What is Dogecoin?

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robertstevens

Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.

How funny is Dogecoin, a cryptocurrency bearing the likeness of a chubby Shiba Inu known for cutesy grammatical inaccuracies? Ask the market: at one point in May 2021, traders though it was worth upward of $90 billion. The relatively obscure internet joke became a worldwide phenomenon after it latched onto the coattails of the rising price of Bitcoin, and was propelled into the mainstream after celebrities such as Elon Musk, Gene Simmons and Snoop Dogg professed support for the coin.

The cryptocurrency started several years ago to poke fun at Bitcoin spinoffs. Somehow, the coin cut through the noise of the market and became one of the largest cryptocurrencies by market cap. An army of supporters is convinced each Dogecoin will reach at least $1 in value, and perhaps even more. How did we get here?

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Dogecoin: A brief history

Dogecoin was created in 2013 by Jackson Palmer and Billy Markus, software developers who created the cryptocurrency as a light-hearted way to poke fun at the cryptocurrency industry. Palmer later left the project in 2015 and sold all of his Dogecoin, calling the cryptocurrency community “toxic”.

The name Dogecoin comes from an internet meme centred a picture of a Shiba Inu dog and text written in comic sans. The first picture of the dog, named Kabosu, was uploaded in 2010 by a Japanese kindergarten teacher named Atsuko Sato. Separately, a Tumblr post in 2012 popularised the use of the word “doge”, although this did not mention the original picture of Kabosu.

Off the back of this Tumblr post, the Internet created several doge-related memes, although again, these did not use the Kabosu picture. Doge threads on 4chan shared pictures of different dogs in costumes and blogs based around “doges” were created on Tumblr. Meanwhile, a blog named Shiba Confessions also gained popularity, posting different memes of Shiba Inus.

The two threads of the meme, Shiba Inus and misspelling the word dog as doge, came together in early 2013. A subreddit dedicated to doge memes, all featuring images of Shiba Inus, was created and the meme took off. The picture of Kabosu remains the most commonly used image for these memes, and her likeness was used for Dogecoin itself.

The memes have since become more surreal and weird, and it remains one of the longest-lasting internet memes, maintaining some level of relevancy for eight years now, despite the fact that most memes die out within months or even weeks.

In 2013, the two software developers created Dogecoin. At first, Palmer tweeted about it as a joke, making fun of the number of altcoins that were on the market at the time. However, his tweet generated sufficient interest to motivate him to actually create the coin.

The coin itself is a variant of a long line of Bitcoin spinoffs. It’s actually a fork of Luckycoin, a coin that’s a fork of Junkcoin, a fork of Litecoin, which is a payments cryptocurrency forked from Bitcoin. From there, it has grown into something far larger than the side project Palmer envisioned.

All in good fun

In 2014, the Dogecoin community raised money to sponsor NASCAR driver Josh Wise. The NASCAR subreddit worked with the Dogecoin subreddit to raise $55,000 for sponsorship. That was equivalent to 67 million Dogecoin at the time (67 million Dogecoin today would be over $25 million).

While in the long run a payment in Dogecoin would have made Wise incredibly rich, the Reddit community converted that Dogecoin to US dollars. Wise subsequently enjoyed his second-best finish of the season to date, and raced a few more races in the Dogecar out of goodwill towards the community. The Dogecar stopped running in 2015, then returned in 2021 to sponsor Stefan Parsons.

Also in 2014, the Dogecoin community sponsored the Jamaican bobsleigh team. The team had qualified for the Sochi Winter Olympics but didn’t have enough money to attend the competition. So, in good spirit, the Dogecoin community raised $30,000. The charity drive caused the price of Dogecoin to rise by 50% relative to Bitcoin. Disappointingly, the bobsleigh team finished in 29th position.

As part of another project, Doge4Water, the community also raised $32,000 to build a well in Kenya. The campaign was led by Eric Nakagawa, the founder of meme website I Can Haz Cheezburger.

2021: Dogecoin’s revival

Despite the community cheer, Dogecoin never really took off. In 2017, a Dogecoin had its first spike, just as Bitcoin encountered its first major bull run. The price of Dogecoin rose from $0.001 in October 2017 to highs of $0.016 in January 2018. Then, along with Bitcoin, the price of Dogecoin crashed. It hit lows of $0.00279 by April. It never made much progress until 2020.

In October 2020, the price of Bitcoin started to rise. There are several reasons. First, the pandemic caused interest rates to scrape the floor, moving money into speculative investments. Then investors were stuck at home and bored, and crypto was certainly more interesting than Netflix. And over the summer, the Ethereum network had just facilitated its own mini-boom in the form of decentralized finance—non-custodial financial protocols. NFTs were next, and turned public attention to crypto.

All of these factors converged and sent Bitcoin’s price skyward; Bitcoin rose to highs of $60,000 by the spring. This huge rise took the rest of the market along for the ride, and almost every cryptocurrency had its own bull market. Dogecoin joined along for the ride. By January 21, it had hit $0.0085. Then it rose to $0.07 on February 11. The real rise started in April, when prices rose from $0.06 on April 6 to $0.29 by April 22. Then it doubled to $0.59 the next month. At its peak in May, Dogecoin hit a market cap of $90 billion, according to data from CoinMarketCap.

Why did Dogecoin manage to attract public attention? Perhaps because very very very famous people started tweeting about the coin. Its most prominent supporter is Elon Musk, the CEO of Tesla and SpaceX.

Musk had tweeted about the coin for months, and each time he did, the price rose significantly. Musk beamed a laser of hope for the crypto market after he disclosed that his company had bought billions of dollars worth of Bitcoin. Musk then announced that he would mention the coin on Saturday Night Live, NBC’s hit comedy show. Investors jumped on the news, hoping that he’d introduce millions of new fans to Dogecoin and drive up demand for the coin.

Musk would later, and nearly all at once, disappoint fans. On Saturday Night Live, he called the coin a “hustle”. The coin’s price tanked, wiping $20 billion from its market cap. Then Musk wiped a further $10 billion when he tweeted that he frowned upon Bitcoin’s environmentally-damaging mining process. (Dogecoin uses the same process, as do most of the top cryptocurrencies).

How does Dogecoin work?

Dogecoin functions much like Bitcoin—a decentralized cryptocurrency payments network that’s useful for peer-to-peer transactions. Similar to Bitcoin, Dogecoin uses a proof-of-work consensus mechanism to mint new Dogecoin and validate transactions.

To process transactions, the Dogecoin network neatly separated them into batches, known as blocks. Each block records the details of every transaction between different accounts on the Dogecoin network within a given timeframe—in the case of Dogecoin, one minute. The network links these blocks together as part of a ledger, and uses this ledger as a record of individual user’s balances.

Proof-of-work is how the individual blocks on the blockchain are validated. To do this, computers use a lot of computing power and electricity to solve complicated mathematical puzzles. The puzzles attempt to find a number which, when added to the end of a block, validates the block. As a reward, miners earn newly-minted Dogecoin.

How is Dogecoin different from Bitcoin?

While Dogecoin is, for the most part, very similar to Bitcoin, there are some differences.

One of the larger ones is that Bitcoin has a capped supply of around 21 million. When all these Bitcoins are mined—predicted to in about 120 years—it’s impossible to create new Bitcoin. By contrast, there’s no limit to how many Dogecoin can be created through mining. The total supply of Dogecoin was once capped at 100 billion, but this limit has since been removed.

The other, glaringly obvious difference is that Bitcoin is a robust, serious project, that very smart people develop upon principles of decentralization and censorship-resistance and libertarianism. Dogecoin is a joke, and its creators never intended to be taken seriously.

How to buy Dogecoin

Dogecoin can be bought on a cryptocurrency exchange, although a user will first need to create an account on one of these exchanges before they can trade. Often, these exchanges require a proof of ID such as a driving license.

You’ll probably have to buy Dogecoin with another cryptocurrency (that you can buy with a fiat currency). One of the most popular is the US dollar-pegged stablecoin, Tether (also known as USDT), with which you can buy Dogecoin on an exchange.

Note that you might have to pay several charges. Depending on which exchange you choose, you might have to pay to deposit money to an exchange, then more for buying Tether, then more to buy Dogecoin. And then, of course, fees to convert your Dogecoin to another cryptocurrency or back to fiat currencies.

Last Updated May 19, 2021

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