Cryptocurrency prices have been experiencing a considerable increase in the past year and a half. Since the crash that was caused by the COVID19 pandemic, the markets have been booming. Let’s see the future of Dogecoin.
While Bitcoin has been the figurehead for the market, leading the way to new highs, alternative cryptocurrencies have also been performing quite remarkably. One such cryptocurrency is Dogecoin.
In 2021, this crypto has gained more than 2000% in value versus the USD, reaching an all-time high nearing the $0.4 mark. Considering that only a couple of years ago, one DOGE was worth less than $0.01, this is quite the performance!
But what exactly happened that allowed this cryptocurrency to follow such incredible growth? Well, this article will help you find out exactly that!
In this post, we go over the origins of the DOGE coin, and the reasons behind its success. Furthermore, we will try to analyze some future developments to help you decide whether it’s worth investing in Dogecoins.
Let’s get started.
What is Dogecoin?
Dogecoin (DOGE) is the brainchild of programmers and marketing Billy Markus and Jackson Palmer. These cryptocurrency enthusiasts were tired of the seriousness of the crypto market, which was being engulfed in a “get rich” mentality.
Dogecoin was the solution for them – a cryptocurrency that was easy to understand and use, which would be based on something (almost) everyone loves – memes! They used Litecoin’s code and released the coin in 2013.
Additionally, they borrowed the extremely popular Doge meme and used the Shiba-Inu as the logo for the cryptocurrency. The success was immediate, such that it even surprised its creators.
The Dogecoin community reached in the hundreds of thousands in mere weeks after the coin’s release. The value of the coin skyrocketed, and in 2014, it had entered the top 10 of most valuable cryptocurrencies by market cap.
As we briefly mentioned, Dogecoin is based on Litecoin’s code. It was actually forged from the now-defunct crypto Luckycoin, which was itself a fork from Litecoin. And while DOGE borrows a lot of its characteristics from Litecoin, it has some unique characteristics that are worth mentioning.
DOGE can be mined
As such, Dogecoin uses the Scrypt algorithm for transaction validation and mining, which was supposed to be a more democratic way of obtaining Dogecoins, compared to Bitcoin’s SHA-256 algorithm.
However, the evolution of hardware has made this algorithm quite difficult to mine, and to mine Dogecoins effectively today, you will need a specialized machine called an ASIC.
With that said, an important thing to know is that DOGGE can be obtained as a side-product of Litecoin mining. This means that if you are mining Litecoin, you get DOGE for free!
DOGE doesn’t have a maximum supply.
You see, most cryptocurrencies are created to be a good store of value and follow a deflationary model.
For instance, Bitcoin and Litecoin are limited to 21 and 84 million coins respectively. This allows them to increase in value as time goes by, become they become increasingly scarce.
Dogecoin has an unlimited supply and every minute a new 10.000 DOGE is created. This ultimately dilutes the value of all DOGE coins in circulation, making them less valuable over time.
The ultimate strength of Dogecoin – the community
As you might have noticed, Dogecoin has some weak fundamentals. It’s not fast, doesn’t provide a good store of value nor it’s innovating the space in any way. So, you might be wondering how is it possible for such a coin to reach the top 10, pushing investors to convert doge to BTC on Godex massively.
The answer is simple – the power of the community and pure hype.
Dogecoin is famous for its eclectic community, which is considered to include some of the most engaging crypto supporters in the space.
In the past, we’ve seen Dogecoin supporters being involved in humanitarian actions and fundraisers, like the time when they were able to send the Jamaican bobsleigh team to the 2014 Olympics.
More relevant today, DOGE is the favorite cryptocurrency of Elon Musk, the 2nd richest man in the world. Musk has a multi-million following on twitter and often “shills” DOGE to his followers. Every time the man tweets about DOGE, the coin’s price usually spikes up.
There are even rumors that the SEC might probe into his tweets, to investigate market manipulation.
Furthermore, DOGE is often a product of hype. In 2020, the price spiked 2000% after a viral Tiktok campaign that aimed to push the coin’s price to $1.
We can conclude that Dogecoin is not a fundamentally sound cryptocurrency like Bitcoin or Ethereum. Some recent projects might be a better investment in the long run, considering the heavy inflation Dogecoin is subject to. However, if you follow Twitter trends well, it can be a great way to make a quick profit.