Introducing Dogecoin cryptocurrency
What is Dogecoin?
Introducing Dogecoin cryptocurrency: what is this infamous internet meme that musk can’t stop tweeting about?
Well it was a cryptocurrency that was started as a joke.
Really no joke.
A cryptocurrency in the top 10 of market caps that was launched for fun it was founded by two engineers called Billy Markus and Jackson Palmer.
Markus worked at IBM and palmer at adobe.
Neither of which had any experience in crypto.
In fact, Markus taught himself how to develop a coin using a guide he found online.
The year was 2013 and at the time there was a meme of a Shiba inu looking quizzically into a camera.
According to this article in business insider the original intent of the project was to be a quote parody of all the serious clone coins that were trying so hard to differentiate themselves but all seemed the same.
So Dogecoin was the self-deprecating example of a clone coin trying to be the next bitcoin.
And on the 6th of December 2013 the first blog was mined on the technical side Dogecoin is based on a proof-of-work cryptocurrency called lucky coin.
This was actually a fork of Litecoin which is why Dogecoin can be merge mined with Litecoin and more on that in a bit.
That’s not as random as the original block reward structure block rewards could be anywhere from one doge per block all the way up to one million dogs per block.
Mining of Dogecoin
Now I should also point out that there was no pre-mine of Dogecoin.
Yep the founders mined it at the same time as the new miners and kept very little of the doge for themselves.
That just shows you how much they thought of Dogecoin as a joke and less than a year after founding Dogecoin Markus left the project and handed all dev work to palmer.
Oh quick point on that random block reward it turns out that it was not as random as they initially thought and some Dogecoin miners were able to find a way around it and disproportionately mint high value blocks.
When this was found out in 2014 it was posted on the Dogecoin subreddit.
The developers then decided that they would remove the randomness component altogether and the block reward was fixed at 10 000 Doge per block.
Since a Dogecoin block is mined every minute this meant a supply growth of 5.2 billion Doge.
Therefore, with a current supply of 129 billion Doge this implies an annual inflation rate of about four percent.
So unlike bitcoin which has a capped supply Dogecoin will have an inflation rate that will approach zero over time that’s an important point to get across.
When it comes to network efficiency Dogecoin can handle around 30 transactions per second which implies a transaction time of about five to ten minutes.
The average transaction fee is about one cent.
Now this is faster and cheaper than bitcoin mainly because the block times are one minute as compared to 10 minutes for bitcoin.
Although this is faster and cheaper than bitcoin it is a lot less efficient than most other blockchains out there it is after all still a proof of work chain.
When it comes to security it has the backing of Litecoin miners.
This is because as a fork of Litecoin it uses the script mining algorithm.
Through Dogecoin ‘s auxiliary proof of work upgrade in 2014 Litecoin miners can also earn doge block rewards while mining LTC.
So you have greater hash power securing the network that you would not have had were Dogecoin using a unique consensus mechanism.
Okay so that’s a rough overview of the tech behind Dogecoin.
Not the most complicated out there but then again it is a Meme coin.
Dogecoin Use Cases
Well there is only one really legitimate use case for Dogecoin and that would be as a medium of exchange.
Indeed, while the cryptocurrency was created as a joke the underlying incentive was to create one people could easily send to friends and family as a less threatening version of Bitcoin.
And to that end Dogecoin has indeed been quite effective.
For example, did you know that in 2014 doge community members raised thirty thousand dollars to send the Jamaican bobsleigh team to the winter Olympics.
Seems like they must have loved the cool running’s movie as much as I did.
Now of course fundraising was not always for the lulls.
Doge community members also raised 50k in order to help give drinking water to people in developing countries.
Then as things started to pick up with Dogecoin over the past year there’s been an avalanche of merchants who have started to accept doge as a method of payment.
Now there are some really amazing things that you can now buy with doge including:
Dallas maverick’s basketball tickets
A subscription for classic films
And of course thousands of other smaller merchants that are looking to ride the doge wave.
Now this use case as a medium of exchange is quite stock standard for most cryptocurrencies.
It has some value and as such can be used as a peer-to-peer digital cash.
Costs and Fees
Admittedly it has lower transaction costs and fees than bitcoin but is still way less efficient than a number of proof-of-stake chains out there.
There are no other use cases.
There are no smart contracts so you can’t develop daps like you can on Ethereum and a host of other smart contract blockchains.
Dogecoin also cannot be considered as a Storehold of wealth.
That’s because it has a ridiculously large supply.
And the inflation schedule is still quite high.
That’s even without considering the fact that a Storehold of wealth has to be highly trusted.
I think you’ll struggle to find anyone in the crypto community who has long term faith in the continued robustness of Dogecoin’s code.
In fact, the most recent changes that were made happened all the way back in 2019.
There has been talk of Dogecoin core devs making some improvements this year including a faster sync speed.
But these are still minor updates in the grand scheme of things.
So given that Dogecoin exists as a stock standard proof-of-work digital cash.
The only other use case I see for it is speculation.
In other words, to be traded on the market and to make or lose money on those trades.
And to that end doge has been going insane.
Eager to capitalize on this insane interest in doge a number of exchanges have started to offer futures products on it.
100x leverage on a Meme coin that is more volatile than the British weather.
And have a feeling that we’re probably not even seeing the full extent of this doge trading volume.
That’s because one of the most active markets for doge is not even an exchange but a trading app.
Yep, Robinhood offers doge as one of the cryptocurrencies on its app.
When users buy doge here they’re not really buying doge but are trading on its price movement.
Hence the trading volume is not captured on sites like coin market cap at all.
Why DOGE Pumps?
Well I happen to think that it comes down to four things.
- Meme Culture
- Social Media
- Elon musk
- And Robinhood
Now we live in an age of memes an era where something as simple as an unfortunate class photo can become synonymous with misfortune.
One where a mistimed image can exist in the ether for years.
There are even instances where memes become memes.
Meme derivatives for endless laughs.
It therefore makes sense that a Shiba Inum like Dogecoin would take off so well.
It’s instantly relatable and easy to remember people will have seen it on the internet somewhere and will therefore know more about it than most other cryptocurrencies.
It’s a lot easier to market a meme dog than it is to promote the complex tech involved in Eth 2.0 for example simplicity sells.
As we know social media is able to amplify memes and make them go viral.
It’s the nature of their algorithms where the more engagement there is with a particular topic the better it organically performs.
Memes feed on themselves and supercharge that engagement.
This is even more prevalent on the likes of TikTok where short form content and memes are able to go viral much more easily than traditional social media platforms.
It ain’t your grandad’s Facebook.
It’s therefore no surprise that some of the biggest trends for Dogecoin have been over on TickTock.
I recall one that happened last year where a user called James G97 posted a video encouraging all his followers just to buy 25 of Dogecoin.
So that when the stock hit one dollar users would have 10 grand.
More recently there was a Dogecoin trend where users were trying to get doge to one dollar on the 20th of April 4/20.
And I want some of whatever it was they were smoking.
Now jokes aside is this sort of simple engaging content mixed with a generally young and inexperienced TikTok user base that means these vids can get flying pretty quickly.
Of course they do sometimes need some help and that is where cult-like figures with massive twitter followers come in.
Elon musk is not just content on sending rockets to space he also wants to send doge to the moon.
Elon has been riding the Dogecoin meme like nobody’s business.
Indeed, you can almost perfectly track the price pumps in doge to his tweets about it.
And given that it’s easy to share a meme on social media and TikTok his simple tweet is amplified and creates a lot of hype.
Tweet of a dog by Elon can make the doge price pump that’s the combined power of a tweet and an instantly recognizable mean.
Of course this would not really be possible where not for the fact that these tick tock users had easy access to a tool to trade doge.
This is of course where Robinhood comes in.
There’s no doubt that the era of Robinhood has opened up trading to a whole new generation of users.
Simple fractionalized and commission free trading.
Of course the main EMO of Robinhood was stock trading but they have now been offering crypto for quite some time.
Moreover, those users on Robinhood don’t have to worry about private keys or offline addresses.
All they have to know what to do is to buy the coin and watch it ride.
Of course we then have the secondary effects of this pump.
As we know bubbles feed on themselves as users are convinced that the price rise is confirmation in the underlying investment thesis.
The higher that doge goes the more attention it grabs and the more media coverage it gets.
This then brings in more investors happy to try their hand on the doge wheel of fortune.
Implications for Crypto
There is a lot of new and young retail money riding on doge.
Some of these investors do not really know the risks of investing in a meme cryptocurrency.
Some people also appear to have over leveraged themselves.
When doge eventually does start to fall a lot of people are going to lose a lot of money.
And this is not just me talking here.
There are hundreds of crypto investors and community members that are sounding the alarm about the risks of Dogecoin.
Eventually there will come a point when there will no longer be new buyers to sustain the price.
Some people will want to take a profit which will then lead to a fall in price.
And who knows how quickly it could fall.
Panic selling can be quite strong and this is especially the case when most of the traders are new retail traders and not the institutions with oceans of capital to tide them over.
Money that could be life-changing in other circumstances.
It is also pretty likely that there are people out there taking out debt to buy a meme coin.
When this bubble does pop there are going to be people who lose a lot of money.
Younger investors who will have their perception of cryptocurrencies completely tainted because of a massive loss in their first foray.
Now apart from those who will be financially impacted by it there are likely to be regulatory and reputational implications for the entire crypto space.
In it the Cardano founder explains what the consequences could be of a doge meltdown.
There could be inquiries, there could be hearings and there will most definitely be mainstream FUD and click bait headlines.
Doge is a really fascinating cryptocurrency.
Despite having some pretty simplistic crypto tech it has captured the attention of millions of users who otherwise would not have been using crypto.
There are also some really strong trends that are sending it higher.
Trends including its Meme value, Elon musk and TikTok .
Add to that mix the simplicity of Robinhood and you have the perfect ingredients for sending the price soaring.
Parabolic price action can be irrational and I sure as hell won’t be shorting doge something the hedge funds who shorted GME learned pretty quickly.
But there will come a time when larger holders take profit and this will lead to a collapse in price.
It’s merely logical.
Memes are fun and game.
The community is cool and dynamic.
However, many are investing with real money and when they lose it.
It won’t be a joke.