoin wallet to store your DOGE rewards. You can download the Dogecoin wallet or opt-in for a third-party crypto wallet which you can download to your PC.
If you decide that mining Dogecoin in whatever form is not for you, there is another option. You can join a Dogecoin community and participate in the community, and you will receive Dogecoin rewards.
You can also buy from a Dogecoin Faucet, which Dogecoin calls a waterbowl. You can collect free coins (a single Dogecoin per claim) at predetermined intervals such as a few hours or each day. The waterbowl process encourages interaction with Dogecoin communities.
The rewards of participating in a Dogecoin community or buying from a waterbowl may be significantly less than mining Dogecoin. Still, it could be a way of accumulating DOGE as an investment without the associated costs.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.
Trading or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from cryptocurrencies, and it's advisable only to risk what you can comfortably afford to lose.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Trading Education.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
FAQ
Is it worth Mining Dogecoin in 2022?
The price of Dogecoin is $0.15 today and, although you receive 10,000 DOGE rewards for solving the hash problem, it is debatable if it is worth mining Dogecoin.
If you solo mine Dogecoin or join a Dogecoin mining pool, you have the expense of setting up a Dogecoin mining rig. On top of that, the running costs of electricity can eat into potential profits. Weigh up the pros and cons of mining Dogecoin and decide the best option for you:
- Solo mine Dogecoin
- Join a Dogecoin mining pool
- Cloud mine Dogecoin
What will the price of Dogecoin be in 2025?
It's difficult to predict what might happen with cryptocurrencies in the future.
Dogecoin has a loyal base of fans. Novice crypto investors are attracted to Dogecoin because of the low price of DOGE.
Crypto experts are predicting that DOGE could be as high as $1 by 2025. In April 2021, the DOGE high was $0.64, which is not so far from a dollar. Much depends on the crypto market itself and also the extent of positive or negative media coverage.
Will Dogecoin make me a millionaire?
You cannot become rich from mining Dogecoin.
Can you become a millionaire by investing in Dogecoin? That depends on how much DOGE you hold as an investor. It also depends on the price you buy Dogecoin and the eventual price you decide to sell your DOGE.
Let's look at a scenario for becoming a millionaire with Dogecoin.
Today, you buy 10,000 DOGE at $0.15 = $1,500
The price of DOGE rises to $1 = $10,000
The price of DOGE rises to $10 = $100,000
The price of DOGE rises to $100 = $1,000,000
$100 from $0.15 seems like an enormous leap, but this is how Bitcoin started. Dogecoin is the #12 listed crypto by market cap. While nobody can predict the future for Dogecoin, it may be worth investing in Dogecoin at the low entry price.
What will the price of Dogecoin be by the end of the year?
Crypto industry experts predict the price of Dogecoin may not get beyond $0.45 by the end of 2022. That price, however, is more than double today's price of $0.15.