What is Dogecoin, and How Does it Work?

In the world of cryptocurrencies, Dogecoin stands out among the other coins on the market. For starters, its logo is a Shiba Inu Dog, and it is named after the famous Doge meme. Launched in 2013 by Billy Markus and Jackson Palmer, Dogecoin has grown to become one of the most accessible cryptocurrencies. The coin has a large devoted fanbase, and it even has some celebrity supporters.

Most people know Dogecoin as the meme coin of the crypto market. However, there is much more to this coin than its status as a joke coin. This article will look at what Dogecoin is, how it works, as well as answer some common questions.

Cryptocurrency defined

To understand what Dogecoin is, we should first explain what cryptocurrencies are. Essentially, cryptocurrencies are digital coins that have a monetary value. They can be used to make purchases with certain vendors. Cryptocurrencies can also be used as an investment option. Each coin has their own exchange rate. For example, Bitcoin (probably the most famous crypto coin) has a high exchange rate of $50,120 CAD for one coin. At the moment, cryptocurrencies are decentralized, meaning their is no governing body regulating them. However, this may change as the popularity of cryptocurrencies continues to grow.

A brief history of Dogecoin

When Dogecoin launched in 2013, its creators intended it to be a parody of the crypto market. To achieve this goal, Dogecoin took its name and logo from the famous Doge meme. The creators also wanted Dogecoin to have broader demographic than Bitcoin. This also why the coin took its name and logo from the Doge meme.

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The original Doge meme. Image source: Wikipedia

Upon its release, Dogecoin quickly gained a following. Soon, the Dogecoin fanbase became a large and dedicated one. To spread awareness about Dogecoin, fans set up several publicity stunts. For example, fans used Dogecoin to sponsor NASCAR driver Joe Wise with $55,000 in 2014.

Throughout its history, Dogecoin’s price has remained low. There have been only two major market jumps for Dogecoin. The first occurred immediately after its launch. The second jump occurred during the 2017 crypto boom. However, Dogecoin’s price fell after the bubble burst in 2018. Still, Dogecoin experienced a resurgence in 2021 after various celebrities including Tesla CEO Elon Musk voiced their support/ interest in Dogecoin. Because of these celebrity endorsements, Dogecoin’s price reached all-time highs.

How Dogecoin works

Like most cryptocurrencies, Dogecoin operates on a blockchain. This is a digital ledger that stores and adds all transactions made on its network. Once someone purchases a Dogecoin from a person or exchange site, that transaction is added to the Dogecoin blockchain. New Dogecoins are created and entered into circulation through a process called mining. Dogecoin miners have an extra incentive for entering new coin into circulation. For each coin they enter, miners could receive 10,000 Dogecoins per block. This is called a block reward system. This reward system has caused the supply of Dogecoin to grow exponentially.

At first, Dogecoin had a maximum supply of 100 billion. This supply cap has since been removed, meaning an endless supply of Dogecoins are being entered into the market. The proliferation of Dogecoin means its exchange rate is low. One Dogecoin costs $0.16 CAD, which is much cheaper compared to Bitcoin’s exchange rate.

Frequently asked questions about Dogecoin

Why is Dogecoin so popular?

One of the reasons Dogecoin is popular is the fact that it is based on the Doge meme. Since millions of people are familiar with the famous meme, Dogecoin’s founders were able to market themselves to that demographic. And Dogecoin’s fans like to support a joke coin. In an industry full of high valued coins, Dogecoin brings some levity. This is something the coin’s fan base can get behind.

Dogecoin is also popular thanks to several celebrity supporters, the most notable being Tesla CEO Elon Musk. In recent years, Musk has made cryptic posts about Dogecoin on his social media account. These posts went viral, helping so spread Dogecoin’s popularity.

Another reason for Dogecoin’s popularity is its low exchange rates. You can buy 100 Dogecoins for $15 CAD, which is way lower for what you would pay for 100 Bitcoins.

How do you pronounce Dogecoin?

Doge can be a tricky word to pronounce. According to Wikipedia, Doge is pronounced Dohj. A helpful tip is treat the g as a j.

How do I buy Dogecoin?

There are several ways to buy Dogecoin. The most common way is through a cryptocurrency exchange. This is an online site that lets users sell and purchase various crypto coins. Popular cryptocurrency exchanges include Binance, Kraken, and Coinbase. Once you have created an account with a cryptocurrency exchange, you can start purchasing Dogecoin. Most exchange sites accept traditional money as payment. Some sites will let you buy Dogecoin with other crypto coins.

Once you have bought Dogecoin, you can then store it on your crypto wallet. There are two types of crypto wallets, hot storage and cold storage. Hot storage is digital based, meaning they save your coins online. There is a heightened security risk with hot storage wallets. Hackers can access your wallet and steal your coins. Cold storage wallets are actual pieces of hardware, like USB sticks. They are much more secure than hot storage wallets. Because of their better safety features, we recommend you use a cold storage wallet to keep your Dogecoins save.

There are alternatives to buying Dogecoin. One way is through a Bitcoin ATM. These machines allow people to but Bitcoin and other cryptocurrencies. They are similar to regular ATMs, but instead of dispensing cash they connect customers to cryptocurrency exchanges where the can purchase their coins.

Lastly, you can buy Dogecoins from someone directly on a peer-to-peer network. These sites eliminate the need for exchanges, which means the trading fees will be low or waived completely.

Is Dogecoin a good investment?

Dogecoin is not a good long-term investment. This due to two factors. First, Dogecoin’s low price means it does not have the same market value of higher priced cryptocurrencies. Second, the large amount of Dogecoins in the crypto market means it will always have a low price. The proliferation of Dogecoin has made a highly inflationary cryptocurrency. Based on these two factors, Dogecoin is more effective as a transaction currency. For example, Dogecoin is commonly used to “tip” content creators on Twitter and Reddit.

Where can I spend Dogecoin?

You can spend Dogecoin at any merchant that accepts it as a form of payment. Currently, there are approximately 1900 merchants that accept Dogecoin for purchases. High profile companies like Elon Musk’s SpaceX and sports teams like the Dallas Mavericks accept Dogecoin as payment. And as mentioned in the previous question, you can use Dogecoin to reward content creators on Reddit and other social media platforms.

What is the Dogecoin price prediction for the short and long terms?

According to Analytics Insight, Dogecoin’s growth depends on the support of celebrity figures. If more and more celebrities choose to support Dogecoin, then its value is expected to grow. Another factor for Dogecoin’s growth is its large and loyal fanbase. The continued support of the Dogecoin community is helping the coin maintain its market value. The price of Dogecoin would surly plummet if its fanbase ended their support for the coin.

 

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Dogecoin’s price over 1 year: 2021-2022. Taken from Binance.com

With that being said, Dogecoin’s price is expected to increase for 2022. Last year, the Dogecoin Foundation announced their 2022 plan to enhance the coin’s utility. Their hope is that Dogecoin will become a Universally used cryptocurrency, which will likely increase its price. Additionally, Elon Musk intends to solely use Dogecoin to fund a space mission. If the mission occurs, Dogecoins value will undoubtedly grow.

In the long term, Dogecoin’s value is expected to increase. In 2025, some experts believe the price for Dogecoin will hover around $0.56-$0.58 USD (U.S. dollars). If this prediction is accurate then the price for Dogecoin in 2028 could reach up $2.13 USD or an average price of $1.79 USD.

However, it is difficult to make an accurate prediction on Dogecoin’s long term value. Dogecoin’s price can be affected by crypto bans and new restrictions being enforced. Also, Dogecoin’s value is influenced by the level of cooperation with financial institutions. For example, some banks do not accept Dogecoin transactions. Depending on how these scenarios play out, Dogecoin’s price could either trend upward or plummet downward.

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Updated date

April 29th, 2022

About the author

Nicholas Mah

Nick Mah is a writer who enjoys writing about music, movies, sports, and cooking related topics. He also enjoys reading and writing about history. In his spare time, he enjoys watching movies, reading a good book, going for long bike rides, listening to music, or playing his guitar.
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