What Is Dogecoin? How To Invest In MDOGE Cryptocurrency?

If you are an active user of social networking sites, it’s pretty obvious that you might have come across the term Dogecoin. In simpler terms, Dogecoin is a cryptocurrency, like Bitcoin or Ethereum. It although has its own flavor and many differences with either of them. Dogecoin was created back in 2013 as a ‘Joke Currency‘ and a more lighthearted coin for crypto enthusiasts. Dogecoin got its name from a once-popular meme. Despite all these funky origin stories, it has exploded exponentially in 2021. As of last week, Dogecoin has become the fifth-largest cryptocurrency by market capitalization. (Source: Forbes).

What is Dogecoin?

Billy Marcus and Jackson Palmer, Two enthusiastic Software engineers, created Dogecoin in late 2013. Palmer purchased the domain and branded the cryptocurrency’s logo using a popular meme at the time. It featured the deliberately misspelled word “doge” that was used to describe a Shiba Inu dog.

Dogecoin was originally forked from existing cryptocurrencies Luckycoin and Litecoin. These two crypto coins used scrypt technology in their proof-of-work algorithm. Dogecoin also uses the same. MDOGE is simply milliDogeCoin, which means 1 DOGE Coin = 1000 milliDogecoin.

In early 2021, Dogecoin gained cult status on Reddit’s WallStreetBets message board. This board was the prime instigator behind the GameStop affair in January. Here enthusiasts promised to propel its value “to the moon”. After some time all discussion of crypto was banned on the subreddit.

Today, Dogecoin is something that can’t be ignored. It has exponentially increased its value and gained more than 5,000% in 2021. (Damn!) . Well, the guilty party is as you might guess Tesla’s and SpaceX’s CEO Elon Musk. He announced Dogecoin his favorite cryptocurrency. According to him, it’s also the “people’s crypto”. He even promised to plant a physical Dogecoin token on the moon.

Cryptocurrency and Blockchain:

Dogecoin is a cryptocurrency that runs on blockchain technology, similar to Bitcoin and Ethereum. Blockchain is a distributed, secure digital ledger that stores all transactions made using a decentralized digital currency. The term blockchain also refers to how the data is stored in ”blocks” of information and then linked together in a permanent “chain.”

“Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.”

All holders carry an identical copy of its blockchain ledger, which is frequently updated with all new transactions in the cryptocurrency. Like other cryptocurrencies, Dogecoin’s blockchain network uses cryptography to keep all transactions secure.

Miners/diggers use computers as their primary resources to solve complex mathematical equations to process transactions and record them on its blockchain which is also known as the “proof of work” system. In exchange for all their hard work by processing transactions and supporting the blockchain ledger, miners/diggers earn additional Dogecoin, which they can then hold or sell on the open market.

You can use Dogecoin for payments and purchases, but it’s not a very effective store of value. Unlike Bitcoin, the total lifetime cap of Dogecoin that may be created by mining is not fixed. Which is the reason why the cryptocurrency is highly inflationary, by design. It’s like a government printing money all the time to pay off its debt.

The blockchain rewards miners/diggers for their hard work by creating millions of new Dogecoins every day. Generally, prices go up when there is a shortage of any product which is not the case for Dogecoin.

Dogecoin vs. Bitcoin

Dogecoin has a few significant differences compared to Bitcoin. Dogecoin miners are referred to as diggers. It’s pretty quicker and easier for miners to complete the mathematical equations that complete and record transactions. This ability makes Dogecoin somewhat more efficient for processing payments. Some variances make the two coins more than just duplicates.

“It takes 10 minutes for the process to ratify new blocks on the Bitcoin blockchain, it takes only one minute on the Dogecoin blockchain,” said Gary DeWaal, Chair of Katten’s Financial Markets and Regulation group. Apart from that Bitcoin’s mining problem is built using SHA-256 hash function whereas Dogecoin uses Scrypt.

As we stated above another significant difference is the absence of any lifetime cap on the number of Dogecoins that can be created. There is a lifetime cap of 21 million for Bitcoins that limits the maximum possible number of coins that can be created. This means that miners are forced to work much harder and longer overtime to earn new Bitcoin. To a degree, it helps to guarantee Bitcoin’s ability to hold and grow its value over time.

There is also a major difference in the Block rewards between these two cryptos. For a Miner, Dogecoin is slightly more rewarding. If you are interested in learning about Dogecoin’s block rewarding, you can refer to their official GitHub repo.

If you are interested in learning about Blockchain check out the below video:

https://www.youtube.com/watch?v=SSo_EIwHSd4&ab_channel=SimplyExplained

If you are interested in learning similar technologies do check out my previous blog.

How to Buy it?

You can buy Dogecoin on a popular cryptocurrency exchange like Binance or Kraken. The exchanges require you to set up and fund an account with U.S. dollars or cryptocurrency. You then can buy and exchange cryptocurrencies, including Dogecoin. Notably, leading crypto exchange Coinbase does not support purchases of Dogecoin.

Some online brokers, including Robinhood and TradeStation, also allow you to buy Dogecoin — in addition to conventional assets like stocks, mutual funds, and bonds. They don’t offer as many of the cryptocurrencies as exchanges, but Dogecoin is generally available.

As with other cryptocurrencies, once you’ve purchased Dogecoin it’s best to move your coins to a crypto wallet. Wallets take many forms, from online services offered by exchanges like Coinbase (while you can’t buy Dogecoin on Coinbase, you can store it in your Coinbase wallet), to apps on your mobile device or even a physical hard drive. You secure the wallet with a private password. Since your coins are held outside of an exchange, there’s an extra layer of protection against hacks.

Before it broke out into the mainstream and rocketed higher in price, you were able to earn free coins for doing basic tasks online.

C. Neil Gray said “For many years, you could perform tasks at Dogecoin ‘faucets’ to earn Dogecoin instead of buying it,”. He is a partner in the fintech practice areas at Duane Morris LLP. “The tasks included things like watching an advertisement or taking a survey. More recently, it’s become difficult to find any that work.”

For Indian Users:

If you are based in India, Cryptocurrency exchange platforms provide the most convenient ways to buy Dogecoin. You can start investing in Dogecoins from popular cryptocurrency exchange platforms like WazirX*, BuyUcoin, and CoinSwitch.

*If you are interested in creating an account in WazirX, you can use my referral link: https://wazirx.com/invite/mtg9czdx

Is it a Good Investment?

Since there is no lifetime limit on the number of Dogecoins that can exist, and millions of new Dogecoins are released onto the markets every single day. There is very little incentive to hold the cryptocurrency for the long term. Bitcoin continues to rise in value because of the system’s lifetime cap on the number of coins that can be created.

“Doge really is less like Bitcoin and more like DASH or Bitcoin Cash, where the express goal is a spending currency,” said White.

Historically, the per coin value of Dogecoin has been very low, around $0.003 per coin for most of 2020, so people were more likely to give them away. “Users on social platforms, like Reddit, Twitter, Facebook, and others, can use Dogecoin to reward, or “tip” each other for posting content,” said Gray.

Almost 50% of the available Dogecoins is held by only 12 accounts. This makes it a very risky coin to hold, as the supply is concentrated in the hands of very few people.

The gains in Dogecoin that have been seen in 2021 may not be sustainable over the longer term. So as long as you are using as a tip or using it as a donation, it’s alright.

Should You Buy Dogecoin?

Those who bought Dogecoin to start 2021 have been well rewarded as it has seen almost 5000% growth. Still, White is a little wary about buying Dogecoin, especially as an investment. The constant flow of new coins onto the market put unending downward pressure on the coin’s value.

White also warned about additional security risks for Dogecoin, compared to other major cryptocurrencies. “It just hasn’t had the same security and code-level scrutiny that Bitcoin or Ethereum has. Plus, there’s just not a particularly robust mining community around Doge. So the exposure for a mining level attack is well above that of something like Bitcoin.”

Buying any sort of cryptocurrency involves risk, and that includes Dogecoin. It’s always worth buying a few coins and familiarizing yourself with the system. Although it’s probably best to refrain from sinking more than a token amount of your hard-earned money in a cryptocurrency. Especially in that one that started as a joke.