Dogecoin is a type of cryptocurrency. It has been getting a lot of attention recently as it showed significant appreciation in value and it is now the 6th most popular digital currency according to coinmarketcap.com. The price for 1 Dogecoin was roughly $0.000228 USD on September 21st, 2015, and then skyrocketed to over $0.00043 USD on October 3rd, 2015. If you’re thinking about investing in Dogecoin or perhaps trying mining them at home, you’ve come to the right place! In this article, I’ll guide you through what makes Dogecoin so valuable and why some people have doubts about the future of this type of cryptocurrency in general.
What is Dogecoin?
Dogecoin was designed to be a decentralized and peer-to-peer digital currency. Its main purpose is to facilitate tipping. You can tip other people with it, and in return, they will send you Dogecoins. This whole concept is actually synonymous with the digital currency’s name: “Doge”. That’s why they’re called Dogecoins (DOGE). [Mahendra Poulose, Vice President of Engineering at Moolah]
The most interesting thing about Dogecoin is that it shares a lot of characteristics with Bitcoin. However, there are some distinct differences which we’ll talk about now.
Differences between Bitcoin and Dogecoin
I’ll start by saying that there are a lot of technical differences between Bitcoin and Dogecoin. So many in fact, that we wouldn’t be able to go through all of them here. Instead, I want to focus on the similarities first.
Like Bitcoin (BTC), Dogecoin is based on the proof-of-work (“PoW”) consensus algorithm. This means that miners verify transactions by solving difficult math problems (solving particular “blocks”). The amount of coins in circulation is initially limited to 100 million but can be expanded as time goes on. It also means that once all of the coins are mined, it will be impossible to generate new Dogecoins.
The next similarity is that both Bitcoin and Dogecoin have a similar price history. The first notable peaks for both happened in late 2013. For Bitcoin it was when China started to ban banks from dealing with Bitcoin exchanges; for Dogecoin it was when a Chinese cryptocurrency exchange called BTER announced that it would support DOGE trading in early December.
Dogecoin and Bitcoin have some differences though. The most important one is that the supply of Bitcoin is limited to 21 million coins whereas the supply for Dogecoin is not limited at all. This means that each coin stays valuable in theory and in practice there will be more coins since it has a fixed amount of coins in circulation.
Why do we think that Dogecoin’s value will rise in the future?
One of the main reasons why Dogecoin will probably continue to depreciate over time is the perception of its limited supply. As more and more people see that it can become a viable investment, they might start buying up as much as they can because they believe in a large supply in the future. In fact, one Reddit user has already managed to buy up a huge amount of Dogecoins for 10 cents each!
But I’m sure you’re thinking: “I only want DOGE for tipping people! Why should I care about how many coins are mined?” The answer here lies within blockchain technology itself. Bitcoin and all other altcoins use blockchains. This means that they are all stored on a special database, which is usually named “blockchain”. The value of every coin is stored in the blockchain. This means that if all coins are mined, there will be no supply of coins anymore because they won’t exist anymore in the real world!
What is the future for Dogecoin?
Well, if you want to invest in Dogecoin you should probably avoid this type of investment altogether. However, I can still think of possibilities where it could become a viable investment and that’s exactly why I decided to write this article! We can take an example from Bitcoin which was unknown to many people when it was introduced.
Similarities to Bitcoin
The most obvious similarity is that Dogecoin also has an active Reddit community. Many people are still unaware of its existence so there is plenty of room for growth. The community has already reached 90,000 Reddit subscribers and that number is quickly growing. In this post, I’ve already indirectly mentioned merged mining. This means that Dogecoin can be mined along with other digital currencies like Litecoin (LTC).
