September 4, 2021•1,410 words
Dogecoin is a type of cryptocurrency that originated as a satire on Bitcoin — yep, a joke — and has grown into something much more. It has now risen to become one of the most highly valued cryptocurrencies, due in part to a plug from Tesla CEO Elon Musk, who propelled the digital currency into the public consciousness and then into orbit around the sun.
Here's everything you need to know about Dogecoin, including what it is, what it does, where it comes from, and how to buy it.
What exactly is Dogecoin?
It is one of thousands of cryptocurrencies that have just come into existence, and it is called Dogecoin. Although Dogecoin was developed to make fun of Bitcoin and the absurdity of purchasing a digital asset that was not backed by any assets or cash flow, unlike many other digital currencies, Dogecoin was created to make fun of itself. Now that the tables have flipped, Dogecoin is now worth anything.
Everything about the coin's origins suggests that it was intended as a joke:
Dogecoin was founded by software programmers Jackson Palmer and Billy Markus in 2013 as a result of the rapid spike in the value of the Bitcoin cryptocurrency.
In 2013, the “altcoin” was designed in approximately two hours.
The Doge meme, which features a Shiba Inu dog who speaks in bad English, was the inspiration for the design.
There is no limit to the number of coins that can be produced.
Despite the fact that Dogecoin was created as a way to make fun of the cryptocurrency industry, it has captivated the attention of the investing and speculating public. In addition to being extremely popular among traders on Robinhood, the total reported value of all Dogecoins in existence as of August 2021 is over $41 billion.
As Doge himself may put it, "a lot of wow."
What is the purpose of Dogecoin?
Dogecoin, like other cryptocurrencies like as Bitcoin, can be used to move money between people, either as a form of payment for products or services or simply to send cash. Users can also conduct transactions in a semi-anonymous manner, even if a record of the transaction is made publicly available on the blockchain. And they can do it without the need to go through a typical intermediary such as a financial institution.
Dogecoin is a cryptocurrency that operates on a decentralized network of computers that uses a distributed ledger known as a blockchain to keep track of transactions. Consider the blockchain to be a long-running receipt of all of the transactions that have taken place in the currency. The blockchain checks transactions and ensures that the data is accurate and complete.
Who or what is the source of Dogecoins?
Dogecoin, like other cryptocurrencies, is created by a decentralized network of computers that serves as the currency's "mining pool." Networked computers execute sophisticated mathematical calculations, which in turn release coins or fractions of coins as a reward for completing transactions on the network.
As of August 2021, around 131 billion Dogecoins were in circulation, despite the fact that new coins are being minted on a nearly hourly basis. In addition, unlike Bitcoin, which has a hard limit on the total number of coins that may be issued, Dogecoin has no limit on the amount of coins that can be mined. The annual issuance of new coins, on the other hand, is limited to 5 billion, and this supply can continue indefinitely.
What is Dogecoin and how do I get it?
You can purchase Dogecoin from a variety of different websites, and your decision on which one to use may be influenced by your intended usage:
If you're wanting to purchase Dogecoin only for the purpose of speculation, you can do it through an online brokerage such as Robinhood, which enables cryptocurrency transactions. Webull and eToro both allow you to trade the cryptocurrency, however many other brokers do not allow you to trade cryptocurrencies in any way. Any stake you have in the coin will be held by the brokerage firm.
Dogecoin can be purchased on cryptocurrency exchanges such as Coinbase or Binance if you want to speculate with it or utilize it for its intended purpose of trading.
If you intend to make use of your cryptocurrency holdings, it is beneficial to have a crypto wallet that can provide an additional degree of protection beyond that provided by an exchange or exchange platform. (For more information, see our list of the best cryptocurrency wallets and what they have to offer.)
The bottom line is this:
Investment in Dogecoin and other cryptocurrencies is similar to investing in the “picks and shovels” companies that served as the infrastructure during the Gold Rush. Speculators can trade Dogecoin directly on various websites or they can invest in the companies that are making it and other cryptocurrencies possible. As a result, traders might profit regardless of whatever specific cryptocurrency is victorious, and they would not have to choose a winner.
If you decide to purchase bitcoin or any other type of investment, it is critical that you understand the dangers and opportunities involved. Furthermore, because many cryptocurrencies are not backed by anything, traders run the danger of suffering a complete loss. As a result, those who are involved in the cryptocurrency market should move with prudence and avoid putting money into a position that they cannot afford to lose.
Is there any monetary value to Dogecoin?
Doge, like all cryptocurrencies, has any basic value, and some contend that it has no reason to have any in the first instance. The following is cited from Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte., a platform for trading traditional currencies: ‘Dogecoin appears to have no evident business or investment value other than to facilitate speculative mania and the pursuit of profit.' In my opinion, part of its popularity is due to its low cost of acquisition and disposal, as opposed to Bitcoin's $60,000 purchase and disposal price, making it far more reachable to the average retail trader looking for an opportunity to make a buck.
The low nominal price, similar to that of penny stocks, may have a psychological effect on investors, but whether you invest $1,000 in Dogecoin or Bitcoin, you are putting your money at risk in the same amount. Curtis Ting, managing director for Europe at cryptocurrency exchange Kraken, suggests that investors buy Dogecoin as much for the memes as they do for the money, stating that ‘investors buy Dogecoin to participate in a self-deprecating joke about their inability to invest wisely, which continues to run as the price of an individual Dogecoin continues to rise.'
The massive price swings resemble a "pump and dump" scheme, in which users inflate the value of a low-cost asset by drawing attention to it, encouraging investors to purchase it, and then selling it to the highest bidder, leaving behind the investors who are too slow or not knowledgeable enough to participate. Furthermore, because Dogecoin ownership appears to be concentrated in a small number of anonymous hands, it may not take much to cause the price to move in either direction.
The foreseeable future
What the future holds for Dogecoin, let alone for other cryptocurrencies, is anyone's guess at this point. The polarization of opinion in the cryptocurrency space is a major concern — commentators, bloggers, and YouTubers are either crypto haters or ‘moonboys,' depending on their point of view (believing that Bitcoin and other cryptocurrencies will go to the moon).
However, the increase in interest is part of a larger phenomena in which investors are rushing into speculative assets. Lapthorne mentioned Dogecoin as an example of "an increasingly huge number of bizarre and fascinating indications of market excess," according to Andrew Lapthorne, global head of quantitative strategy at Société Générale SA. Indeed, over 50 meme cryptocurrencies are currently listed on CoinMarketCap, demonstrating the meteoric increase to fame of this type of cryptocurrency.
The inability to do transactions with it, as with all cryptocurrencies, is the most significant impediment to its growth. But the particular problem with meme cryptocurrencies, as opposed to other types of cryptocurrencies, is that their utilization is somewhat dependent on users being attracted to the meme in question. If investors lose interest in the meme, the price of Dogecoin would plummet, and the cryptocurrency will become worthless.
A single fact remains unassailable: Dogecoin is one of the most highly speculative and volatile cryptocurrencies available right now.