What is Dogecoin?: The 'Joke' Cryptocurrency that’s Worth $51 Billion
Some of the best things are invented by accident. A blockchain network that started as a joke and was inspired by a Shiba Inu meme is now worth $51 billion!
The price of Dogecoin (DOGE) has reached new highs against both fiat currencies and bitcoin. Read on to find out more about DOGE!
What is Dogecoin (DOGE)? 🐕
Dogecoin's story starts with the Doge meme, pictures of the Japanese dog breed Shiba Inu with comedic broken dialogue in the Comic Sans font.
The Doge meme originated on Tumblr in 2013, derived from a photograph taken in 2010 and was ranked the top meme of 2013 by the Know Your Meme website:
The original spawned a number of other Doge memes over the years, such as the one below:
The popularity of these memes led to a joke on Twitter about 'investing in dogecoin' by Jackson Palmer on November 27, 2013. After some encouragement from his friends, Palmer pursued the creation of a fun, light-hearted version of Bitcoin (BTC) for a laugh.
The face of the original Shiba Inu meme was used as the coin's logo, and Palmer set out acquiring the dogecoin.com domain. The website caught the attention of Billy Markus, who reached out to Palmer and they worked together to create Dogecoin (DOGE), which was done in a few hours.
Dogecoin was initially modelled on LuckyCoin, a coin where the block rewards are random for each block (instead of being fixed) and is based on Litecoin. Along with Dogecoin, these coins all use Scrypt mining, with faster block times and quicker transactions than Bitcoin.
The Dogecoin network was first introduced to the world through Bitcointalk on December 6, 2013, but little did the two creators know that their coin would far exceed their expectations. DOGE went from a joke to quickly becoming a favourite method for tipping in online communities such as Reddit, as it's easy as typing '50 doge'.
DOGE also became a favourite of cryptocurrency traders before stablecoins were created. Because of Dogecoin's fast transactions and cheap fees, cryptocurrency traders could use the altcoin to move funds to and from different exchanges quicker than they could with BTC.
The Dogecoin community also earned a reputation for philanthropy - not just tipping a few coins here and there on the internet, but also bigger projects which attracted mainstream attention. For example, some charitable campaigns include helping the Jamaican bobsled team to attend the Sochi Winter Olympics in 2014, and Dogecoin Socks, a project to donate socks to the homeless. The founders also donated all of their coins to charitable causes. At a time when Bitcoin was perceived as the coin of the 'bad guys' (because of the association with The Silk Road), Doge was positioning itself as the 'good guy' of crypto.
Despite being launched almost 8 years ago, Shibes are still digging for Dogecoin and the meme-powered blockchain network has recently been enjoying a major resurgence. The Dogecoin price reached fresh highs against both bitcoin and the US Dollar in April, moving into the top 5 coins by market capitalization once again.
Comparison Between Bitcoin and Dogecoin
What are the similarities and differences between Bitcoin and Dogecoin?
The main similarities between the two are:
- Bitcoin and Dogecoin share the same code base: if you download and open the Dogecoin client, it feels the same as Bitcoin Core client, except for a few stylistic changes, such as a Comic Sans font, 'dig' replacing the word 'mine', and so on. This results from Dogecoin being a code fork of Litecoin, which is itself a code fork of Bitcoin.
- Both use Proof of Work for mining: Bitcoin and Dogecoin can both be mined, requiring hardware and electricity, as opposed to Proof of Stake where consensus is achieved by nodes who stake their tokens.
- Both were 'fairly launched': both coins were launched without a premine or instamine (where coins are distributed to founders before launch). There was no initial coin offering or token sale to raise funds to launch Dogecoin.
- Both have exhibited price cycles: Bitcoin's price has alternated between bullish and bearish cycles based on its 4-year block halvings. DOGE has also exhibited its own cycles, normally appreciating rapidly for a month or two (usually in Q1 or Q2) before alternating into a falling or sideways moving market. Between August 2014 and January 2021, DOGE-BTC traded in the 20 satoshi to 200 satoshi range, fluctuating within these levels and alternating between bullish and bearish phases.
The main differences between the two are:
- Supply Dynamics: While Bitcoin will only ever have a supply of 21 million, Doge has no hard cap on the number of coins in circulation. Instead, the altcoin has a soft cap - while there's no strict upper limit - the growth in the supply of coins ensures that the inflation rate falls over time to a low percentage such that it is meaningless as there is fixed number of DOGE created per unit of time. DOGE had an initial supply limit of 100 billion, but this was removed in February 2014 and a fixed block reward of 10,000 DOGE was introduced. On the other hand, BTC has a block reward that declines over time, and the question of who will pay the miners when the block rewards run out is still an unanswered question. While the supply of BTC is currently below 19 million, the supply of DOGE currently sits just under 130 billion. The number of DOGE in existence is expected to reach approximately 133.5 billion by the end of 2021, while BTC will edge closer to 19 million.
- Mining Algorithm: Despite both coins utilizing Proof of Work mining, bitcoin mining algorithm is based on SHA-256 while Dogecoin's utilises Scrypt, which was designed to prevent the use of specialized machines used in Bitcoin (such as ASICs). Dogecoin is also merged mined with Litecoin to increase its security - where Litecoin miners can also mine Doge with the same hardware, which doesn't have any downsides for miners.
- Transaction costs & speed: Dogecoin offers cheaper and faster transactions. Since the block time is just one-minute (so 10,000 DOGE are created each minute for each block), compared to ten minutes for Bitcoin, more transactions can be absorbed by the Dogecoin network. There's a difficulty adjustment after each Doge block instead of every 2,016 blocks as in Bitcoin. The median transaction fee for DOGE over the past 30 days has been around $0.12, compared to $9.41 for BTC.
Why is DOGE on Fire at the Moment? 🔥
DOGE has always had a strong social aspect and active community; it has one of the largest cryptocurrency-related Reddit forums (with over 1.4 million subscribers), it enjoys lots of Twitter activity (with the official account Dogecoin account amassing over 865,000 followers), and has displayed strong growth in the number of active addresses - which shows the number of users is increasing.
In the past year, the social dimension of DOGE was strengthened even further by several factors:
- a Tik Tok campaign in the summer of 2020 to push DOGE to $1,
- the GameStop short squeeze, which sparked more interest in investing,
- the post-pandemic cryptocurrency bull run, and
- Elon Musk tweeting about DOGE, bringing more awareness to the altcoin and attracting new users.
Over the past week, the social buzz for dogecoin is almost as high as it is for Bitcoin, with almost 1.8 million tweets versus Bitcoin's 1.97 million according to LunarCRUSH. Data from BitInfoCharts also shows that the number of tweets per day for Dogecoin has overtaken Ethereum and Litecoin, and is catching up with Bitcoin.
Of course, social sentiment is not everything, but if this trend persists, then it could bode well for Shibes. However, if the buzz dies down and falls out of step with other top 10 coins, then the upward move may fade.
While chatter on social media is one thing, Dogecoin is also getting a boost via endorsements from none other than Elon Musk, the CEO of Tesla and SpaceX/Neuralink founder.
From tweeting he's taking Tesla private at $420 to his appearance on the Joe Rogan Experience podcast, Elon Musk is a walking, talking meme himself, so it is fitting he'd muster his support behind another powerful meme, Dogecoin. Musk first publicly displayed his affection for DOGE in April 2019, when he said that the altcoin is "pretty cool":
Since then, the SpaceX founder has gone onto mention the memecoin several times...
...with one remarking he'd built Doge mining rigs with his kids:
What Does the Future Hold for DOGE? 🔮
It’s an exciting time for cryptocurrency investors and traders, especially Shibes!
The altcoin recently broke above its all-time high in terms of the bitcoin and is looking for a new ceiling. DOGE traded below the 300 satoshi level (0.00000300 BTC) from February 2014 until April 16, 2021, with the recent rise lifting DOGE once again to the top 5 coins by market capitalization.
Remember, if you decide to invest in DOGE, do not invest more than you can afford to lose! Cryptocurrencies can be extremely volatile and it would've taken a dogecoin investor over half a decade to see any profit if they had bought around 300 sats in 2014.
But according to the Lindy Effect, the longer something non-perishable survives, the greater the likelihood it continues existing, suggesting it is unlikely that Dogecoin is going to go away any time soon. If there’s ever proof that all you need is a community of enthusiasts to make something valuable, look no further than Dogecoin!
Happy DogeDay! 🐕Are you bullish or bearish on Dogecoin? Let us know (and why) on Discord or via Twitter. If you enjoyed our article, please share it on Twitter with the hashtag #DogeDay!
-The Rollbit Team