Dogecoin Explained: Everything you need to know about the meme coin
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Dogecoin used to be one big joke. It was created in 2013 as a reference to a meme that featured Shiba Inu, a Japanese dog breed. The months and years that followed cemented Dogecoin’s position as a meme coin, and although the coin slowly grew and gained traction, It didn’t seem like it was going to blow up.
Thanks to a cult-level following on Reddit and a flurry of Elon Musk and Snoop Dogg tweets, Dogecoin grew by over 14’000% between January and May. So if you had invested $1,000 on New Year’s day, your investment would have been worth about $140’000 in June.
Due to the recent crypto crash, Dogecoin’s value has dropped a bit, but it’s still one of the largest cryptocurrencies in the world by market cap.
In this article, we will go through the history of Dogecoin, why it became popular, how to use Dogecoin and how to trade Dogecoin for free.
Let’s dive in.
History of Dogecoin
What comes to mind when you think of bitcoin? Ground-breaking technology that changed how people use money forever, right? The design of cryptocurrencies using blockchain technology is ingenious and came from a well-thought-out idea.
Unfortunately, we can’t say the same about Dogecoin. There was no extraordinary inspiration or well-thought-out idea. Software engineers Billy Markus and Jackson Palmer created the cryptocurrency on December 6, 2013, as a joke. The Shiba Inu dog picture was a popular meme in 2013, and the co-founders chose it to create satire in the digital currency space.
Both co-creators met on Reddit, a social networking platform, and had never met each other offline before the creation of Dogecoin. Palmer was a product manager at Adobe Inc. in Sydney, Australia, while Markus was a software developer at IBM in Oregon, USA.
The original idea for Dogecoin came from Palmer, who wanted to create a satirical coin because of the hype surrounding cryptocurrencies at the time. He wasn’t sold on the crypto idea then, and he had many mocking comments regarding cryptocurrencies. However, for the Dogecoin idea, he had a lot of positive feedback online, so he bought the domain name “www.dogecoin.com”
In Oregon, Markus was struggling to create ideas for a digital currency. When he found that Dogecoin was getting some publicity, he asked Palmer if he could join and develop the underlying software. Palmer agreed.
According to Markus, the cryptocurrency took them two hours to create.
Markus designed Dogecoin as a fork of Luckycoin, a fork of Litecoin, which is derived from Bitcoin. A fork in cryptocurrency is a change to the original blockchain that creates a new version of the blockchain. Most times, forks happen to address some challenges and add new functionality to the blockchain.
In other words, Dogecoin is a revised version of Luckycoin. Dogecoin uses the Proof of Work model and the sCrypt technology derived from Litecoin for its hash function.
After the release of Dogecoin, it gained some followers online and rose about 300% in value in the next two weeks.
Rise of Dogecoin
Just before the rise of Dogecoin in mid-2021, a sub-forum on Reddit called r/WallStreetBets had come together to buy a large amount of GameStop stocks to increase the value of those stocks and annoy Wall Street traders who had bet on the stock price dropping.
So when a WallStreetBets trader tweeted about Dogecoin in mid-January, many other Redditors were open to the new challenge: buy as many Dogecoins as required to push the price up to $1. This action caused Dogecoin to rise by 142% in two hours, from $0.007 to $0.017.
In addition to the crazy WallStreetBets challenge to raise the value of Dogecoin, Tesla owner and billionaire Elon Musk tweeted a lot about Dogecoin and its potential to surpass the current global financial system.
Rapper Snoop Dogg also tweeted about Dogecoin, calling it “Snoop Doge,” and pinned the tweet.
The insane rise of the coin continued until May, when it reached an all-time high of $0.7376 on May 8, giving it a market cap of over $70 billion.
How does Dogecoin work?
Dogecoin is a cryptocurrency that runs on its blockchain technology. Dogecoin is a fork of Luckycoin, so it derives most of its underlying technology from Litecoin. Like other blockchain networks, it is decentralized and uses cryptography to secure the transactions on the network.
Dogecoin uses the Proof-of-Work (PoW) consensus mechanism to verify its transactions. The PoW consensus mechanism is a system used by blockchains like Bitcoin. It involves blockchain members solving complex mathematical problems to compete for the right to verify transactions on the blockchain.
In traditional finance, the centralized institution keeps ledgers and verifies transactions all by themselves. In decentralized finance, different individual members ramp up their computing power and use it to verify the transactions and mine new blocks. These miners get tokens as their reward for spending money on computer modifications and utility bills.
In Dogecoin, the reward for mining a new block is 10’000 DOGE tokens. A new block is mined every minute, meaning 1’440 Dogecoin blocks per day.
Unlike Bitcoin, Dogecoin doesn’t have a maximum supply. This means an infinite number of DOGE tokens can be mined. About 1’440 blocks are mined every day, and each block comes with a 10’000 DOGE block reward. This means the network creates 14’400’000 DOGE tokens every day.
Dogecoin used to have a maximum supply capped at 100 billion DOGE tokens, until February 2014, when co-founder Palmer removed that cap.
Currently, there are almost 135 billion DOGE tokens in circulation, and more are on their way.
Owners of Dogecoin
It sounds weird considering the amount of Dogecoins in circulation, but only a handful of people own a large percentage of DOGE tokens. Out of the 133 billion DOGE tokens in circulation, 106 billion DOGE tokens are held by only 535 entities. That is 82% of the supply!
What makes Dogecoin Valuable
Dogecoin is valuable simply because of demand and supply, just like any other asset — crypto, fiat, real estate, or precious stones. So when the demand for Dogecoin rose in 2021, the value of the token soared, and it became one of the best crypto assets that year.
Another factor that helped Dogecoin’s value was its involvement in several charitable ventures. It started when users created a Dogecoin subreddit, and many legitimate funding requests for advocacy started to appear. This led to the creation of the Dogecoin Foundation in 2014.
One of the first requests was that the community sponsor the Jamaican bobsled team to compete at the Sochi Winter Olympics in 2014. That initiative got over $30’000 in funding using DOGE.
In March 2014, the community also donated about $50’000 to a project to bring clean water to a region in Kenya.
Because of these charitable donations, members coined “Do Only Good Everyday” for the backronym DOGE.
This pure image of the coin is endearing to many users and has made it more valuable.
Pros and Cons of Dogecoin
Now, let’s look at some of the advantages and drawbacks of Dogecoin
- It has a large community and a growing list of followers: There are about 4.85 million holders of Dogecoin worldwide, and more than 946 of these people hold $1 million or more Dogecoins. It also has a large online community of people actively promoting and pushing it.
- It is listed on the stock market: DOGE has been listed on numerous crypto and stock exchanges. This has proved, to a large extent, the credibility of the token and has increased its demand, driving up the value of the coin.
- It is easy to transact.
- It doesn’t have any particular technological proposition: Bitcoin made money decentralized. Ethereum made it possible to build decentralized applications on the blockchain. Solana made decentralized applications on the blockchain faster. Dogecoin is just a digital currency with a meme. Apart from demand and supply, Dogecoin has no unique technological selling proposition.
- It doesn’t have good technical support: Although it is one of the biggest cryptocurrencies in the world, its technical support is not as robust as that of Bitcoin or Ethereum. Because of this, there has been no major technological update since 2015.
Uses of Dogecoin
There are a few important uses of Dogecoin:
- Purchase: You can pay for goods and services online using DOGE tokens. Here is a list of companies that accept Dogecoin as payment on their websites and platforms.
- Rewards: Miners get 10’000 DOGE tokens as a reward for every mined block on the Dogecoin network.
- Donations: As the community did on Reddit, groups can use Dogecoin for crowdfunding for different causes.
The Future of Dogecoin
At the time of writing, Dogecoin is the 10th largest cryptocurrency by market cap. Its current price is $0.08178, and it has a market cap of about $10.8 billion. The price of Dogecoin has dropped in 2022 due to the crypto market crash, but it is still one of the most valuable cryptocurrencies in the world.
Another good sign is that many merchants and companies like Twitch, Tesla, etc., accept Dogecoin as a payment method, and others are likely to join them. If this trend continues, the purchasing power of Dogecoin will increase, and its value will follow.
However, there are a few concerns.
The fact that only a few accounts hold large amounts of DOGE is terrifying. These big whales could sway the market in whatever direction they please, and the little HODLers will suffer the damage.
Also, since there is no supply limit, the demand for Dogecoins has to surpass its current supply of 14’400’000 DOGE tokens per day for the coin to keep rising in value. For now, this seems likely to keep happening, thanks to the large community online and supportive tweets from celebrities, but no one knows how long these will last.
It is essential to realize that investing in Dogecoin or any other cryptocurrency is risky, so you should do your due diligence and seek expert financial advice before you put your money.
How you can trade Dogecoin with zero fees
You can trade Dogecoin with zero fees on Lykke, the no-fee crypto exchange. Lykke is a Swiss-based crypto exchange that uses advanced algorithms to allow for zero transaction fees and low spreads for our customers.
All you have to do is register and get verified at Lykke Wallet. First, you need to pass through the quick and necessary KYC procedure to get verified. After that, you can deposit funds into your account by bank transfer using the fiat gateway at no banking fees. The exchange covers it for a limited time. Also, crypto deposits are free.
After making deposits, you can exchange to Dogecoin without any trading fees.