Is Dogecoin A Real Investment Or A Joke?
Dogecoin (DOGE) did originally start as a joke but over time has left a noticeable mark on the world of cryptocurrency.
Australian creator, Jackson Palmer was looking at CoinMarketCap and a meme of Doge, based on the famous Shiba Inu and using the comic sans font, at the same time and tweeted the idea as a joke.
Palmer was encouraged by colleagues from Adobe Systems’ marketing department in Sydney to make the joke a reality. Palmer then purchased the domain name dogecoin.com.
He then continued the joke believing that it would eventually fade away with co-founder Billy Markus, a programmer from Portland, USA, who reached out to him online.
The idea was to be as ridiculous as possible. They even had the idea of having random block rewards from 0 to 1 million every time a block was mined.
The duo was surprised that it didn’t die down as a joke and eventually, the two saw Dogecoin as a way to reach a wider demographic than Bitcoin and a strong culture grew around the coin and the meme.
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How does Dogecoin work?
Dogecoin was created when Markus forked Luckycoin which is now inactive and was originally a fork of Litecoin, which is a fork of Bitcoin.
It uses different proof of work algorithm than Bitcoin and is fairly similar to Litecoin in how it works. In fact, all modifications and updates made on Litecoin will also be made on Dogecoin.
Although Dogecoin doesn’t support smart contracts, it is cheap and fast. Some people even use Dogecoin to transfer money between exchanges because it has low transaction fees and is quite fast.
Dogecoin mining is an expensive process and takes a lot of time, something Palmer is not happy about as it is not good for the environment.
It has also been set up so mining Dogecoin gets more difficult over time. However, after the 600,000th block was mined there has been a permanent reward of 10,000 per block.
Dogecoin also doesn’t have a total cap. This was done to ensure miners kept working on the project and not leave if the total supply was reached.
This also means that extremely high transaction times can be avoided as there is always an incentive to mine.
Most other cryptocurrencies such as Bitcoin, do have a total cap on the number of coins and when that cap is reached, people will likely stop using them.
In this sense, this could mean that Dogecoin could outlive many other cryptocurrencies.
Like many other cryptocurrencies, Dogecoin also has a public ledger, meaning old transactions cannot be erased.
Dogecoin also has merged mining with Litecoin.
What is Dogecoin trying to achieve?
As Dogecoin started to be taken more seriously, the team behind it started to develop ideas about what it should achieve.
It became clear that the ideology behind Dogecoin should be simple; to create an easy to use cryptocurrency, not something technologically impressive.
Palmer believes the most important thing for a cryptocurrency to do is to be able to process payments.
For him, cryptocurrencies that pay people for services, such as watching advertisements or other concepts that are very new aren’t a good idea because they haven’t been tested yet with fiat money and people are not used to the idea yet.
Cryptocurrencies need to give people tangible use cases, such as buying everyday items. Unless this is done, people won’t adopt it.
To achieve this, making payments needs to be as efficient as possible.
Dogecoin also started to be used as a tipping system, where people tipped people online for the content that they enjoyed.
Members of the Dogecoin community are referred to as ‘Shibes’. Many of them found Dogecoin appealing because it wasn’t as serious and political as most other cryptocurrency projects.
The Dogecoin community is well-known to have performed various acts on charity.
One of the most notable charity causes was when Dogecoin worked with charity: water, a non-profit organisation that aims to deliver drinking water to people in developing nations.
The community managed to raise the equivalent of $30,000 to build a well in Kenya.
Other noteworthy events include the 2014 Winter Olympics where the community attempted to raise $50,000 for the Jamaican bobsled team and sponsored NASCAR driver Josh Wise who drove a Dogecoin-themed car.
The community has been noted as very supporting. On the 25th of December 2013, a hack took place where many Dogecoin holders had their coins stolen.
Dogecoin started an initiative called ‘SaveDogemas’ and managed to raise enough to cover what was stolen.
There is also a common phrase in the Dogecoin community that states ‘1 DOGE = 1 DOGE’, which implies that Dogecoin should only be used for transactions and not as an investment.
There is also a future project to bridge Ethereum with Dogecoin (Dogethereum) so it can be used on the Ethereum blockchain as an ERC 20 token.
Palmer left Dogecoin and Billy Markus is now the primary figure behind its development.
How has Dogecoin performed?
Like many other cryptocurrencies, Dogecoin is relatively volatile.
At the time of writing, Dogecoin has a market capitalisation of $311,734,638 and there are 120,801,435,050 (120 billion) coins in circulation, according to CoinMarketCap.
The large block reward of 10,000 coins per block mined is likely the reason why Dogecoin’s market capitalisation is quite low.
When Dogecoin was first introduced, it was relatively high against Bitcoin while the US dollar remained low.
This may suggest that most people where trading Bitcoin against Dogecoin, but not against the US dollar.
On top of that, it is also worth considering that by 2015, 100 billion Dogecoins had already been mined, which is most of the coins which are in circulation today.
Looking at Dogecoin historically, it has already gone through numerous peaks against Bitcoin, often shooting up dramatically and then gradually decreasing in price.
In January 2014, Dogecoin even briefly surpassed Bitcoin and all other cryptocurrencies in terms of trading volume.
Dogecoin only started to get major traction against the US dollar in April 2017. It then reached a market cap of almost $2 billion in January 2018, which was the largest market cap it has ever reached.
Will Dogecoin meet such highs again?
This is yet to be seen.
After reaching its highest point of $2 billion, Dogecoin has gained more value against the US dollar and seems to be repeating the same movements - shooting up and then slowly declining.
It is also important to remember that many market experts believe the cryptocurrency market is a lot more mature these days and so reaching the same highs may not happen.
Then again, other cryptocurrency enthusiasts believe another, much larger cryptocurrency bubble is likely to take place.
If it does, prices may surge once more before dropping tremendously.
It should also be noted that Dogecoin is the most successful cryptocurrency based on a meme (meme coin).
If it continues to remain as a way to tip people online for their content, this may also raise its value.
Is Dogecoin worth investing in?
Dogecoin doesn’t offer anything particularly unique to traders, but it’s worth more than the meme behind it.
If you are a believer that smart contracts and other features such as dApps are not that important, then it may be a good investment.
In that arena, Dogecoin does perform well. It is fast and cheap to use.
Dogecoin may be more useful for traders to store value in when switching between exchanges or when the market is very volatile.
If Dogecoin adopts more features, this will likely improve the price.
However, it seems that Dogecoin’s strengths lie mostly in spreading awareness of cryptocurrency and remaining resilient to change.
That said, it does have value in that it can be used for tipping as it is very fast. Not having a token cap also keeps miners incentivised to continue working.
Plus, it is worth noting that the community around Dogecoin do not want it to be used in such a way but as a real currency.
If you remember anything from this article, make it these key points.
- Dogecoin was originally started as a joke. It didn’t die down as its founders intended.
- In January 2018 Dogecoin reached a market cap of almost $2 billion. At the time of writing, it is closer to $311 million.
- Traders use Dogecoin to transfer crypto to other exchanges. Because it is relatively fast and cheap to use.
- Dogecoin has been very successful in spreading awareness of cryptocurrency. For many, it introduced them to what cryptocurrency is.
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