Summary

Yes, Dogecoin (DOGE) was inspired by the most famous meme of all time. Remarkably, its tongue-in-cheek comedic qualities haven’t hurt its viability in the digital currency world. Dogecoin has gathered a loyal group of users who have raised funds for many different initiatives over the years.

Foreword

Since the birth of Bitcoin in 2009, the development of digital currencies has been unstoppable. Since its inception, thousands of alternative digital currencies, also known as tokens, have sprung up to suit every situation. Some seek to establish themselves as currencies, while others are committed to promoting the development of smart contract platforms such as Ethereum.

Dogecoin may be one of the most unique offerings among early coins. It has been attracting cryptocurrency enthusiasts from all walks of life since 2014. In this article, we explain to you the why and the consequences.

A brief history of Dogecoin

Creation and launch

Dogecoin (DOGE) is an open source cryptocurrency derived from a fork of the Litecoin code base. As the name suggests, it is mainly based on the Shiba Inu emoticon that took the Internet by storm in 2013. The original image depicts a Shiba Inu dog with its inner monologue displayed in comic font.

At first, Billy Markus, a programmer from Oregon, proposed creating a "funny version" “The idea of digital currency. His reasoning is that a more user-friendly cryptocurrency has a better chance of attracting mainstream attention than Bitcoin. Around the same time, Adobe’s Jackson Palmer said in a now-deleted tweet that he was “investing in Dogecoin and firmly believes it is the next big thing.”

With the encouragement of some people, Palmer went a step further and created dogecoin.com. Shortly after the website went live, Marcus stumbled across it. He contacted Palmer to make it a reality and then set out to develop what is now known as Dogecoin.

Once launched, the cryptocurrency quickly became popular on social media. In just a few months, its market value reached millions of dollars.

Community Programs

The Dogecoin community has earned a reputation for charitable donations. At first, it was just a tipping system on websites such as Reddit, where users could send small amounts of Dogecoin to each other to reward content creators on such websites.

This dedication was echoed in subsequent, larger fundraising efforts: In 2014, the community slew for Jamaica The team raised more than $30,000 worth of Dogecoin to fund its trip to the Sochi Winter Olympics. At the time, the team had qualified but could not afford to travel to Russia to compete.

In the same year, the community launched two other initiatives. Doge4Water once again raised more than $30,000 to help people in Kenya drill wells. Later, Dogecoin enthusiasts raised more than $50,000 worth of the digital currency to sponsor NASCAR driver Josh Wise. Wise spray-painted the Dogecoin logo on his racing car, making the digital currency famous.

Tesla CEO Elon Musk once tweeted that Dogecoin may is one of his favorite digital currencies. After a community vote, he jokingly became the elected CEO of Dogecoin.

Famous TikTok

Mid-2020 , a viral video on the video sharing app Douyin caused a chain reaction, triggering a sharp rise in the price of Dogecoin. One user called on everyone to buy Dogecoin and said that once the price reaches $1, they can "get rich together" by trading Dogecoin. As the hype intensified, Dogecoin was trading at more than 2.5 times what it was a few weeks ago. However, the good times did not last long, and the price of Dogecoin subsequently began to fall sharply.

It is worth noting that this behavior can be regarded as a kind of "pump and sell" strategy. Investors face significant risks and are therefore illegal in traditional markets. Before there is hype around an asset, agitators buy in large quantities and others join in investing due to fear of missing out (FOMO), ultimately causing the price to rise significantly ("pump"). The agitators will then sell off their holdings and "ship" in large quantities - under the huge selling pressure, the price will inevitably plummet, causing subsequent investors to suffer heavy losses.

As always, you need to research potential investments yourself. Binance Academy has a wealth of trading and economics resources to help users gain a deeper understanding of the cryptocurrency market.

How does Dogecoin work?

Dogecoin is based on a fork of Litecoin (LTC) called Luckycoin. However, the agreement subsequently underwent important changes. Let’s learn how it works together!

Blockchain

Similar to Bitcoin, Dogecoin also uses a blockchain, which uses proof-of-work (Proof- of-Work) add blocks (Blocks). Network participants install open source software on their devices and operate as full nodes, meaning each participant maintains a complete copy of the database (which contains all transactions).

The system is decentralized and has no administrator control. Users can directly send messages to communicate with each other, relying on cryptographic technology to determine whether the other party is honest and trustworthy.

For a more comprehensive understanding of such systems, see The Ultimate Guide to Blockchain Technology.

Mining and supply

In blockchains such as Bitcoin that use proof of work, the goal of mining is to gain new currency. Participants must prove to the network that they have completed a "workload," which can also be viewed as a process of solving complex puzzles.

This problem needs to be solved through a hashing algorithm (Hashing) before the user can provide valid output that can be accepted by the network. Human power alone cannot calculate the answers to difficult problems, so users can only rely on electricity and computing power to try to solve the problems.

The main difference between Bitcoin and Litecoin is that the latter does not use the SHA-256 hash function for mining. This is intentional - Litecoin relies on Scrypt, an ASIC-resistant proof-of-work algorithm.

In short, this means that specialized computers used for Bitcoin mining cannot be compared with conventional computers used for Litecoin mining. Computers and GPUs compete. In theory, this will increase the degree of decentralization of the mining environment. However, soon after, application-specific integrated circuits for Scrypt emerged.

As a derivative of Litecoin, Dogecoin follows the Scrypt algorithm. However, in order to avoid competition and reduce security risks, Dogecoin developers switched to a federated mining model, where Litecoin miners can earn Dogecoins at the same time while mining. For a detailed analysis, see the case study “Dogecoin and Litecoin Joint Mining” written by Binance Research.

Dogecoin’s mining goal is to generate a block reward of up to 10,000 Dogecoins in a one-minute block time . There is no cap on unit supply, and there are already over 100 billion in circulation. Dogecoin enthusiasts believe that removing all restrictions is a good option, which will effectively incentivize the consumption of the token and prevent early adopters from obtaining excessive returns.

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How to use Dogecoin?

Like many other cryptocurrencies, there are many ways to obtain Dogecoin. Users can mine it themselves or receive payments for goods and services. However, the easiest way is to buy directly through a cryptocurrency exchange. Typically, you first need to buy Bitcoin or another popular cryptocurrency and then exchange it for Dogecoin.

Dogecoin can be used in the same way as any other cryptocurrency - you can store it long-term in a hardware wallet, redeem it Other currencies, purchase goods or use them to pay tips. Bitrefill is probably the easiest way to spend Dogecoin, which is to purchase gift cards and vouchers from a range of retailers through Bitrefill.

Summary

Although Dogecoin is an asset that grew out of an internet meme, it has already built a loyal community of users. Six years later, it still maintains a market capitalization of hundreds of millions of dollars.

Whether the market views Dogecoin as an emerging currency, a viable financial asset, or something in between Things in between are not yet clear. But few cryptocurrencies have had as much impact as Dogecoin simply by virtue of their status in the meme community.

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