What Is Dogecoin (DOGE) Cryptocurrency & How Does It Work?

Dogecoin is a cryptocurrency like bitcoin and Ethereum, but it is a very different currency from these popular coins. Originally created at least partly as a playful joke for crypto enthusiasts, Dogecoin got its name from a previously popular meme.

 

What is Dogecoin?

Jackson Palmer created dogecoin in late 2013. Palmer attached the cryptocurrency logo to a then-popular meme that included the word "DOGE", deliberately misspelled to describe Shiba Inu.

 

Bitwave CEO Pat White said: in the early days, the enthusiastic community raised funds to raise awareness of Dogecoin, send his Jamaican team to the 2014 Olympics, and sponsor NASCAR drivers. , Arranged a publicity stunt.

 

In early 2021, Dogecoin achieved a high place on the Wall Street Beats message board on his site Reddit. This is because in January he was the main instigator behind the Jim stop scandal, promising that enthusiasts would bring its value" to the moon " (which is why discussions about cryptocurrencies were held online). (This was before he was killed). No subreddits).

 

By May 2021, Dogecoin had risen from just under 1 cent at the beginning of the year to 0.68 dollars. Tesla CEO Elon Musk has partially blamed Dogecoin for its phenomenal growth after calling it his favorite cryptocurrency. Until mid-2021.

Since then, Dogecoin has depreciated in value, reaching a low of about 0.11 dollars in March 2022, but it is still among the top 20 cryptocurrencies in terms of market capitalization.

 

How does Dogecoin work?

Like many other currencies, Dogecoin operates on a blockchain dedicated to it. The digital ledger of Dogecoin is constantly updated with all new transactions and the network uses encryption to keep all transactions secure.

 

The Dogecoin blockchain uses a proof-of-work consensus mechanism, where miners use computers to solve complex mathematical formulas to process and record transactions on the blockchain. In exchange for blockchain support, miners can earn additional dogecoins to hold or sell on the open market.

 

Dogecoin can be used for payments and purchases but is a less effective store of value. This is mainly due to the lack of a lifetime cap on the number of Dogecoins that can be mined. This means that cryptocurrencies are inherently very inflationary.

 

Blockchain rewards miners by creating millions of new Dogecoin every day.

 

Dogecoin and bitcoin

Dogecoin has some important differences compared to bitcoin. Firstly, it will be faster and easier for miners to complete formulas that complete and record transactions, which will make Dogecoin more efficient in processing payments.

 

Gary Dewal, chairman of the board of the Katin group for financial markets and regulation, said:

 

Another important difference, as mentioned above, is that there is no lifetime limit to the number of Dogecoins you can create. There is a maximum lifetime limit of 21 million bitcoins which limits the maximum number of coins you can generate. 

This means that miners will have to work harder and longer over time to get new bitcoins, which will help bitcoin maintain and increase its value over time.

 

How to buy Dogecoin?

You can buy Dogecoin on cryptocurrency exchanges such as Binance and Kraken. The exchange requires you to set up and fund your account in US dollars or cryptocurrencies.

 

Some online brokers such as Robinhood and TradeStation also allow you to buy Dogecoin in addition to traditional assets such as stocks, mutual funds, and bonds. While they don't offer as many cryptocurrencies as exchanges, Dogecoin is widely available.

 

As with any cryptocurrency, after buying Dogecoin, it is better to transfer coins to your crypto wallet. Wallets can take many forms, from online services offered by exchanges such as Coinbase to mobile applications and physical hard drives. Protect your wallet with a special password. 

Since the coins are stored off-exchange, they have an additional layer of protection against hacking.

 

Before Dogecoin became mainstream and skyrocketed in price, you could earn free coins just by doing basic tasks online.

 

 

Is Dogecoin a good investment?

There is no lifetime limit to the number of Dogecoins that can exist, and with millions of new doge-coins being released, there is little incentive to hold cryptocurrencies in the long term. The value of bitcoin continues to grow due to the system's lifetime ceiling on the number of coins that can be created.

 

Historically, the value of Dogecoin per coin has been very low, it was about 0.003 dollars per coin for most of 2020, which makes people more likely to give up Dogecoin. I was, too. "Users of social platforms such as Reddit, Twitter, and Facebook can use Dogecoin to reward or' tip ' each other for posting content, "Gray said.".

Should I buy Dogecoin?

Those who bought Dogecoin before the big winnings in 2021 received good bonuses. However, White is somewhat cautious about buying Dogecoin, especially for investment purposes. The constant influx of new coins on the market puts endless downward pressure on the value of the coin.

 

White also said that the additional security of Dogecoin compared to other major cryptocurrencies makes him warn about the risks "it did not have the same security reviews and code level as bitcoin and Ethereum". 

Also, since there is no particularly strong mining community around the DOGE, the vulnerability to mining-level attacks is much greater than something like bitcoin. While it's always worth buying a few coins and getting acquainted with the system, it's probably better not to put more than one token of your hard-earned money into a cryptocurrency that you started as a joke.