There are thousands of cryptocurrencies in circulation and the numbers continue to grow at a fast pace. Dogecoin (DOGE), a meme cryptocurrency, was started as a joke, but today it has a market cap of over $22 billion and around 10,000 new coins are mined every minute. It may be nowhere near Bitcoin or Ethereum in terms of value, it certainly has huge popularity and a large community to fuel its growth.
While the price of Dogecoin has increased significantly since May 2020, it has remained an affordable investment option with a large supply.
What is Dogecoin?
Dogecoin was created in 2013 by a software engineer duo Billy Marcus and Jackson Palmer. The coin was first conceptualized to poke fun at the popular crypto Bitcoin. Dogecoin is no longer a joke. It has appreciated by more than 5000% in 2021 and has been supported by a number of celebrities including Elon Musk.
This cryptocurrency is also based on blockchain technology similar to Bitcoin. Its blockchain network also uses cryptography to maintain a high degree of transaction security and is based on the proof-of-work system. Doge can be used for purchases and making payments.
Auxiliary Proof-of-Work Model
Dogecoin’s underlying technology draws upon that of Litecoin. LTC miners were earlier allowed to mine Doge through Auxiliary Proof-of-Work (aPOW). There are two advantages of this model:
- It encourages miners to allot computing power to complete Dogecoin blockchain transactions.
- It regulates the process of new Doge creation that gets distributed by miners.
How is Dogecoin Different from Bitcoin?
Doge is different from Bitcoin and other cryptocurrencies in a number of ways.
- Efficient Processing: It is less research-intensive and faster to complete and record transactions. The Bitcoin blockchain takes around 10 minutes to verify and the Dogecoin blockchain just 1 minute.
- Lifetime Cap: Overall, only 21 million Bitcoins can be created. This explains why it is increasingly harder and takes longer to create a new Bitcoin. This feature also helps this cryptocurrency to maintain or grow its value over time. There is no lifetime cap on how many Dogecoins can be created through mining. This makes it an inflationary crypto. Since the blockchain creates millions of new Dogecoins every day in order to reward miners, price gain is a challenging proposition here.
Key Facts About Dogecoin
There are many facts about Dogecoin that make it an interesting cryptocurrency for users and investors.
- Dogecoin has one of the largest communities supporting it. This highly active community regularly works together to fund various charitable efforts and projects. This includes sponsoring NASCAR.
- Dogecoin is widely used for tipping. Users regularly tip other users for anything they think deserves to be rewarded. The actions can include posts, contributions, and other activities.
- The coin recorded an all-time highest market cap of $88 billion in May 2021.
Dogecoin as an Investment Option
Dogecoin is designed to be inflationary, as more coins get created every day, translating into infinite supply. On the other hand, Bitcoin has a built-in scarcity model. Almost 15 million doge coins are created everyday. This unlimited cap on supply potentially has a negative impact on value in the long term.
Gold and diamonds are valued because they are scarce. Bitcoin has a similar scarcity advantage when it comes to long-term investment potential. It is this scarcity that makes Bitcoin proponents promote holding the crypto long-term. If you are interested in bitcoin trading, visit Immediate Bitcoin. Investors seeking to make quick profits can find a lot of value in this cryptocurrency.
Future of Dogecoin
Despite its unique configuration and unlimited cap on supply, Dogecoin has one advantage that may make it a good investment option in the long term. There is a lot of hype around this crypto and this factor is helping drive its value up. Elon Musk got involved in popularizing Dogecoin through a series of social media posts and this has made a big impact on its growth.
However, a cryptocurrency will need much more than celebrity support to appreciate in value and stay relevant in the long term. There is one important similarity between Dogecoin and most other cryptos – it is also quite volatile. It can be just the cryptocurrency for those that want to gamble on the hype that is driving its price higher.