What is Dogecoin? A Guide for Beginners in 2022

Cryptocurrencies have been making headlines lately with the fluctuation of Bitcoin, Ethereum, and up-and-coming contenders.

Dogecoin is among those making a sudden climb that no one originally thought was possible.

Started as a joke in 2013 by software engineers Billy Markus and Jackson Palmer, Dogecoin is named after the popular meme “doge”, the deliberate misspelling accompanied by a silly picture of a Shibu Inu dog.

Cryptocurrency Basics

Cryptocurrency is the term used to reference any virtual form of payment. While it’s commonly used to refer to currencies like Bitcoin, you’ve more than likely already had experience “trading” cryptocurrency.

If you’ve ever purchased “tokens” or “points” on a video game, through an online shopping center, or another online source, you’ve been a part of the digital trading experience.

Cryptocurrencies are considered either centralized or decentralized.

When “centralized”, a third-party monitors exchanges and keeps a nontransparent ledger to record the transactions. When “decentralized”, the cryptocurrency is stored on what’s known as the “blockchain”.

To record transactions, blockchain is a linked peer-to-peer network system run through multiple computers. Each block is a recorded transaction and the chain is the extensive list they’re recorded onto.

These blockchains are stored through thousands of servers, making it virtually impossible for one entity to “own” and control the ledger.

Bitcoin, Ethereum, and Dogecoin are all examples of decentralized cryptocurrencies.

How Does Dogecoin Work?

While there are a few significant differences between this form of digital payment and other more popular cryptocurrencies, there are many core similarities.

Because Dogecoin (crypto name DOGE) runs through a blockchain, all Dogecoin holders have an identical copy of the ledger.

This information is frequently updated to reflect recent transactions; like other blockchains, the network is encrypted to keep the data and transactions secure.

“Miners” – individuals with high-powered computers or groups with a coordinated network – process and record transactions on the blockchain by using advanced programs to solve intricate mathematical equations that make up a “proof of work” system.

Miners are typically motivated to work on the blockchain because of the compensation in the currency they’re mining; as they process transactions and support the ledger, they’re given an additional bit of Dogecoin that they can hold or sell.

How Dogecoin is Unique

The primary difference between Dogecoin and other popular cryptocurrencies is the speed and ease for miners to process the transactions.

It’s significantly less taxing to complete the mathematical equations, making it a slightly more efficient process for documenting the ledgers.

Gary DeWaal, Chair of Katten’s Financial Markets and Regulation group, told Forbes it takes Dogecoin one minute to ratify new blocks, “where it takes 10 minutes for the process to ratify new blocks on the Bitcoin blockchain.”

There also isn’t a limit on the number of Dogecoins that can be completed, another major difference between this cryptocurrency and Bitcoin.

Where there’s a lifetime cap of 21 million Bitcoin – 18.7 million of which have already been mined at the time of this writing – there isn’t a lifetime cap on new Dogecoin.

Bitcoin miners need to work longer and harder exponentially to generate and earn new Bitcoin. However, because there’s no lifetime cap on Dogecoin, there’s a higher inflation rate as millions of Dogecoins are mined every day which makes it difficult to speculate the price gains over time.

Where and How to Buy Dogecoin

With its recent surge in popularity, Dogecoin can be found on a variety of cryptocurrency exchanges.

It’s always important to ensure you’re able to access your digital wallet on the platform you’re investigating, which is what gives you the ability to transfer and receive Dogecoin.

While some brokers only accept USD to buy and sell Dogecoin, sites like Coinbase and Gemini accept other forms of currency including CAD, HKD, and AUD.

For most exchange sites, you’ll be required to set up an account that will allow you to add funds in your currency of choice that will be used to exchange for cryptocurrency.

Your digital wallet will be how you access, buy, and sell your cryptocurrencies. There are four different digital wallets you can “carry”, with the primary difference being their security levels.

A desktop wallet is installed on a computer and can be accessed through a private key.

A mobile wallet gives you the ability to send and receive cryptocurrency similar to a desktop wallet, but there has recently been an increase in scam sites posing as secure mobile wallets – be sure to research diligently if this is your option.

Similarly, while web wallets allow you to access your cryptocurrency through multiple desktop and mobile devices, it’s crucial to find a secure provider.

Finally, a hardware wallet is considered the most secure as it’s a physical device that allows you to store your crypto information. Because they need to be connected to a computer through a USB port, they’re practically invulnerable to viruses and cyber-attacks.

However, they can cost anywhere from $100 to $200 and you need to be careful not to lose the device.

Uses for Dogecoin

When looking to use Dogecoin as a currency, you first need to be able to purchase it. Sites like Binance and Kraken, two of the most popular crypto exchange markets, support Dogecoin and others have been quick to follow suit.

Now that you have the tokens, though, you need to find places that will accept Dogecoin as a viable source of currency.

Prepaid crypto cards from sources like Mastercard and BitPay have been on the rise to account for the mounting popularity in cryptocurrency trading.

However, as these are still relatively new, you might not be able to use them in your local grocery store anytime soon.

Social media “tipping”, trading, and online gaming services have been faster to accept cryptocurrencies like Bitcoin and Dogecoin.

Some organizations are even accepting digital currencies for donations. The American Cancer Society began accepting Dogecoin in May 2021 in honor of Sporklin, one of the developers who passed from cancer.

While the creators have urged caution to stay away from donation scams, Dogecoin’s developers encourage traders to donate to any worthwhile cause, including ones they consider “amusing or fun”.

On the other hand, there are a few major platforms that still don’t support Dogecoin. For example, while Paypal has recently integrated the ability to buy, sell, and use cryptocurrencies, Dogecoin didn’t make the list.

Square’s mobile payment service also only currently allows members to buy and sell Bitcoin. It’s important to note, though, that the platform hasn’t said anything about opening up availability for other cryptocurrencies either.

How Dogecoin Became a Sensation

Dogecoin originated as a joke in 2013 as a parody of Bitcoin’s rise to popularity in 2010. One of the creators, Billy Markus, said the crypto community tends to be “pretty elitist and not very inclusive.”

Markus told CNBC the creators “wanted to make a community that was more fun, lighthearted and inclusive.” The community has even turned the term DOGE into an acronym Do Only Good Everyday.

At the start of 2021, DOGE was still trading at less than 1 cent. However, it saw a jump to as high as 74 cents by mid-2021, prompting celebrities like Elon Musk to weigh in on the situation.

With both the attention from Elon Musk’s Twitter account and Reddit’s forums – which was responsible for the GameStop surge in early 2021 – Dogecoin grew over 600% as traders flocked to capitalize on the investment.

It’s still debatable to consider Dogecoin a good investment to buy into at this point, there’s no denying that it’s made the mark its creators wanted within the community.

The Future of Dogecoin

Dogecoin started as a parody currency to infiltrate the closed-off crypto community. While it’s still a pinnacle of meme culture, the up-and-coming cryptocurrency is arguably being fueled by the supportive community and celebrity attention.

Like many other cryptocurrencies, though, Dogecoin is still working towards becoming a viable financial instrument.

The developers are still adamant that this is a joke currency, but as the numbers continue to fluctuate on an upward trend, there are brokers arguing that it’s still a key investment to make.

Especially with it becoming more widely available as a donation option, tradable currency, and across exchange sites, some financial analysts are arguing this was the push needed to give it legitimacy.

Like many gambling and trading opportunities, it can feel like a lost cause if you didn’t make the choice before the surge. However, it’s important to note that trading in any form of cryptocurrency is a risky business.

Having strong financial literacy, a foundation in good investment skills, and building your digital wallet with several forms of crypto are a few key factors to take into account if you’re looking for a productive trading experience.

To have a future in cryptocurrency trading, get up close and personal with the system, your options, and the environment.

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