Know Your Crypto: Dogecoin (DOGE)

• Dogecoin is a token that sprouted more like a joke in 2013 and is now a serious contender for the cryptocurrency throne.
• Standing at number 10, With a trading volume of $725,926,513.34 and the current price standing at $0.08093.

It’s one of the earliest cryptocurrencies, having been launched in 2013. Since then, it has come to lead the industry of meme coins and become one of the world’s most renowned and most valuable cryptocurrencies.

Dogecoin was developed by two software engineers – Billy Markus and Jackson Palmer as a joke to poke fun at the wild speculation in cryptocurrencies at the time. It was created based on the code of Luckycoin, which itself had been based on the Bitcoin code. It took the two engineers just hours to complete the project, basing it on the Shiba Inu dog, a Japanese dog breed, which at the time had become extremely popular on the Internet as a meme.

Billy and Jackson expected the project to die off soon after launch. However, sparked by Reddit, the coin grew a community very quickly and took off. The two founders stepped away from Dogecoin a few years after it launched, selling off all their tokens. For Billy, the proceeds were just enough to buy a used Honda Civic, as he later revealed.

Being a clone of Bitcoin to some large extent, Dogecoin mirrors most of the features of Bitcoin. The most fundamental one is the proof of work (PoW) consensus mechanism in which miners validate transactions by building blocks.

However, Dogecoin differs from Bitcoin in other aspects. First, despite both relying on PoW, Bitcoin has built its consensus mechanism on the SHA-256 hash standard while Dogecoin utilizes Scrypt, first applied by Charlie Lee on Litecoin.

Scrypt democratizes the mining process and ensures the smaller miners can still compete with the big dogs. With SHA-256, miners who’ve invested in heavy equipment such as the latest application-specific integrated circuits (ASICs) are more likely to earn the block reward over the smaller miners. However, Scrypt makes a network ASIC-resistant, ensuring a level-playing field for all the miners, including those using small GPU mining machines.

Dogecoin is one of the few cryptocurrencies that has no hard cap on supply. When its two founders created it, they launched it with a 100 billion DOGE cap. However, since they wanted it to be a joke project, they later removed this cap. This was their way of ensuring no DOGE user holds the cryptocurrency as an investment. This gives DOGE an infinite supply and makes it unsuitable as a store of value in contrast to projects like the 21-million-capped Bitcoin.

One tenet that Dogecoin took from Bitcoin is a block size capped at 1MB. However, while a new block is generated every ten minutes on Bitcoin, it only takes one minute on Dogecoin. Therefore, despite having same-sized blocks, Dogecoin is over 7 times faster than Bitcoin.

In addition, the block reward on Dogecoin stands at 10,000 DOGE, meaning that 600,000 new tokens are generated on the network every hour. This further ensures that Dogecoin’s scarcity is downplayed and in theory, its value falls every minute, just as its founders intended.
Despite all the mechanisms put in place to stifle its value growth, Dogecoin has emerged as one of the world’s largest cryptocurrencies. Its value has been mostly tied to the one thing that its founders thought would be its biggest undoing – its status as a joke project. This endears it to new investors, especially those who just want a project through which they can learn about cryptocurrencies. It has also attracted the interest of several celebrities over the years, led by Tesla CEO Elon Musk who has even nicknamed himself the Dogefather. All these factors have led to a surge in price that at one time saw DOGE become the world’s fourth-largest cryptocurrency.