What Is Dogecoin?
Dogecoin is a real discovery of the cryptocurrency market. This asset, which was originally created as a joke, has become a full-fledged digital currency, and its price shows a consistent sharp increase. What is Dogecoin? What makes it different? Is it really worth showing interest in it and allocating part of your capital to it?
To understand the Dogecoin phenomenon, one has to take a closer look at Bitcoin. Since its inception, BTC has become a widely discussed and growing instrument. There is a lot of talk about Bitcoin, and the number of its supporters is growing.
Dogecoin is a response to the surge of interest in the creation of Satoshi Nakamoto and cryptocurrencies in general. However, it differs from other altcoins in that it was created by accident. Although there is no confirmed information on this subject, it is difficult to otherwise evaluate the creation, which was supposed to refer to the first cryptocurrency and borrowed its name and logo from one of the most popular Internet memes Dogecoin is something like a parody of a full-fledged cryptocurrency.
Dogecoin appeared on December 8, 2013. The creators were Jackson Palmer and Billy Markus. The first of them, at the time of the release of the new coin, held the position of a software engineer at Adobe. The latter worked for IBM. They decided to create their own peer-to-peer cryptocurrency, which would be much more widespread and easily accessible.
Within 30 days after the appearance of the asset, more than a million users visited its official website. Just three days were enough for the price of Dogecoin to rise six times since the launch.
Interestingly, the creators of Dogecoin are not really benefiting from the wave of its current popularity. They got rid of their coins.
What Is Dogecoin Backed by?
2021 can safely be considered a real renaissance for this asset. Since January, the currency has grown by 13 thousand percent. Elon Musk was behind her success that year. The head of Tesla, using social media channels, advertised Dogecoin in a tongue-in-cheek style and led many investors to consider this asset as a source of potential profit. The parody currency was taken seriously by traders, and today it can be considered a full-fledged investment asset.
How Does Dogecoin Work?
All cryptocurrencies work on the basis of blockchain technology. These are digital databases (sometimes called ledgers) that contain information about transactions. The data is not held in one place, but on thousands of computers. They are called nodes. Therefore, blockchain is a decentralized network. It does not act as a central server. All transactions made with Dogecoin coins are stored on the Dogecoin blockchain.
You can understand how a transaction takes place in the Dogecoin blockchain via the following example:
Maria lives in Brazil and Juan is in Mexico.
Maria needs to send money to Juan, bypassing the bank and paying no fees.
Maria decides to use Dogecoin.
She sends 10 DOGE to Juan.
Computers (nodes) connected to the platform first make sure that there are coins to transfer.
The transaction occurs after half of the validators on the network agree that Maria has assets to send.
The operation is added to the blockchain.
Nodes are rewarded for controlling the transaction in the form of new coins.
Juan receives virtual money.
Dogecoin has common technical characteristics with the world's first virtual currency – Bitcoin. Accordingly, the network is secure and provides real-time consensus. As with Bitcoin, hackers must control 51% of the system's hash power in order to change the state of the blockchain.
DOGE is mined in the same way as LTC, using the same Scrypt-based proof-of-work algorithm. There are three ways to become the owner of virtual coins:
Buy on the exchange.
Get it on your own.
Where to Store Dogecoin Cryptocurrency?
Owning Dogecoin is no different from holding another cryptocurrency. The user can keep coins on the exchange or transfer them to the wallet. The first option is less preferable, since many exchanges are periodically hacked. For storage, you can use the official Multidoge or Dogecoin Core wallet, which is offered on the project website. The coin is also supported by the multi-currency services
How To Earn Money on Dogecoin?
There are three ways to make a profit on a coin:
Participation in the liquidity pool.
Since Dogecoin is a controversial and highly speculative asset, investing in it for profit is a risky task. Most exchanges offer limit orders. This is a good way to average out the purchase price, which is useful for volatile investments. With the help of a limit order, you can set the price at which the coin will be purchased automatically. Then the user does not have to monitor the market on his own. If the price never drops to the set limit, the buy order will not be executed.
If the owner of the coins is a professional, then he can earn on DOGE trading. But if the user is captivated only by excitement, then it is better to carefully calculate the volumes that he can afford to lose. Fundamental and technical analysis help to achieve good results in trading.
The popularity of a platform for the exchange or sale of coins depends on how quickly and at what rate it converts assets. This is influenced by the available resources in the system, which it receives from users' wallets. The owner of the coins gives the site the right to use their coins to replenish the liquidity pool. This is how traders act as autonomous market makers and enable others to transact. Pool members earn income in the form of commissions.
What Is Happening with Dogecoin?
Does Dogecoin have a chance to shake up the cryptocurrency market? In a sense, this has already happened. It only took the ridiculous posts of Elon Musk to make a currency attractive. The events around Dogecoin to some extent confirm the opinions that the near future may belong to small cryptocurrencies. However, before deciding to invest a significant amount of money in Dogecoin, it is worth remembering a few things. The following factors affect the rate of a digital coin:
General trends in the crypto market.
News and promises from developers.
Activities of competing projects.
Public statements of opinion leaders on the web.
More and more people are learning about Dogecoin cryptocurrency.The optimism surrounding the asset has made it an attractive long-term investment option for some users. In addition, it is supported by many investors. Over time, the popularity of an inflationary cryptocurrency may grow further.
However, you can look at the prospects of the coin from the other side. Imagine investing in shares of a company that produces almost nothing and consists of a few sofas in an empty office. But it has a very funny dog logo that people love. Can the price of such shares rise? Yes, but it can also drop down to zero. Anything is possible, but it's worth considering how far the joke can go.
At the moment, there is no economically sound evidence that would convince us that the meme-cryptocurrency can become the same valuable tool as standard digital currencies.
Secondly, Dogecoin is not immune to inflation. If at some point there are too many of these coins on the market, the price of the asset will inevitably fall. Third and last, you need to remember the pedigree of this cryptocurrency. It's still a joke and its current popularity could fade very quickly.