Summary
- DOGE is an open-source, peer-to-peer cryptocurrency based on the popular Shiba Inu meme, created in late 2013.
- Dogecoin is a fork of Bitcoin’s codebase, utilizing the proof-of-work consensus mechanism. However, unlike Bitcoin’s capped 21 million supply, DOGE’s supply is uncapped, which is debated to be better suited for everyday transactions.
- Since the surge in enthusiasm over the years, retailers like Tesla, Gamestop, AMC, and others have started accepting DOGE as a form of payment.
What is Dogecoin?
Dogecoin (DOGE) is an open-source, peer-to-peer cryptocurrency created in December 2013 by a software engineer named Billy Markus. Markus reasoned that a more lighthearted coin would have a better chance of attracting mainstream attention than Bitcoin. Starting as a joke amongst friends, Markus garnered the attention of another software engineer, Jackson Palmer. Palmer’s strong interest in DOGE compelled him to create dogecoin.com, a domain Billy eventually stumbled onto. At this moment, Billy reached out, and the two partnered to begin developing the Dogecoin code base.
The Dogecoin logo was born from an internet meme featuring a Shiba Inu dog which was sensationalized in 2013. Like other cryptocurrencies, Dogecoin employs distributed ledger technology. However, its underlying code is a copy (e.g., fork) of the Litecoin codebase, a fork of the original Bitcoin codebase. So Doge is a fork of a fork, if you will.
Those who fork blockchains aim to implement new features or technical upgrades, diverge from the original project due to differing visions or governance disputes, and create new cryptocurrencies with unique rules or functionalities.
For example, the Litecoin fork of Bitcoin decreased the block production time from 10 minutes to 2.5 minutes which improved transaction speed and throughput, increased the total supply of coins, and changed the method by which calculations are solved.
Source: Bitminer.io
How Does Dogecoin Work?
Dogecoin uses the same proof-of-work consensus mechanism as Bitcoin, which requires miners to solve complex mathematical problems to validate transactions and add them to the blockchain. Miners are rewarded with newly minted DOGE coins for securing the network. Dogecoin uses a cryptographic algorithm called Scrypt, which differs from Bitcoin’s Secure Hash Algorithm 256 (SHA-256). In simplest terms, Scrypt consumes less energy and prevents using specialized Bitcoin mining equipment (e.g., ASIC Miners) to mine Dogecoin. This means that Dogecoin miners don’t need specialized and costly equipment to compete against large mining operators, enabling everyday users to participate in DOGE mining.
One notable difference is Dogecoin’s inflationary nature. While Bitcoin has a finite supply of 21 million coins, Dogecoin has an uncapped limit, currently at approximately 139.7 billion DOGE. Around 5 billion new Dogecoins are introduced into circulation each year, contributing to an inflation rate of roughly 4%, which decreases over time. This can result in a reduced value per coin over time unless demand for the cryptocurrency grows faster than the inflation rate.
What is Dogecoin Used For?
Dogecoin serves various uses. While Bitcoin is often perceived as ‘digital gold’ or a store of value, Dogecoin is seen as a ‘fun and friendly’ currency. It is often used to tip content creators online, donate to charitable causes, and facilitate other online transactions. The low cost to acquire coins, minimal transaction fees, and playful branding has made it a popular choice for microtransactions.
One of the earliest uses of DOGE was for tipping on the Reddit platform. The “dogetipbot” on Reddit, active until 2017, allowed users to tip others with a simple code.
In 2014, the DOGE community came together to raise over $30,000 worth of Dogecoin to enable the Jamaican bobsled team to participate in the Sochi Winter Olympics.
Over time, several retailers have begun accepting DOGE as a form of payment. Elon Musk’s Tesla, for instance, has facilitated Dogecoin-enabled purchases, and Musk has openly discussed the idea of accepting DOGE as payment on Twitter. Other retailers and entities accepting DOGE include Dallas Mavericks, AMC, Gamestop, and many more.
