What is Dogecoin?

What is it about this cryptocurrency that has gotten everyone to stand up and take notice?

The first decentralized cryptocurrency, Bitcoin, was launched back in 2009. Since then, various other cryptocurrencies have followed suit. One such cryptocurrency is Dogecoin, created by software engineers Jackson Palmer and Billy Markus in 2013.

Palmer and Jackson actually started Dogecoin as a satire.  They took inspiration from the ‘Doge’ meme, featuring a Shiba Inu Dog, which became wildly popular in 2013. The Dogecoin logo features the famous meme dog against the backdrop of the symbol ‘Ɖ’.

Fast forward to the present day, and Dogecoin has seen a surge in popularity, especially after Elon Musk and Mark Cuban both tweeted in its favor. Musk referred to it as “the people’s crypto” while Cuban claimed his NBA team Dallas Mavericks completed 6000 Dogecoin transactions in April.

In this article, we’ll take a comprehensive look at how Dogecoin works and how to invest in it. We’ll also discuss other factors, including its safety levels and expected future price.

Image: Binance Academy

How Does Dogecoin Work?

Like other cryptocurrencies such as Ethereum and Bitcoin, Dogecoin runs on Blockchain technology. The Dogecoin blockchain ledger receives regular updates with all new transactions.

The Dogecoin blockchain is capable of processing 40 transactions per second. This number is much higher than Bitcoin. The blockchain uses a ‘proof of work’ system. In this system, miners solve complex mathematical equations and record transactions on DOGE. In exchange for supporting the blockchain ledger, miners get to mine Dogecoin at no extra cost.

Dogecoin’s initial block rewards varied randomly between zero and one million DOGE. However, after reaching a supply of 100 billion on February 18, each mined block was modified to yield a reward of 10,000 DOGE.

Like Litecoin, Dogecoin uses Scrypt technology.  This technology has lower hash rates and consumes less energy than Bitcoin’s  SHA-256 mining algorithm.

How to Invest in Dogecoin?

Before you invest in Dogecoin, take into account your financial situation and risk tolerance level. Many experts believe that investors need to be extra cautious when investing in DOGE. This is because it lacks the technological development of Bitcoin and due to its unlimited supply.

To buy Dogecoin, you’ll need to open an account with a cryptocurrency exchange. Amongst the most popular exchanges out there are Coinbase and Kraken. Both of them offer a straightforward and simple platform for users. Find more details on cryptocurrency exchange platforms here.

Despite its recent popularity, Dogecoin is still not available on all exchanges. Make sure you consider only the exchanges that have DOGE available to buy.

Before you begin trading, you need to deposit money in your selected exchange. Most exchanges allow you to deposit cash from a checking or savings account. Typically, you’ll have instant access to a portion of your deposited money for trading. If you deposit a large sum, you may need to wait for a few days for the transfer to clear before you can use the entire deposit.

As soon as the money transfer is cleared, you can start buying Dogecoin. On the purchasing platform, search for Dogecoin and choose what kind of trade you want. Then, type in the dollar amount you want to invest or how many Dogecoins you want to purchase. Once you successfully place your order, you’re done with your investing.

Will Dogecoin Reach $1?

In early July 2021, Dogecoin volumes shot up following a TikTok trend. The trend sought to elevate the meme-based cryptocurrency’s price to $1. TikTok user James Galante requested his followers to buy Dogecoin in June. He claimed that they could get rich if enough of them invested $25 in Dogecoin.

By 7th July, the coin’s 24-hour volume had leaped above $870 million. This marked an astounding 683% surge from its average volume of the past year. A couple of weeks later, Musk gave it another boost by tweeting a meme promoting Dogecoin as a whole currency rather than just a form of investment.

Image: NewsBTC

Even with these recent surges, it is very tough to predict whether Dogecoin’s price will rise or fall due to its volatile nature. The crypto market is affected by a number of factors that have to be considered. These include regulatory crackdowns and the aforementioned activities.

Wallet Investor predicts that DOGE price will reach $0.50 by late 2022 and finally exceed $1 in December 2024. DigitalCoin forecasts the coin’s value to surpass $1 by 2028. Elon Musk himself recently hinted at Dogecoin reaching the $1 mark.

For the short-term, it does look like Dogecoin’s price will remain firmly below $1. But with its popularity increasing among experienced and new investors alike, there is a good chance the coin will reach $1 in a couple of years.

Is Dogecoin Safer Than Bitcoin?

While there is no such thing as a ‘safe’ cryptocurrency, it might be a stretch to claim that Dogecoin surpasses Bitcoin’s safety features.

First off, Bitcoin is the ‘original’ cryptocurrency that has been on the market for over 12 years now. Although very few merchants accept crypto payment forms, those that do are more likely to accept Bitcoin. Dogecoin, on the other hand, is accepted by very few merchants, giving it limited utility. 

Dogecoin’s credibility is also hurt by its very premise. Since it was created as a joke, many investors still don’t view it as a strong competitor in the crypto market.

Every Bitcoin transaction above $1000 requires three confirmations to make it final. But this cryptocurrency doesn’t have a fixed number of confirmations as it depends on the destination address. If an address needs two confirmations, it would take less time than an address that needs four. 

Bitcoin contains a well-funded and comprehensive ecosystem, the like of which doesn’t exist with Dogecoin. It has been in the market for a long time, experiencing many security updates. Although Dogecoin uses a proof-of-work algorithm, Bitcoin’s market experience still makes it the safer option.

Is Buying Dogecoin the Best Option?

Dogecoin has undoubtedly soared in popularity due to the recent media frenzy. Yet, the pertinent question is: will this growth actually hold up?

For any cryptocurrency to succeed in the long run, it needs to have a competitive advantage. The fact is that Dogecoin’s recent meteoric rise is largely due to social media popularity rather than its own competitiveness.

Simply put, there is not much right now that separates Dogecoin from its competitors. It doesn’t carry the name recognition and first-mover advantage of Bitcoin. It also doesn’t boast features such as non-fungible tokens (NFTs) in its blockchain technology like Ethereum. Many supporters point out its low transaction fees as its selling point. Even then, there are other cryptocurrencies that have lower transaction fees than Dogecoin.

Right now, the masses might be going through a fear of missing out with regard to Dogecoin. But people must realize that FOMO usually backfires without proper data to fall back on. And apart from a huge fan following, this cryptocurrency doesn’t have much going its way to leave the top cryptocurrencies behind.

Image: CoinDesk

Final Thoughts

The decision to invest is always your own, considering your financial situation. Having said that, it might be better for you to invest in proven options like Bitcoin and Ethereum right now, keeping Dogecoin on the back burner.

Please feel free to leave your suggestions in the comment section below.

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