Dogecoin is one of the oldest and best-known cryptocurrencies. This meme coin started as a joke, but over the years, Dogecoin has established itself as a part of the crypto universe. Even Elon Musk is a big fan! But, what is Dogecoin? This article is the ultimate Dogecoin beginner’s guide. We’ll go through the history and technology behind Dogecoin.
Dogecoin is a traditional cryptocurrency
Let’s first place Dogecoin in the correct category of cryptocurrencies. We like to categorize cryptocurrencies into three different groups: currencies, platforms, and tokens.
Bitcoin is the best-known currency. Though, the narrative has changed more and more to digital gold and store of value in the past years. Its followers, such as Litecoin, Bitcoin Cash, and Monero, represent this group as well.
Ethereum is the king of platforms. These are also called ecosystems, frameworks, and operating systems. Essentially, platforms are like iOS or Android. They are ecosystems for decentralized apps. Other known platforms include Cardano, Zilliqa, Tron, and NEO.
Tokens are created inside these platforms. They have utility or governance use inside a specific program (app). Chainlink, Aave, and Uniswap are examples of popular tokens. A token doesn’t have its own blockchain.
It’s pretty easy to place Dogecoin into one of these categories. It is technically based on Litecoin and its purpose is to function as a fast & cheap digital P2P currency.
The ticker of Dogecoin is DOGE.
Dogecoin was founded by Jackson Palmer
The name Dogecoin has its origins in the famous doge meme, which became popular in 2013. The meme has a Shiba Inu dog in it with some thoughts written in broken English using the Comic Sans font. Doge is a slang word for dog.
Dogecoin is founded by Jackson Palmer. He had an idea of a new cryptocurrency in November 2013. Palmer made the following tweet on the 28th of November: ”Investing in Dogecoin, pretty sure it’s the next big thing.”
According to Palmer, he had the Coinmarketcap.com website on one browser window and the doge meme on the other. The name Dogecoin is a combination of the words coin + doge. The joke became real once Palmer registered the dogecoin.com domain name.
Around the same time, a programmer Billy Markus run across Dogecoin and contacted Palmer. Markus began creating the actual cryptocurrency by forking Luckycoin.
Below is a short video, where Palmer is talking about the history of Dogecoin.
Previously mentioned Luckycoin is based on Litecoin, which is based on Bitcoin. Hence, Dogecoin is technically very close to Bitcoin. The Dogecoin blockchain started running on the 6th of December in 2013. This is when the genesis block was mined.
DOGE has one special feature, which differs it from almost every other cryptocurrency. It was launched fairly. There are not many cryptocurrencies with a fair launch besides Dogecoin and Bitcoin. It means there was no ICO, no founder allocations, etc. Anyone could join and start mining DOGE from the start.
The year 2015 had a significant event in Dogecoin’s history. This is when the founder, Jackson Palmer, resigned. There haven’t been any major technical updates in Dogecoin after 2015 besides bug and compatibility fixes.
This is what Palmer said in a Software Engineer Daily podcast.
I absolutely couldn’t have predicted that it would grow to the level that it has now. I saw Dogecoin as the pinnacle of mania back then. I left in 2015 after the whole industry had been hit by a lot of scams and consumer option was reaching a low and interest was dwindling from venture funds. I was like, “I think this spot is over.” I really did not anticipate the resurgence that has happened. There are definitely parallels though, and so I think Dogecoin is a historical case study is very important and useful, as a mirror to shine back on what’s happening right now.
The above quote is from 2018. Back then, Palmer was an active figure on social media and created lots of useful educational material on Youtube. Unfortunately, those videos have been made private since.
Dogecoin hit the mainstream big-time in January 2018. This is when the market cap of the meme coin became over two billion dollars. One DOGE was worth about $0.018 at the time.
The price went down quickly with the rest of the crypto market in the following months. Dogecoin remained in the shadows until 2021. That’s when the price started to move big time.
The graph below shows the price development of DOGE in 2021.
Dogecoin’s price went up 400% from around $0.01 to $0.05 in March of 2021. Then came April and May. The price moved all the way to $0.74. The social media meme of a one-dollar DOGE almost became reality. At its peak, Dogecoin was one of the top five cryptocurrencies with a market cap of 95 billion dollars.
One reason for the massive price move was a general altcoin rally. Many top 100 currencies went up 10x at the same time. There was also something else going on.
The spring of 2021 saw the rise of meme coins. This trend was set in motion by Reddit’s WallStreetBets community. They manipulated various U.S. stocks to insane valuations. This kind of meme investing found its way to cryptocurrencies as well. Dogecoin benefited a lot, but hundreds of other meme coins were born out of nowhere.
The most popular meme coin after DOGE is Shiba Inu (SHIB). It became eventually a top 10 currency and even moved above Dogecoin in the crypto rankings.
Elon Musk and Dogecoin
Elon Musk is currently the richest person in the world with a fortune of 200+ billion dollars. He is also a big fan of Dogecoin. Tweets and comments by Musk have boosted Dogecoin’s price on many occasions.
Below is a tweet from Elon Musk from December 2020. It’s typical trolling and/or joking Musk has done many times before on Twitter.
One word: Doge
— Elon Musk (@elonmusk) December 20, 2020
Musk even had the text CEO of Dogecoin in his Twitter bio for a while. This describes well what Dogecoin is. It’s about memes and having fun. You shouldn’t take it too seriously.
There was lots of speculation in 2021 about whether Musk has any DOGE himself. He admitted in The B Word conference in July that he owns Bitcoin, Ethereum, and Dogecoin. However, his DOGE position is small, and Musk is certainly not a Dogecoin whale.
Elon Musk has also acted behind the scenes. Ross Nicholls revealed for Decrypt in 2021 that Musk had contacted the Dogecoin development team as early as 2019. He had also offered them funding, but the team had refused politely.
Dogecoin’s development is coordinated by a non-profit foundation in the United States. The Dogecoin Foundation was originally founded in 2014. It was brought back alive in August 2021. The board consists of long-term Dogecoin developers. Advisors include Ethereum founder Vitalik Buterin, who is a known Dogecoin fan.
Elon Musk has no official role in the foundation. However, one of the advisors is Jard Birchall, who is representing Elon Musk and also is a legal & financial advisor.
The Dogecoin-Litecoin connection
The program code of Dogecoin is based on Litecoin, as previously mentioned. This means Dogecoin is using the Proof of Work algorithm to reach a consensus. It makes Dogecoin a mineable cryptocurrency. The same applies to Bitcoin, Bitcoin Cash, Dash, Monero, and a few other currencies. Almost every new blockchain project has chosen a Proof of Stake variation in the past 3-4 years.
One major difference separating the mining of Bitcoin, Dash, Monero, and Dogecoin is the mining algorithm. Dogecoin is using scrypt, just like Litecoin. Bitcoin has the famous SHA-256. Originally, Litecoin used scrypt to prevent mining with ASIC devices. Nowadays this advantage has disappeared due to the creation of scrypt ASIC miners.
Below is a picture of Antminer L3 ASIC, which is a Litecoin ASIC miner by the Chinese manufacturer Bitmain.
There is also one special feature in Dogecoin mining. It is merged with Litecoin using the Auxiliriaty Proof of Work (AuxPow) technology.
Since many coins use the Scrypt algorithm for their Proof of Work, the basic algorithm for these coins is the same and solutions can be shared. Because of this, miners will be able to submit their solutions to dogecoin even if they aren’t mining dogecoin specifically. To do this though, the coin they were actually mining must have a higher difficulty (guaranteeing that you can’t spend less time than required on a solution).
Right now, the only Scrypt-based coin with a higher difficulty than Dogecoin is Litecoin. Thus, Litecoin miners will be able to choose to also submit their solution to (potentially) receive dogecoin.” (Source: Reddit)
AuxPow was implemented in 2014. It was the Litecoin founder Charlie Lee, who contacted Dogecoin developers and presented this idea. Merged mining with Litecoin would improve the security of the Dogecoin blockchain, which was vulnerable to 51% attacks.
Dogecoin is fast and cheap to use. A new block is created every minute and transaction fees are extremely low. DOGE is well-suited for making micro-transactions, such as giving tips online.
With each block, there are 10,000 new DOGE coins being created. This adds up to over five billion new coins per year. There are currently about 128 billion coins in circulation, which means the yearly inflation is about four percent.
Dogecoin hasn’t seen any major technical changes since 2015. This is not that surprising, though. Coins in the currency category don’t tend to change that much.
Dogecoin is all about having fun
There is a large community around Dogecoin, which has grown steadily over the years. The Reddit page has currently (Jan. 2021) 183,000 followers. The official Twitter account has 187,000 followers. It’s nice to have something fun in the crypto universe, which can be sometimes very hostile on social media.
Even if DOGE is a meme coin and all about having fun, it is also a currency worth a billion dollars. The community can also get serious if needed. It has shown amazing fundraising efforts in the past.
Dogecoiners helped the Jamaican bobsled team to the 2014 winter Olympics, raised 40 million dollars to build wells in Kenya, and also sponsored a NASCAR driver.
May 4th pic.twitter.com/og71mP9pMk
— Dogecoin (@dogecoin) April 27, 2014
Dogecoin has also been used on Reddit as a tipping currency. All in all, DOGE is a coin not to be taken too seriously. It certainly lightens up the mood on social media!
With all this said, one must remember there are developments and serious efforts being done every day to ensure Dogecoin’s existence. It’s quite impressive how Dogecoin has been able to stay relevant and popular without a billion-dollar war chest or a big marketing team.
Investing in Dogecoin
Let’s talk about Dogecoin as an investment. Can you even do that? Should the words investing and Dogecoin even be mentioned in a sentence together? Even if Dogecoin is a meme coin, it doesn’t mean you can’t make money owning it. There is a significant difference between investing and trading, though.
Investing is considered to be something you do with long-term goals in sight. It’s based on fundamentals and valuations. Trading or speculating is something else. You can buy anything and sell it back to the market after one minute with a profit. That is a totally different method of making a profit.
Dogecoin shouldn’t be considered a long-term investment. The high yearly inflation doesn’t help either. There are currently about 132 billion DOGE in circulation and five billion more being mined each year. This translates to inflation of 3.8 percent.
Dogecoin is the undisputed king of meme coins. It’s likely that Dogecoin has Elon Musk’s support in the future as well.
Doge meme shield (legendary item) pic.twitter.com/CeomU9q84c
— Elon Musk (@elonmusk) March 1, 2021
However, the market has changed a lot in the past year.
Decentralized exchanges (DEXes) have become extremely popular. They make it possible for anyone to launch a token with enough liquidity for trading. This is why there are hundreds of different meme coins in the market. Some of them are dog-themed and some include words like Elon, moon, and rocket.
Cryptocurrency exchanges used to be the gatekeepers of new projects. There was some due diligence done at least before launching a new coin. Decentralized exchanges don’t have these restrictions. Newcomers have also learned to use DEXes surprisingly well. Binance Smart Chain’s PancakeSwap has been a popular DEX due to its low fees.
Dogecoin’s competitors have also reached significant market positions. The biggest rival, Shiba Inu, even became a top 10 currency and overtook Dogecoin in the rankings. The video below compares these two coins.
The rise of meme coins has made Dogecoin the “original meme coin” or an OG alternative.
Dogecoin gives a chance for risk-takers to make a quick buck. Price moves have been pretty violent in the past, even hundreds of percent per day. Of course, the price can go down as fast. If you want to speculate with DOGE you should:
- Buy when the market is calm and not everyone is talking about Dogecoin
- Understand how to cash out before the price crashes
Most small investors do the exact opposite. They buy meme coins after 1000%+ moves. This is usually when the mainstream media is writing about such coins. What happens is those small investors become liquidity for whales to exit their positions.
An investor should find meme coins before they become popular. This is not easy, though. There are hundreds (if not thousands) of meme coins and more than 99% of them never make it.
Dogecoin has kept its ranking surprisingly well in 2021. Even if this is the case, we don’t see DOGE as a potential long-term investment. Investing in meme coins is like playing in a casino. Some lucky people end up winning, but the group of losers is massive.
Dogecoin price and how to buy Dogecoin
There is a desktop and a mobile wallet available for Dogecoin. It is recommended to move your coins out of the exchange after purchasing them. Ledger Nano X and Trezor Model T provide ultimate security.
You should also check the video below by Coin Bureau. It gives a good overview of the project.
Image credit: knowyourmeme.com, a screenshot from dogecoin.com