What is cryptocurrency Dogecoin (DOGE) and how does it work?

What is Dogecoin (DOGE)?

Dogecoin (DOGE) is an open-source peer-to-peer cryptocurrency designed for sending and receiving digital payments processed through the Dogecoin blockchain network. Dogecoin was developed by software engineers Jackson Palmer and Billy Markus and launched in December 2013 as a decentralized cryptocurrency for instant payments. Dogecoin was originally created as a hard fork of the now non-existent Luckycoin, a fork of Litecoin (LTC). So, as a fork of a fork (of a fork), Dogecoin joined the cryptocurrency market with a reputation as a “joke coin” – a persona its devoted community happily embraced. With no CEO or official entity behind DOGE, Dogecoin is mostly driven by its enthusiastic holders who have proven faithful over the years.

The user base of DOGE is on the rise year-to-year, pushing prices higher and propelling the Dogecoin market cap to constantly higher highs. DOGE is mostly used for crowdfunding and tipping online content creators as a “light” crypto-asset but is being accepted by an ever-growing list of merchants as a means of payment.

Though DOGE was born a meme, Dogecoin has emerged to become one of the top cryptos by market cap with 5000% returns in 2021 and is endorsed by millions of users – including notable supporters like Elon Musk and Snoop Dogg.

How Does Dogecoin Work?

Dogecoin is indirectly based on the code of the first cryptocurrency, Bitcoin. More specifically, it was created as a hard fork of the now-defunct Luckycoin, which was a hard fork of Litecoin (LTC). Litecoin became known as the first hard fork ever to be created when it split from Bitcoin. Dogecoin borrowed a Scrypt-based consensus mechanism from Litecoin, which is how DOGE shares many functionalities with Bitcoin and its hard fork “derivatives”. The use of Scrypt in Dogecoin’s Proof-of-Work (POW) algorithm prevents miners from using ASICs – the specialized equipment used in Bitcoin mining.

Just like with Bitcoin, network participants of the Dogecoin blockchain use their computing power to secure the network and fuel block creation while verifying transactions. The difference is that Dogecoin has a “light” architecture, which enables DOGE to process transactions more promptly compared to Bitcoin. Dogecoin can be mined with computational power used by network participants to generate new blocks and validate transactions by solving mathematical equations. With every generated block, miners are rewarded with 10,000 DOGE.

Dogecoin creators Jackson Palmer and Billy Markus initially designed the internet’s favorite coin with a maximum limit of 100 billion DOGE. However, the team removed the limit only a couple of months after the launch. Dogecoin now has an inflationary supply after this change of monetary policy, generating 5 Billion new DOGE every year.

Who Are the Founders of Dogecoin? History of Dogecoin

The Dogecoin blockchain – and the DOGE crypto that powers it – were created by software engineers Billy Markus and Jackson Palmer. Billy Markus worked at IBM, and Palmer was a software engineer at Adobe, and the duo shared a vision to develop a fun and easy-to-use crypto that stands out from traditional (read: “boring”) banking systems while offering near-zero fees on instant transactions.

The story of Dogecoin started with an idea to create crypto that could be used by wider demographics compared to Bitcoin, and the first step was taken when Palmer bought the Dogecoin.com domain name and created the project’s official website. After launching DOGE and recording millions in trading volume within its first days on the market, there were as many unique visits to the official website, too.

Even after launching the DOGE currency as a success, neither Palmer nor Markus took over the title of CEO, and the role of the Dogecoin community became even more important for the network. The Dogecoin (DOGE) community showcased its strength on more than just a few occasions, with a special accent on collecting enough funds to cover the losses of having million DOGE coins stolen in a hack attack on the now-defunct Dogewallet project.

What Makes Dogecoin Unique?

Dogecoin is unique in its marketing approach, presented as a fun and friendly internet currency. Dogecoin was perceived as a “joke coin” in 2013 when it launched, gathering millions of followers in just the first month.

Unlike the numerous cryptos and digital assets that are presented as ambitious and groundbreaking blockchain projects, Dogecoin embraced a much more casual approach – while still offering desirable features such as near-zero fees, instant transactions, a strong but lighthearted community, and non-competitive mining. Even though Dogecoin shares similarities with both Litecoin and Bitcoin, its unique approach defined DOGE as a user-friendly internet currency perfect for micro-payments and ideal for social media users, content creators, and vendors alike.

What Gives Dogecoin Value?

Dogecoin’s value in the market is defined and determined by the balance of selling and buying activity, which forms Dogecoin price. A major source of its value is derived directly from the strong and supportive community backing the project, and the unique approach that DOGE has taken as a cryptocurrency created for internet-based payments.

Dogecoin value may also rise with endorsements, like in the case of Elon Musk tweeting about DOGE being one of the most interesting digital assets in the market, after which Dogecoin price skyrocketed and went “to the moon” as the investing community likes to say.

The value of Dogecoin and DOGE price can also follow major global trends that form the collective momentum of all cryptos in the market. DOGE price may change following collective trends, usually powered by Bitcoin as the most dominant crypto by market cap. The use case of DOGE also plays a role in Dogecoin value, as DOGE crypto is mostly used as an incentive on social media platforms, for tipping content creators, and sending and receiving micropayments with nearly zero fees.

How Many Dogecoin (DOGE) Are in Circulation?

At its inception, Dogecoin’s total supply was limited to 100 billion. However, the dev duo changed the monetary policy of Dogecoin shortly after the initial release of DOGE, removing the limit and creating an infinitely inflationary supply.

It is estimated that the circulating supply will double in 26 years, and currently there is no hard limit to the total supply. Block creation happens roughly every 1 minute and the mining reward is 10,000 DOGE.

Other Technical Data

Dogecoin is a cryptocurrency that uses a custom Proof-of-Work consensus algorithm to enable instant payments on its ledger. Dogecoin’s coin price depends on trading activity, technical value, mainstream use, adoption, collective trends in the crypto market, and a multitude of other factors.

The Dogecoin network works similar to Bitcoin’s blockchain and many other altcoins, such as Litecoin, as all transaction data and block generation info are permanently written on the immutable blockchain. This decentralized system is designed to inherently prevent tampering with recorded data. The rules of the network are defined by the protocol and are enforced through full nodes (miners) who are responsible for verifying every single transaction on the network.

How Is the Dogecoin Network Secured?

The Dogecoin network depends on miners to secure the blockchain and validate transactions. PoW rules are enforced through full nodes and miners are operating with computational power to solve mathematical equations. By solving an equation, a new block is generated, transactions are verified and permanently recorded, and miners are rewarded with 10,000 DOGE.

Dogecoin DOGE

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Bitcoin BTC

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Ethereum ETH

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XRP XRP

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How To Use Dogecoin

Dogecoin is primarily used as an online blockchain-based currency for payments and instant transactions. Users can send and receive DOGE with their Dogecoin (DOGE) wallets within seconds and with minimal transaction fees. Dogecoin can also be used to tip content creators and encourage content creation across the internet and on social media networks. Dogecoin is perfect for microtransactions, as the coin allows users to send and receive small amounts with near-zero fees.

Dogecoin can also be used as a speculative investment, as Dogecoin’s price is subject to frequent changes.

How To Choose a Dogecoin Wallet

The type of Dogecoin wallet you choose will likely depend on the amount of DOGE you have and what you intend to do with it.

Hardware wallets (aka cold wallets) like Ledger or Trezor offer the most secure option with offline storage and backup. However, they tend to be more expensive and difficult to understand so are probably more suitable for those with experience and large amounts of DOGE to store.

A simpler, and usually a free option, is software wallets. These can be downloaded to your smartphone or computer and may be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. Software wallets are more convenient for making transactions but less secure than their hardware counterparts, meaning they’re better suited to inexperienced users with smaller amounts of DOGE.

Finally, there are online wallets or exchanges, known as hot wallets, which can be accessed with a web browser. These are less secure than the alternatives and require users to place their trust in a platform to manage their DOGE coins. These are best for those who are holding small amounts of DOGE or are making frequent trades. Just make sure to pick a service with strong security measures and a good reputation.

Kriptomat offers a secure storage solution, allowing you to both store and trade your DOGE without hassle. Storing your DOGE coins with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Buying and selling DOGE coins, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Dogecoin Mining

The Dogecoin network operates based on the Proof-of-Work protocol, which means that Dogecoin can be mined much like Bitcoin. Miners verify and validate transactions, and secure the network from potential attacks and malicious entities. One Dogecoin block is produced every minute, and the block reward is 10,000 DOGE. 

Conclusion

Though Dogecoin started as a joke, it soon became one of the top cryptocurrencies on the market. Brandishing the well-known and easily recognizable DOGE-y logo of Shiba Inu, Dogecoin recorded around 5000% returns in 2021 and was embraced by celebrities including Elon Musk and Snoop Dogg, propelling coin price to new highs.

Dogecoin was created as a fun and user-friendly digital currency that enables instant payments and cost-efficient transactions. No longer considered to be just a joke, Dogecoin has built an incredibly strong and constantly-growing community of users, promoters, and endorsers who all praise DOGE for its simple and straightforward utility.

Dogecoin FAQ

How To Buy Dogecoin

You can buy Dogecoin (DOGE) on cryptocurrency exchanges, such as Kriptomat, where you can register and create an account for free and buy Dogecoin. Learn more about how you can own DOGE and how to buy Dogecoin.

How to Sell Dogecoin

You can sell Dogecoin on cryptocurrency exchanges, using the same crypto exchange where you placed your buy order for Dogecoin. Traders use Kriptomat to sell Dogecoin and earn a profit on price changes, based on the difference between the buy and sell Dogecoin price.

What Is Dogecoin Used For?

Dogecoin has a strong community that mostly uses DOGE for tipping online content creators. Dogecoin is also used for crowdfunding which is often organized within the community of DOGE holders, and as a payment method for fast blockchain-based transactions at low fees. 

Is Dogecoin a Joke? 

Dogecoin was considered a joke at its inception due to the fact that the developers of DOGE used the image of the famous Shiba Inu meme for their logo. However, strong community, prompt block creation, and instant transacting placed DOGE among the top cryptocurrencies. 

Dogecoin Price

Dogecoin price is influenced by a lot of traditional factors such as project news and developments, market sentiment, the flow of cryptocurrency on exchanges, and the economy in general. 

Additionally, since the adoption of DOGE grows, more people will be turning to it as a payment method and its demand will rise, driving up Dogecoin’s price and market cap.

The current Dogecoin (DOGE) price is EUR.

The 24-hour trading volume of DOGE is EUR. DOGE is currently ranked of all cryptocurrencies by total market cap, with a market cap of EUR. It has a circulating supply of DOGE.

Register now to begin your journey into the world of Dogecoin and cryptocurrencies with Kriptomat!

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