It was Bitcoin that rocked the financial world in 2009. But the surprises that the cryptocurrency world would bring were far from over.
Dogecoin is a cryptocurrency that started as a spoof on Bitcoin. Now, it’s one of the most talked-about and recognizable cryptocurrencies. This unprecedented success has left many people wondering how to buy Dogecoin with a credit card, where to spend it, and what’s the future of the project.
Let’s get some context first and explore DOGE’s origin and functionality.
Who Created Dogecoin and Why?
Billy Markus and Jackson Palmer, former software engineers, launched Dogecoin as an open-source, peer-to-peer cryptocurrency. Just like its predecessors, DOGE is running on blockchain, a distributed, secure digital ledger.
Those broadly familiar with internet memes might recognize the Shiba Inu dog that’s featured on the coin. This particular image appears on everything related to Dogecoin. Some of DOGE’s initial fame can be attributed to such a ridiculous mascot.
Dogecoin was meant to poke fun at some of the wild speculations in cryptocurrencies. Oddly enough, Dogecoin followed the same path. During the first five years of its existence (2015-2020), the price was hovering around 20 cents. And following an increase in retail investing during the pandemic, the speculative action around Dogecoin suddenly exploded. Of course, the support from Elon Musk also helped.
DOGE was first used for tips on Reddit and Twitter. There are now many online merchants that accept it as a method of payment. Now, users can buy food, household supplies, and even website domains with dogecoins.
Special Features of Dogecoin
Dogecoin is similar to other cryptocurrencies in many ways, but there are a few points that need to be discussed separately.
DOGE uses the auxiliary proof-of-work mechanism
The project relies on energy-intensive proof-of-work (PoW) mining, which is the industry standard for now. The reason it’s called auxiliary proof-of-work is that this consensus algorithm allows users to mine DOGE simultaneously with other cryptos. DOGE is actually mined at no extra cost.
It has a unique reward system
Before February 2018, block rewards were determined at random. Once the supply reached 100 million, the reward became fixed - 10,000 DOGE.
There is no maximum supply
14,400,400 new DOGE tokens are created every day, and there is no mechanism to stop it. At the time of writing, there are over 132 billion coins in circulation.
Most dogecoins are in the hands of a few
The allotment of DOGE is vastly skewed. While other cryptocurrencies are evenly distributed across thousands of users (for the most part), there are few DOGE holders with massive investments. An estimated 0.002% of Dogecoin wallets hold more than 50% of all dogecoins.
Dogecoin vs. Bitcoin
Bitcoin excels in some areas, while Dogecoin shows better performance in others. The first most noticeable difference is that Bitcoin’s value is significantly higher than Dogecoin’s. And because BTC has a limited supply, it should hypothetically rise in value as it becomes less available.
That said, Dogecoin’s price is much less volatile. This makes DOGE more stable, which is somewhat surprising for such as daring coin.
Does Dogecoin Have Real Value?
At its core, Dogecoin has no fundamental value, just like any other cryptocurrency. Jeffrey Halley (Senior Market Analyst, Asia Pacific) agrees that Dogecoin does not have apparent commercial or investment use. The main reason why it found so many supporters is that it’s very cheap and viral.
The phenomenon is similar to penny stocks in the stock market. Beginners appreciate the low entry barriers, whether it’s crypto or traditional investment assets. Besides, it doesn’t matter if you’re putting $1,000 towards DOGE or BTC - the risk is similar either way.
Many on Wall Street and Main Street investors are trying to decipher the value aspect of Dogecoin, for that matter. But the vagueness of use cases doesn’t stop the growing community of DOGE enthusiasts.
Bottom Line
The future of Dogecoin is a guessing game. Most people who tried to guess where would the crypto industry by now were wrong. Some overestimated its rise and impact, while others underestimated it.
Dogecoin is described as one of “an increasingly large number of weird and wonderful signs of market excess”. But when it comes to value projections, the premise is fairly simple. If the DOGE receives an uptick in attention, the price will rise, and vice versa. What all investors need to remember is to be cautious with such unpredictable assets.