January 3rd, 2021, marked the 12th anniversary of Bitcoin. Against it all, the original OG crypto managed to beat all circumstances and continued to intrigue and inspire millions. It was truly a time to celebrate. On that same day, Bitcoin reached an all-time high of $35,000; indeed, another reason to bring out the champagne bottle. Then on March 14, 2021, it hit another all-time high; $61,090.00; a truly astonishing feat!
But while many celebrated these achievements, another cryptocurrency coin has also been making recent headlines, to the point of it stubbornly clinging on to the top 20. Even after reaching its own all-time high back at the beginning of February, this altcoin has continued to stir up a lot of commotion and criticism about its rapid price increase.
So, what altcoin has made such a fuss? It would be none other than that little crypto meme, Dogecoin. Within just one year, it had pumped 2,639.71%, most of it within just this year, reaching an all-time high of $0.08 by February 9, 2021, according to CoinMarketCap. Before this pump, few had ever heard of Dogecoin and those that did not give it any serious consideration. But after this big, unexpected pump, some began to wonder if it really had any potential.
But, what is it about this crypto coin that has been making headlines and drawing criticism from many circles? Is this crypto meme really all that it’s cracked up to be, or is it just nothing but pure hype? Well, this Dogecoin review article will attempt to answer these questions and more. We will dive down into the fundamentals of Dogecoin, its origins, its dedicated community, and why it got people talking about it.
What is Dogecoin?
Dogecoin has a fascinating origin story. To quote its creator, “Dogecoin is the spare change you throw in the jar when you get home.” and no, he didn’t mean that as an insult. Unlike other altcoins, it was created purely as a tongue-in-cheek digital coin. It is an open-source, decentralized, peer-to-peer cryptocurrency based on the famous 2013 Doge meme Kabosu, a Japanese Shiba Inu. Its token is the DOGE token.
So why was it created? It was designed so as to stem off the negative stereotype surrounding cryptocurrency as a ‘dark' market for criminals and money launderers.
The first DOGE token was released on December 16, 2013, but the first mine blocked was on December 6.
Like most other peer-to-peer cryptocurrencies, Dogecoin can be used as a medium of exchange. Although primarily used for tipping (yes, the creator literally meant you could use the token to tip) users on Reddit and Twitter, you can also use the token to spend on various items and services.
Dogecoin is based on the proof-of-work algorithm from both Luckycoin, now dead crypto, and Litecoin. However, it uses Scrypt technology. Dogecoin's proof-of-work differs from Bitcoin's in other ways as well.
Firstly, the altcoin has a block time of 1 minute, costing about 1 cent. Secondly, although it was originally supposed to have a maximum supply of 100 billion tokens, due to an improper coding by its creator, 10,000 DOGE tokens are to be minted per block after it reached its 100 billion limit, giving it an inflation rate is 5 billion DOGE tokens minted every year! Therefore, it does not have a max supply and makes Dogecoin unprofitable to mine.
However, its most interesting feature, and what probably allowed the token to stand the test of time, has to do with the concept of merge mining. What the heck is that? Merge mining makes it possible to mine two different cryptocurrencies without sacrificing computational power or incurring costs. This allows more established cryptocurrencies to secure other smaller blockchains like Dogecoin. And who was that more established cryptocurrency? None other than the crypto market's digital silver, Litecoin!
Charlie Lee, the founder of Litecoin, approached Dogecoin's creator and proposed to merge mining the two cryptocurrencies. Considering that mining Dogecoin was highly unprofitable and having very few miners, it was at risk of suffering a 51% attack. Choosing Litecoin to merge its mining with was a no-brainer. They both used the Scrypt mining algorithm, allowing the Dogecoin network to become much more secure and decentralized.
So, in August 2014, Dogecoin transitioned its mining algorithm to an auxiliary-proof-of-work, allowing it to merge with Litecoin's blockchain. As a result of this merge, Dogecoin has become highly correlated to Litecoin in terms of security and decentralization. If Litecoin were ever to go down or experience an attack, so will Dogecoin.
Dogecoin was created by Australian software engineer Jackson Palmer and American Billy Markus. After reading a Wired news article about the best memes of 2013, Palmer got the idea of creating a funny, cute, lovable digital coin that went against all the stigma, technicalities, and honestly, just boring aspects surrounding cryptocurrencies. As an active purchaser of website domains, Palmer bought the dogecoin.com domain with the now-famous doge logo and Comic Sans text.
Billy Markus approached Palmer and convinced him to make an actual Dogecoin cryptocurrency. He designed its protocol, basing it on other cryptocurrencies such as Litecoin. He soon left the project in early 2014 and gave all control over to Palmer.
Jackson Palmer eventually left Dogecoin in 2015 after the rapidly growing Doge community was scammed and manipulated. Paradoxically, part of the scammer’s manipulation strategy was airdropping thousands of Dogecoins to charitable causes and sponsoring various community initiatives through the donation of DOGE tokens. Yes, the same person that helped put Dogecoin on the map was the same person that manipulated an entire community.
Not long after its launch, Dogecoin quickly began to grab people's attention and soon began to form an entire dedicated and well-established community. Even though the crypto meme was founded by Palmer and Markus, Dogecoin continues to speed on ahead thanks to its community fanbase.
How big is this community? To give you an example, there is a Dogecoin community on Reddit titled r/dogecoin that boasts of having 1.2 million members. At the time when the Dogecoin website launched, it quickly began to gain traction, with it being viewed over a million times within its first month.
The community has also been known for organizing and donating to various causes. For instance, not even after a month of its launch, a bunch of Dogecoin wallets was hacked. The community responded by coming together and refunded all affected users. In another example, in 2014, a group of Dogecoin members banded together to sponsor the Jamaican bobsled team to travel to Sochi, Russia, and attend the Winter Olympic Games.
Who is This Product for?
Unlike most other peer-to-peer cryptocurrencies, Dogecoin is meant to be solely used as ‘crypto tipping.’ While there are some who believe Dogecoin to be the ‘currency of the internet, in reality, it is more as ‘the spare change of the internet.’ The main reason for this is its use case value and circulation.
There is an infinite supply of Dogecoin circulating, and not many businesses and organizations are accepting Dogecoin as an alternative form of payment. Moreover, it faces immense pressure from other more prominent cryptocurrencies such as Litecoin, Dash, Monero, Verge, Zcash, and especially Bitcoin.
While the first two points are not likely to change, the third point may very well do. As more and more retail and institutional investors enter and invest in cryptocurrencies, there will be a greater tendency to accept and utilize Dogecoin. This is already occurring. Largely thanks to its recent headlines hype by the likes of Elon Musk, certain exchanges are beginning to list Dogecoin to be bought and traded.
On January 29, 2021, Crypto.com, a major centralized exchange, listed Dogecoin. Other major exchanges have also listed the lovable crypto meme over the years, including Binance, Kraken, Huobi Global, and Bittrex. Coinbase has yet to list it, but considering how long it took them to list Cardano, it shouldn’t really be that surprising. In regards to new businesses, Travala, Dallas Mavericks, and Elephant Chateau, among others.
The list is still short, but it is no doubt that it is slowly expanding, and given how popular the crypto meme is becoming among well-known investors and celebrities, the sky is the limit.
Is Dogecoin’s Infinite Supply a Good Thing?
Given its huge and still increasing circulation, it seems like a no-brainer that choosing to invest in Dogecoin in the hopes of generating a profit is, at the very least, very risky, if not outright suicidal. The coin has no maximum supply and continues to pump millions of DOGE per year. It also doesn’t help that this high minting was accidental. However, that doesn’t mean that this issue was not discussed within the DOGE community.
Quite the contrary, actually. In an article written last year, it discusses how Palmer and the community came together and decided to keep Dogecoin’s infinite supply. One of the reasons has to do with maintaining the health of the Dogecoin network. If a hard cap and halving were placed, making the mining process that much more difficult, it could impact the network as miners would begin to leave to seek more profitable altcoins.
“The sad reality is that a lot of the hash rate on alt-coin networks comes from multi-poolers who are mining coins then instantly cashing out—they just go after whatever is most profitable,” Palmer wrote.
“As block rewards get lower and lower over time, these guys disappear and move on to a newer, more profitable alt-coin. This is the fate of most coins coming on the market (and why you see them popping up and dying every day). By keeping the reward there, the hope is that a number of miners will remain and keep the network running into the future.”
The fear was that if it came more costly to mine DOGE than being reward by it, then there would be no incentive for anyone to do continue mining it.
Another reason as to why it was it decided to leave DOGE uncapped was to disincentive users to hodl it. With Bitcoin and other cryptocurrencies that have a finite amount, if more and more users came into the market and saw its limited supply but popularity, they will be incentivized to hodl it, forcing the price to go up before then selling it at a higher price. While this may not be much of a significant problem for Bitcoin, it is for cases like Ethereum. Like Dogecoin, the blockchain platform has no maximum supply.
It was meant to power the Ethereum blockchain by paying for transaction fees whenever users participate in its many decentralized applications (Dapps). However, the start of the reason why Ethereum’s price has been on the rise is that many are starting to also consider it to be a store of value, like Bitcoin. And with EIP-1559 expected to be active in July of this year, the burning of ETH instead of paying miners to verify transactions is will be causing this utility token to be deflationary. Dogecoin was not designed for it to be hodled. It was meant to be wildly circulated and used. In other words, like fiat currency, it was meant to be spent. To ensure that, it needs to have a high inflationary rate.
The article argues that the real problem is not the inflationary rate but its usage expansion. Like fiat currencies, price inflation typically follows monetary inflation if money is being pumped into the system without a concurrent expansion in economic activity. The inflationary problem with Dogecoin should be brought under control if its use cases expend considerably.
As stated earlier, there are alternatives. We will not include Bitcoin since that is already one obvious reason.
Litecoin is perhaps Dogecoin’s second most prominent competitor. Even though it merged-mined with the crypto space’s digital silver, that doesn’t mean they ‘partnered’ up. Litecoin has a maximum supply of just 82 million. It is one of the oldest cryptocurrencies that had not only remained active but has maintained its position as one of the top 10 cryptocurrencies throughout its history. In addition, Litecoin has been known to be very receptive to being upgraded with new additional features than Bitcoin.
Segregated Witness and the Lightening Network are just a few examples. Like Bitcoin, Litecoin is widely accepted as an alternative form of payment by thousands of merchants worldwide. It is also wildly accessible, as virtually every exchange has listed it. It also has a lot of staying power, and with its limited supply and much lower price, Litecoin stands to remain one of the crypto space’s most favorite coins.
Dash is another decentralized, peer-to-peer cryptocurrency that has been around since 2014. Its maximum supply is rather low, at 18,900,000, lower than Bitcoin's. According to its Whitepaper, Dash was meant to be an improvement of Bitcoin by providing stronger privacy and faster transactions. Its three key features are InstantSend, which allows for instantly settled payments; ChainLocks, which makes the Dash blockchain instantly immutable; and PrivateSend, which offers additional optional privacy for transactions.
However, it should be noted that there is some controversy surrounding it. Because of its privacy feature, Dash has been, quite erroneously, considered to be a private coin, like Monero and Zcash. As a result, a few exchanges have chosen to delist it. Yet despite this, it remains wildly popular in many parts of the world, including Latin America.
Two other competitors are indeed privacy coins; Monero and Zcash. By privacy, I mean referring that any transactions sent to another user will be strictly obfuscated. Although the record on a blockchain, no one will be able to see a user’s wallet address, nor how much send are in it, or which other wallet the user sent it to.
Monero has a max supply of 17,871,429, while Zcash has a total of 21 million. Apart from their supply amounts, there is a difference between the two. Monero’s privacy feature is by default, meaning any transactions you do will be automatically private. There are no options.
Contrary to that, Zcash does offer its privacy as an option. Users can decide whether or not to send funds anonymously, but not privately like any other cryptocurrency or private. This gives these coins a serious edge over others. While Bitcoin initially did allow some privacy, with the advancement of crypto forensics and technological advancement, it is becoming easier to find out who certain wallets belong to.
However, like Dash, both privacy coins have come under serious scrutiny for the strong potential of them being utilized for criminal activities. After all, just like with most cryptocurrencies, anyone can buy and use Monero and Zcash. There are no restrictions. As a result, some centralized exchanges have chosen or were coerced to delist these coins and others. However, despite these bans, both privacy coins continue to be popular.
Dogecoin Review – Conclusion
In conclusion, Dogecoin has surprised many and captivated all of us in the crypto space. Even after the initial hype set off by Elon Musk, Dogecoin continues to remain at the top 20, surpassing utility tokens with more use cases such as Filecoin and Vechain, at least at the time of writing this article.
Despite all the rage and cuteness, its price continues to be hampered by its rampant inflation, and that is likely to change. The community itself has it made it clear that it wishes to keep its high inflationary rate so as to maintain its price low for it to be more wildly used. They figured that with an uncapped max supply, there is more than enough Dogecoin to go around.
With the case of Bitcoin, there wouldn’t be enough of it for all the millionaires in the world. That would not be a problem with Dogecoin. There is plenty to go around that is the point of it. Therefore, this coin should be considered in any way to be a store of value, nor as a type of investment.
While the crypto market is generally risky, Dogecoin tends to be near the top given its uncapped supply, limited use cage, and with its meager price, it should come as no surprise that there are whales that hold numerous amounts of DOGE that can lead to price manipulation. Therefore, it is best to adhere to the fundamentals of this crypto meme and use it for what it really is; a wildly popular but nevertheless spare change crypto coin.
Ease of Use
- It is faster than Bitcoin and other altcoins. The currency has a block time of 60 seconds.
- It is an apt choice for small transactions, owing to its less value.
- It has low transaction fees, which makes it more suitable for regular use.
- It has emerged as an ‘online tipping currency’ or gaming currency, which has resulted in more and more people joining the Dogecoin community.
- It is a coin of lesser value and is relatively less stable and mature than other coins in the market.
- It remains completely dependent on the success of Litecoin for its own survival.
- Has a huge inflationary rate, which makes it an unlikely coin to buy and hodl over a certain period.