Dogecoin (DOGE) is a cryptocurrency, like Bitcoin or Ethereum. But it is very different in many aspects. It has become popular thanks to Elon Musk who loves DOGE and tweets about his favorite crypto more often than about Mars.
Dogecoin was originally created at least in part as a lighthearted joke for crypto enthusiasts.
It took its name from a once-popular meme.
And it would as well have been forgotten by now if it wasn’t for Elon Musk.
For some reason – and we will talk about it in a moment – Musk has become obsessed with Dogecoin. His immensely popular Twitter account is a highly effective marketing machine that pushes DOGE up, one hype after another.
So what had once started as a joke now turned to be one of the most popular cryptocurrencies out there.
In this article we will explain what Dogecoin is, how it works, should you invest in DOGE and could it become the next Bitcoin.
And, of course, we will try to predict what will happen to DOGE if Elon Musk suddenly loses interest in it.
What is Dogecoin
Actually Dogecoin is more of a meme crypto token than a real cryptocurrency. It was developed in late 2013 by software engineers Billy Marcus and Jackson Palmer.
Both described Dogecoin as an attempt to poke fun at Bitcoin.
Palmer branded the cryptocurrency’s logo using a meme popular at the time that featured the misspelled word “doge” to describe a Shiba Inu dog.
DOGE was well received by the crypto community. Many enthusiasts were kind of tired of Bitcoin that was way too serious. DOGE allowed for crypto to be fun and light headed.
A community of enthusiasts arranged publicity stunts to raise Dogecoin’s profile. Later they gathered funds to send the Jamaican Bobsleigh team to the 2014 Olympics and to sponsor a NASCAR driver.
For many years Dogecoin was seen as a joke. Its price rightly reflected it. In early 2021 one DOGE had a value of just one penny.
Nothing predicted a big change.
Yet it occurred.
At first, Dogecoin gained cult status on Reddit’s message boards. Some of the users promised to propel its value to the moon. Their efforts eventually began to bear fruit.
By May 2021, Dogecoin rose to a high of $0.68.
Enter Elon Musk.
Tesla CEO is responsible for the massive growth after calling Dogecoin his favorite cryptocurrency. Somewhere in the summer of 2021 Dogecoin was consistently polling among the top five cryptocurrencies by total market cap.
But that was the best of Dogecoin to date.
Since then, the value of Dogecoin has been falling steadily, bottoming out around $0.11 in March 2022, although it remains among the top 20 cryptocurrencies by market cap.
So you can effectively conclude that DOGE has gone out of fashion.
Unless Elon Musk is planning something big again, of course.
How does Dogecoin work?
In general terms, Dogecoin is a cryptocurrency that runs on blockchain, similarly to Bitcoin and Ethereum.
Blockchain is a distributed, secure digital ledger that stores all transactions in blocks that are linked with each other and protected by strong cryptography.
And just like Bitcoin, Dogecoin is a decentralized digital currency or a cryptocurrency.
The similarities with bitcoin don’t end there. Dogecoin is also based on a Proof-of-Work system and uses mining as the main driving force. Miners use powerful hardware to solve complex mathematical equations in order to process transactions and record them on the Dogecoin blockchain.
In exchange for processing transactions and supporting the blockchain ledger, miners earn DOGE. Just like miners of Bitcoin are rewarded BTC for their participation.
How is Dogecoin different from Bitcoin?
There are differences between Dogecoin and Bitcoin that are actually crucial.
It is highly inflationary
While Bitcoin is limited to 21 million tokens to be mined, there is no lifetime cap on the number of Dogecoins that may be created by mining. It means that the cryptocurrency is highly inflationary, by design.
The blockchain rewards miners for their work by creating millions of new Dogecoins every day, which makes it very challenging for speculative price gains in Dogecoin to hold up over time.
It is quicker that Bitcoin
At least, Dogecoin is mined with ease.
It is quicker and easier for miners to complete the mathematical equations that complete and record transactions on the transactions, which makes Dogecoin somewhat more efficient for processing payments.
Each new block in the Bitcoin blockchain is ratified during 10 minutes, while in Dogecoin each block can be processed in just one minute.
What has Elon Musk to do with DOGE?
Elon Musk is a tech billionaire with great passion for innovation. He brought us to the age of electric cars and is about to send us to Mars. Presumably, a part of humanity.
Do you remember his quotes about Mars colonies with 100,000 people by the end of the century?
But there is another side of his personality that is rather interesting. He loves Twitter. Musk actually loves Twitter so much that he recently bought a huge share of the company and joined the board of directors.
But that’s another story.
As for DOGE we must mention that Musk is an avid Twitter user. And he likes tweeting about his favorite cryptocurrencies.
He used to tweet about Shiba Inu and some others. But his most noticeable tweets were dedicated to Dogecoin.
Love him or hate him, Musk sure knows how to create price action.
His tweets were reasons for DOGE price hikes more than once.
Let’s take a look at some of the Musk’s tweets that changed the fate of Dogecoin:
- December 20, 2020: Musks tweets ‘One word: DOGE’ — the price spiked 25%,
- February 4, 2021: Musk makes multiple tweets about DOGE — the price surged over 60%,
- May 9, 2021: Musk calls DOGE “a hustle” on SNL — the price tanked over 30% in a few hours,
- May 12, 2021: Musk tweets Tesla won’t accept bitcoin as a payment — crypto markets fell 25% in the following days,
- December 15, 2021: Musk tweets that Tesla will accept DOGE — the price surged 25%
Musk has justified his DOGE obsession in the past by saying some pretty weird things.
“Wouldn’t it be funny if the thing that was designed to be a joke currency ended up being the real currency?”, he tweeted once.
Is Dogecoin a good investment?
The simple answer to this would be just ‘no’.
Since there is no lifetime limit on the number of Dogecoins that can exist, millions of new Dogecoins are released onto the markets every single day. And it will always be like this. Till Dogecoin exists or till the end of days – whatever comes first.
It means that there is very little incentive to hold Dogecoin for the long term.
Scarcity of the cryptocurrency has proved to be one of the best ways to protect it from inflation. Bitcoin continues to rise in value because of the system’s lifetime cap on the number of coins that can be created.
So what can I buy with Dogecoin?
Dogecoin is good for spending, not for holding.
Some analysts say Dogecoin should not be compared to Bitcoin directly. It would be more appropriate to compare Dogecoin to Bitcoin Cash, a crypto that was intentionally created to be spent.
The transactions in DOGE are quite fast and fees are reasonably low.
So when you need to throw a small amount of money to somebody, DOGE is a nice way to do that.
Not for buying and holding for a long time, though. Dogecoin is not a rival to Bitcoin in any sort of way.
How to mine Dogecoin
As I mentioned before, Dogecoin uses the same protocol as Bitcoin, which is called Proof-of-work.
However, Dogecoin is different in some ways.
Dogecoin mining is less power consuming
First of all, it is much less power-hungry than BTC, which generates a shocking amount of heat and energy. Dogecoin relies on an algorithm called Scrypt. It’s less complex than mining on Bitcoin’s SHA-256 algorithm.
Scrypt requires fewer resources, allowing miners to mint DOGE on less-powerful computers.
There is a comparison that shows how much easier it is to mine.
Just look at these figures: DOGE uses 0.12 kWH of energy per transaction whereas BTC and ETH waste 707 kWh and 62.56 kWh, respectively.
What do I need to mine DOGE
Start with getting a wallet for DOGE. It might be any wallet you like that has DOGE in the list of possible tokens.
Then you need a computer with a relatively powerful GPU. As you can see, DOGE doesn’t need as much power as ETH or BTC. An average gaming laptop will be highly productive at mining DOGE. Then just google for software to mine Dogecoin. There will be options, choose whichever you like, download it and start mining.
At the time of writing, it is possible to earn around $2-3 per day mining DOGE on a middle specs gaming laptop.
How to buy Dogecoin
If you are not mining, the easiest way to get some DOGE is simply to buy tokens.
You can do it on a cryptocurrency exchange like Binance, Coinbase or Kraken.
Of course, you will have to register and set up an account, get your identity verified and your bank card attached.
You then are able to buy and exchange cryptocurrencies, including Dogecoin.
As with other cryptocurrencies you can either hold the DOGE tokens in the wallet that crypto exchange provided you with (that would be a custodial wallet) or move them to a separate non-custodial wallet. The main difference is that the latter allows you to hold the private keys to your wallet thus making it much more secure.
But as we mentioned before DOGE is not the best crypto to be held for a long time, it is more suitable for spending quickly. So choosing the wallet is not that important as with Bitcoin or some other crypto that is supposed to be kept for a while.
Here are a few thing you should definitely know about Dogecoin now:
- Dogecoin is a highly volatile cryptocurrency that has no protection against inflation
- There is no strategy or philosophy that makes Dogecoin unique or simply outstanding among many other cryptocurrencies out there
- There are no signs of DOGE recovering from falling and getting back to its price peaks (I mean the level of mid 2021)
- If Elon Musk stops pushing it, Dogecoin might be completely forgotten in a year or so
Sources: Forbes Advisor, Dmarge, Laptopmag