Dogecoin is one of a number of cryptocurrencies that have hit the headlines in recent months, gaining a lot of attention because of both its price rises and its uniqueness as a ‘meme cryptocurrency’ with a cult following. It has a market capitalisation of around $44 billion, making it the sixth largest cryptocurrency and the 475th largest asset in the world (as of 10 June 2021). Show The price of Dogecoin has appreciated dramatically since May 2020 (see Figure 1), but it remains a relatively cheap coin with a very large supply. But what exactly is it – and does it have any value? Figure 1: Price of DogecoinSource: CoinMarketCapWhat is Dogecoin?Dogecoin is a cryptocurrency that began as a joke, taking its name and logo from a meme of a Shiba Inu dog that became popular online in 2013. It was founded by Jackson Palmer – a software engineer working for Adobe – although he has since walked away from the project. Palmer had two tabs open side-by-side on his computer – one was CoinMarketCap (an aggregator of data on cryptocurrencies) and the other was a news article about the best meme of 2013, Doge. When switching between the tabs, Palmer had the idea to put the two elements together and quickly tweeted about a hot new cryptocurrency called Dogecoin and bought the website domain. Shortly afterwards, IBM developer Billy Markus reached out to Palmer via Twitter asking him if he would be willing to create an actual Dogecoin cryptocurrency and it was officially launched on 6 December 2013. On 25 December 2013, multiple Dogecoin wallets were hacked but the Dogecoin community came together and refunded affected users. This marked the first of many large-scale initiatives by the Dogecoin community. Dogecoin is primarily used for tipping users on Reddit and Twitter, but it is also accepted as a method of payment by a few dozen merchants. It can be used to buy food, household supplies and even website domains. But it was primarily created as an attempt to break the stigma surrounding cryptocurrencies, which carried negative connotations at the time. Palmer also introduced it as an alternative to the greed he saw in the cryptocurrency community and as such, Dogecoin is designed to be unattractive to investors by keeping a permanently low value due to its mining algorithm. How does it work?Dogecoin is a version of Luckycoin (now defunct), which itself is a ‘fork’ of Litecoin (which is also a fork of Bitcoin). A fork happens when a blockchain diverges into two potential paths and can lead to a complete change in protocol and eventually a completely new cryptocurrency. For example, in 2017, Bitcoin Cash was created after a hard fork in the Bitcoin blockchain. The Dogecoin blockchain can process around 30 transactions per second, which is much higher than Bitcoin. It uses a proof of work consensus algorithm called Auxiliary Proof of Work, which allows those who mine other proof of work cryptocurrencies (primarily Litecoin) simultaneously to mine DOGE at no additional cost. This process is known as merged mining. Dogecoin’s initial block rewards were designed to be random and vary between zero and one million DOGE and this continued until it reached a supply of 100 billion, which occurred in February 2018. Since then, each mined block yields a reward of 10,000 DOGE. One block is mined every minute and Dogecoin has no supply cap. Palmer has stated that this was a mistake, and that the supply cap should have been set at 100 billion. It was left ‘unfixed’ on purpose as it keeps the cost of DOGE low. Like Litecoin, Dogecoin uses Scrypt technology, which has lower hashrates (a measure of computational power per second) and uses less energy than Bitcoin’s SHA-256 mining algorithm. Overall, Dogecoin is quite different from Bitcoin, which has a supply cap of 21 million coins, of which over 18.5 million have already been mined. Community and backersThe Dogecoin Foundation is a non-profit corporation registered in the US state of Colorado, and was created to facilitate the philanthropic initiatives of the community. Back in 2014, the foundation sponsored the Jamaican bobsled team so they could compete at the Sochi Winter Olympics and then sponsored NASCAR driver Josh Wise who sported the icon on his car and jacket at the 2014 Talladega All-Star race. They also sponsored Doge4Water, a project that successfully funded the creation of a clean water well in Kenya. Source: RedditReddit threads proclaim Dogecoin’s value as a new global currency and Tesla chief executive Elon Musk commented that ‘Dogecoin was made as a joke to make fun of cryptocurrencies, but fate loves irony. The most ironic outcome would be that Dogecoin becomes the currency of Earth in the future.’ Musk regularly tweets about cryptocurrencies and his recent tweet criticising the energy usage of Bitcoin corresponded to a 30% fall in its value. But he remains more positive about Dogecoin, with his tweet stating that he is working with its developers to improve the network causing a surge in price – as did his tweet asking followers whether they want Tesla to accept Dogecoin. Dogecoin thus has strong backing and the recent rise in the prices of meme currencies and shares such as GameStop shows that large groups of small investors can move markets. Does Dogecoin have any value?Like all cryptocurrencies, Doge has no fundamental value, and some argue it has no reason to have any. Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte., a platform for trading traditional currencies, is quoted as saying: ‘Dogecoin has no apparent commercial or investment use other than as a conduit for speculative mania and the attempt to make a buck. I suspect much of its appeal lies in the fact that it is very, very cheap to buy and sell, as opposed to $60,000 for Bitcoin, making it much more approachable to a retail trader who fancies a flutter.’ The low nominal price may have a psychological effect on investors like ‘penny stocks’ do, but whether you put $1,000 in Dogecoin or Bitcoin, you are risking the same amount. Curtis Ting, managing director for Europe at crypto exchange Kraken, suggests that investors buy Dogecoin for the memes as much as for the money, stating: ‘investors buy Dogecoin to participate in a self-deprecating joke about their inability to invest wisely, which keeps going as the price of an individual Dogecoin continues to appreciate.’ The huge fluctuations in price look a lot like a ‘pump and dump’ scheme, where users jack up the price by focusing attention on a cheap asset, encouraging investors to buy and then dumping the coin and leaving behind the investors who are too slow or not savvy enough. Further, the ownerships of Dogecoin seems to be concentrated in relatively few anonymous hands, so it may not take much to get the price moving in either direction. The futureWhat the future holds for Dogecoin, never mind other cryptocurrencies, is a guessing game. The big problem with the cryptocurrency space is the polarisation of opinion – commentators, bloggers and YouTubers are either crypto haters or ‘moonboys’ (believing that Bitcoin and other cryptocurrencies will go to the moon). But the uptick in attention is part of a wider phenomenon of investors piling into speculative assets. Société Générale SA’s global head of quantitative strategy, Andrew Lapthorne, has cited Dogecoin as an example of ‘an increasingly large number of weird and wonderful signs of market excess.’ Indeed, over 50 meme cryptocurrencies are now listed on CoinMarketCap, documenting their rise to prominence. Like all cryptocurrencies, the greatest inhibitor to its growth is the inability to use it for transactions. Yet the specific issue for meme cryptocurrencies, as opposed to other cryptocurrencies, is that their usage relies somewhat on users being attracted to the meme. If investors lose interest in the meme, then the price will collapse and Dogecoin will be worthless. Only one thing is for certain: Dogecoin is one of the most speculative and volatile cryptocurrencies today. Where can I find out more?Who are experts on this question?Author: Andrew UrquhartPhoto of a Dogecoin cryptocurrency medallion by Forextime.com from FlickrRight now, and for the next hundred years or so, Dogecoin operates like, and will continue to operate like, most other crypto assets. “Capped” assets are nowhere near mined out – and will continue adding to their supply, just like Dogecoin, for the foreseeable future. Dogecoin’s … Read more… Dogecoin (/ˈdoʊ(d)ʒkɔɪn/ DOHJ-koyn or DOHZH-koyn,[2] code: DOGE, symbol: Ð) is a cryptocurrency created by software engineers Billy Markus and Jackson Palmer, who decided to create a payment system as a "joke", making fun of the wild speculation in cryptocurrencies at the time.[3] It is considered both the first "meme coin", and, more specifically, the first "dog coin". Despite its satirical nature, some consider it a legitimate investment prospect. Dogecoin features the face of the Shiba Inu dog from the "doge" meme as its logo and namesake.[4][5][6] It was introduced on December 6, 2013, and quickly developed its own online community, reaching a market capitalization of over $85 billion[a] on May 5, 2021.[7] It is the current shirt sponsor[b] of Watford Football Club.[8] Dogecoin.com promotes the currency as the "fun and friendly Internet currency", referencing its origins as a "joke."[9] Software engineers Billy Markus and Jackson Palmer launched the satirical cryptocurrency as a way to make fun of Bitcoin and the many other cryptocurrencies boasting grand plans to take over the world. With the help of Reddit, the site became an instant hit. Within two weeks, Dogecoin had established a dedicated blog and forum, and its market value has reached $8 million, once jumping to become the seventh largest electronic currency in the world.[10] Dogecoin is based on Scrypt algorithm, and the transaction process is more convenient than Bitcoin. Dogecoin takes only 1 minute to confirm, while BTC takes 10 minutes.
Originally formed as a "joke",[11] Dogecoin was created by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer. They wanted to create a peer-to-peer digital currency that could reach a broader demographic than Bitcoin. In addition, they wanted to distance it from the controversial history of other coins.[12] Dogecoin was officially launched on December 6, 2013, and within the first 30 days, there were over a million visitors to Dogecoin.com.[13] Palmer is credited with making the idea a reality. At the time, he was a member of the Adobe Systems marketing department in Sydney.[14] Palmer had purchased the domain Dogecoin.com and added a splash screen, which featured the coin's logo and scattered Comic Sans text. Markus reached out to Palmer after seeing the site, and started efforts to develop the currency. Markus had designed Dogecoin's protocol based on existing cryptocurrencies Luckycoin and Litecoin,[15] which use scrypt technology in their proof-of-work algorithm.[16] The use of scrypt means that miners cannot use SHA-256 bitcoin mining equipment, and instead must use dedicated FPGA and ASIC devices for mining which are known to be more complex to produce.[17][18] On December 19, 2013, Dogecoin jumped nearly 300% in value in 72 hours, rising from US$0.00026 to $0.00095,[19] with a volume of billions of Dogecoins per day. This growth occurred during a time when bitcoin and many other cryptocurrencies were reeling from China's decision to forbid Chinese banks from investing into the bitcoin economy.[15] Three days later, Dogecoin experienced its first major crash by dropping by 80% due to this event and to large mining pools exploiting the small amount of computing power required at the time to mine Dogecoin.[20] On December 25, 2013, the first major theft of Dogecoin occurred when millions of coins were stolen during a hack on the online cryptocurrency wallet platform Dogewallet.[21] The hacker gained access to the platform's filesystem and modified its send/receive page to send any and all coins to a static address.[22][23] This hacking incident spiked tweets about Dogecoin, making it the most mentioned altcoin on Twitter at the time, although it was in reference to a negative event. To help those who lost funds on Dogewallet after its breach, the Dogecoin community started an initiative named "SaveDogemas" to help donate coins to those who had them stolen. Approximately one month later, enough money was donated to cover all of the coins that were stolen.[24] In January 2014, the trading volume of Dogecoin briefly surpassed that of Bitcoin and all other cryptocurrencies combined. However, its market capitalization remained substantially behind that of Bitcoin. Initially, Dogecoin featured a randomized reward that is received for each mining block. However, in March 2014, this behaviour was later updated to a static block reward.[25] Co-founder Jackson Palmer left the cryptocurrency community in 2015 and has no plans to return, having come to the belief that cryptocurrency, originally conceived as a libertarian alternative to money, is fundamentally exploitative and built to enrich its top proponents. His co-founder, Billy Markus, agreed that Palmer's position was generally valid.[26][27] During 2017 to early 2018 cryptocurrency bubble, Dogecoin briefly reached a peak of $0.017/coin on January 7, 2018, putting its total market capitalization near USD 2 billion. In July 2020, the price of Dogecoin spiked following a TikTok trend aimed at getting Dogecoin to $1.[28] On May 9, 2021, SpaceX announced a rideshare mission to the Moon completely funded by Dogecoin, thus becoming the first space mission funded by a cryptocurrency. Elon Musk confirmed this news via Twitter.[29] DOGE-1 will be a minor 40 kg rideshare payload on Intuitive Machines' IM-1 mission in Q1 2022.[30][31][32][33][34] On August 14, 2021, the Dogecoin Foundation announced the "re-establishment of the Dogecoin Foundation (est 2014), with a renewed focus on supporting the Dogecoin Ecosystem, Community and promoting the future of the Dogecoin Blockchain."[35] The Foundation was reinvigorated by the addition to its Board of notable advisors such as Vitalik Buterin (Ethereum co-founder and inventor) and Jared Birchall (representing Elon Musk).[36][37][38] 2021 boom and subsequent fallIn January 2021, Dogecoin went up over 800% in 24 hours, attaining a price of $0.07, as a result of attention from Reddit users, partially encouraged by Elon Musk and the GameStop short squeeze.[39] In February 2021, Dogecoin hit a new high price of $0.08 following Twitter encouragement from Musk, Snoop Dogg and Gene Simmons.[40] In March 2021, Dallas Mavericks owner Mark Cuban announced his NBA team would allow purchasing tickets and products with Dogecoin; within two days, Cuban had declared his franchise had become the top Dogecoin merchant, having carried out 20,000 transactions.[41] In April 2021, Dogecoin and other cryptocurrencies surged, stimulated in part by the direct listing for cryptocurrency exchange Coinbase on April 14, although that platform did not provide trading of Dogecoin.[42] Its price first reached $0.10 on April 14,[43] before hitting a new high of $0.45 on April 16 (up 400% that week[44]), with a volume of nearly $70 billion traded in the preceding 24 hours.[45] At the time[update], Dogecoin's market capitalization approached $50 billion, making it the fifth-highest-valued cryptocurrency;[46] its value had increased more than 7,000% year-to-date.[45] Interest in Dogecoin contributed to an outage in electronic trading platform Robinhood's cryptocurrency system on April 15, caused by "unprecedented demand", and prompted concerns from experts of a nearing speculative bubble in the cryptocurrency market.[44] On May 4, 2021, the value of Dogecoin first surpassed the symbolic hurdle of $0.50,[47] a greater than 20,000% increase in one year. On May 8, 2021, despite, or perhaps because of expectations of a surge in interest in Dogecoin resulting from Elon Musk's appearance on Saturday Night Live, Dogecoin dropped 34% from $0.711 at the opening of the show to below $0.470 45 minutes later. By the following morning Dogecoin hit a swing low of $0.401, a cumulative drop of 43.6% and lost value of $35 billion.[citation needed] As of July 2022, DOGE has fallen below $0.07 and its $8.9 billion market cap makes it the tenth largest cryptocoin.[48] Dogecoin is an altcoin[c] with a large userbase, and is traded against both fiat currencies and other cryptocurrencies on several reputable cryptocurrency exchanges and retail investment platforms. Trading physical, tangible items in exchange for DOGE takes place on online communities such as Reddit and Twitter, where users in such circles frequently share cryptocurrency-related information.[5][49][50] Several cases of people using their employers' or universities' computers to mine Dogecoin have been discovered.[51][52] Dogecoin has also been used in an attempted property sale,[53] and has been used in the pornography[54] and gambling[d] industries. Online tippingOne major mainstream commercial application of the cryptocurrency has been Internet-based tipping systems, in which social media users tip other users for providing interesting or noteworthy content.[55] DogetipbotDogetipbot was a cryptocurrency transaction service used on popular sites like Reddit and Twitch. It allowed users to send Dogecoins to other users through commands via Reddit comments. In May 2017, Dogetipbot was discontinued and taken offline after its creator declared bankruptcy; this left many Dogetipbot users losing their coins stored in the Dogetipbot system.[56] DeFi (decentralized finance) is a form of finance that does not rely on middlemen such as brokerages, exchanges, or banks to offer financial instruments.[57] This is accomplished using "smart contracts" which are automated enforceable agreements that do not need intermediaries like a bank or lawyer, but use online blockchain technology instead. While Dogecoin cannot interact with smart contracts directly given that it operates on its own chain, the coins can be "wrapped" so that they can be locked into a state that is interoperable with a contract until it is later released. The Ren Project has enabled Dogecoin (renDOGE) to be used on the Ethereum blockchain and access the DeFi network. Most DeFi coins use the Ethereum blockchain network.[58] DeFi linked coins use decentralized applications ("dApps") to transact and trade on decentralized exchanges (DExs). An example of a Dexs is Uniswap; these are entirely peer-to-peer exchanges, without any company or other institution providing the platform.[57] Dogecoin started with a supply limit of 100 billion coins, which would have been far more coins than the top digital currencies were then allowing. By mid-2015 the 100 billionth Dogecoin had been mined with an additional 5 billion coins put into circulation every year thereafter. Although there is no theoretical supply limit, at this rate, the number of Dogecoins put into circulation will only double in 20 years (the next doubling will occur in the year 2075). There is no implemented hard cap on the total supply of Dogecoins. Nonetheless, in February 2014, Dogecoin founder Jackson Palmer announced that the limit would be removed in an effort to create a consistent reduction of its inflation rate over time.[59] In other words, the inflation rate improves over time starting at 5% in 2015 to less than 4% by 2019, 3% by 2027, and 2% by 2035. Dogecoin's implementation differs from Litecoin (of which its code is forked) by several parameters. Dogecoin's block time is 1 minute as opposed to Litecoin's 2.5 minutes.[5] The Dogecoin community and foundation have encouraged fundraising for charities and other notable causes. On January 19, 2014, a fundraiser was established by the Dogecoin community to raise $50,000 for the Jamaican Bobsled Team, which had qualified for, but could not afford to go to, the Sochi Winter Olympics. By the second day, $36,000 worth of Dogecoin was donated and the Dogecoin to bitcoin exchange rate rose by 50%.[60] The Dogecoin community also raised funds for a second Sochi athlete, Shiva Keshavan.[61] Doge4WaterInspired by the Winter Olympics fundraiser and smaller charity fundraising successes, the Dogecoin Foundation, led by Eric Nakagawa, began collecting donations to build a well in the Tana river basin in Kenya in cooperation with Charity: Water. They set out to raise a total of 40,000,000 ($30,000 at the time) Dogecoin before World Water Day (March 22). The campaign succeeded, collecting donations from more than 4,000 donors, including one anonymous benefactor who donated 14,000,000 Dogecoin (approx. $11,000 at the time, or $2.8m in 2021).[62] NASCARJosh Wise's Dogecoin-sponsored Chevrolet in 2014 Josh Wise 2015 Toyota DogeCoin racecar On March 25, 2014, the Dogecoin community successfully raised 67.8 million Dogecoins (around $55,000 at the time) in an effort to sponsor NASCAR Sprint Cup Series driver Josh Wise. Nicknamed the "Moonrocket",[63] the No. 98 car featured a Dogecoin/Reddit-sponsored paint scheme and was driven by Wise at the Aaron's 499 at Talladega Superspeedway.[64] Wise and the car were featured for nearly a minute, during which the race commentators discussed Dogecoin and the crowdfunding effort, while finishing twentieth and narrowly avoiding multiple wrecks.[65] On May 16, Wise won a spot at the Sprint All-Star Race through an online fan vote beating household name Danica Patrick, largely due to the efforts of the Dogecoin Reddit community. He finished the race in fifteenth, the last car running.[66][67] The following race in the Coca-Cola 600, Wise debuted a Dogecoin/Reddit.com helmet. Wise later announced he would run the car again at the Toyota/Save Mart 350 and the GEICO 500 as a thank-you gift to the community.[citation needed] He finished twenty-eighth in the race due in part to a refueling issue; he was in twelfth place after a gas-and-go pit stop, but the gas can did not engage long enough, resulting in a second pit stop that took him towards the back of the pack. Eutechnyx, the developer of the NASCAR '14 video game, added the Dogecoin car as a drivable car in a DLC pack.[67][68] On March 2, 2021, NASCAR Xfinity Series team B. J. McLeod Motorsports announced that Dogecoin would be sponsoring the No. 99 car in the Alsco Uniforms 300 at Las Vegas alongside Springrates;[69] Stefan Parsons drove the car to a 36th-place finish as fuel line issues prevented him from completing the race. Coincidentally, his father Phil was the owner of the team that fielded the original Dogecoin-sponsored car in 2014. Dogecoin's origin as a "joke", which makes it the first meme coin, has made it difficult to be taken seriously by mainstream media and financial experts.[70][71] The cryptocurrency has had a long and problematic history of scams.[72][73][74] Similar to many other cryptocurrencies, Dogecoin has been described by some commentators as a form of Ponzi scheme. Critics allege that Dogecoin investors who purchased Dogecoins early on, have a large financial incentive to draw others into purchasing more Dogecoins in order to drive the price up, therefore benefitting the early investors financially at the direct expense of later purchasers.[75] Dogecoin does not have a supply cap like other cryptocurrencies, such as Bitcoin with its capped supply of 21 million coins.[76] Dogecoin has instead a deliberately stable, "deterministic inflation" rate of 10,000 Dogecoin per block, with a block time of one minute.[77] Exactly five billion new Dogecoin will be created and enter circulation every year.[77] While the price of Dogecoin is volatile, this volatility has its benefits. It allows cryptocurrency day-traders, those being traders who enter and exit a trade within one day, to trade off this volatility and benefit from the extreme swings in Dogecoin's value. Additionally, while the cryptocurrency may have begun as a "joke", it was in September 2021 the 10th-largest cryptocurrency in the world, with a market capitalisation of USD $26 billion.[78] Larger coins included Bitcoin, Ethereum, Cardano, Binance Coin, Tether, and XRP. Dogecoin uses relatively little energy for transactions compared with some other cryptocurrencies (0.12 kilowatt-hours per transaction (kWh)).[79] In comparison, Bitcoin uses 707.6 kWh[80] and Ethereum uses 62.56 kWh.[81] Mark Cuban has stated of Dogecoin that, "Doge has 'deterministic inflation' meaning the amount of inflation is defined. There is no uncertainty as to the amount of created and it's inflation percentage. Which could allow it to grow as a valid payment mechanism. The unknown is whether enough people will use it this way."[82] Elon Musk frequently uses his Twitter platform to express his views on Dogecoin, which has led some to claim that his actions amount to market manipulation[83] because the price of Dogecoin frequently experiences price movements shortly after Dogecoin-related tweets released by Elon Musk. Nevertheless, because cryptocurrencies are not regulated like stocks, these actions are not illegal.[84] Musk and his promotion of Dogecoin have been criticized by Dogecoin co-founder Jackson Palmer, who called Musk a "self-absorbed grifter".[85] Musk's first Dogecoin-related tweet occurred on December 20, 2020. Musk tweeted 'One Word: Doge'. Shortly after, the value of Dogecoin rose by 20%.[86] This was followed by a series of Dogecoin-related tweets by Musk in early February 2021 captioned 'Dogecoin is the people's crypto' and 'no highs, no lows, only Doge'. Following these tweets, the value of Dogecoin rose by roughly 40%.[86] On April 15, 2021, the price of Dogecoin rose by more than 100% after Musk tweeted an image of Joan Miró's 'Dog Barking at the Moon' painting captioned 'Doge Barking at the Moon'.[87] The price of Dogecoin rose by 11% on May 20, 2021, shortly after Musk tweeted a Doge-related meme.[88] In May 2021, the price of Dogecoin was up 10% in the hours after Musk tweeted a Reddit link for users to submit proposals to improve the cryptocurrency.[89] On December 14, 2021, Dogecoin spiked more than 20% after Elon Musk said that Tesla will accept the currency as a means of payment for Tesla merchandise.[90][91] On June 16, 2022, Elon Musk was named in a complaint seeking damages of $258 Billion. The complaint was filed in federal court in Manhattan by plaintiff Keith Johnson. Johnson cited Musk's repeated use of his massive social influence to promote the altcoin, which he claims artificially inflated the price. [92]
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