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May 15, 2024

What is Dogecoin & How it Works?

SUMMARY

Dogecoin is a cryptocurrency that was started as a meme and fun alternative to traditional cryptocurrencies like Bitcoin, Ethereum, etc. Developed by Billy Markus and Jackson Palmer, Dogecoin got its name from the Shiba Inu dog from the Doge meme as its logo and mascot. That gave instant popularity and a unique identity to Dogecoin.

Dogecoin functions on a decentralized network and follows the Proof-of-Work (PoW) algorithm like Bitcoin. Though it started as a meme, Dogecoin gained attention over the years and gained a dedicated community.

Let’s delve deeper into Dogecoin, its features, and how it works.

TABLE OF CONTENT

    What is Dogecoin?

    Dogecoin is an open-source cryptocurrency that was created as a lighthearted alternative to traditional cryptocurrencies like Bitcoin. Launched in 2013, Dogecoin is abundant, unlike Bitcoin, which was designed to be scarce. So, Dogecoin has no maximum supply.

    Dogecoin follows the PoW consensus mechanism, which is a computationally intensive process. Thus, miners will need advanced mining hardware with excellent hash rate and energy efficiency to solve complex puzzles and mine new Dogecoins. Upon confirmation, the transactions are added to a decentralized public ledger.

    Dogecoin attracted several eyeballs due to the tremendous price surge in May 2021. It is most probably due to social media-driven trends. For instance, Tesla Elon Musk’s tweet on Dogecoin is partly responsible for the price surge. However, the price dropped in the later months of 2021. No one can predict when the Dogecoin price will fall or surge again, as it depends on several factors. Thus, users should watch the market closely before making any investment decisions.

    Features of Dogecoin

    Features of Dogecoin

    Now, let’s discuss some of the prominent and unique features of Dogecoin.

    • Abundant in Supply

    Dogecoin is abundant, unlike other traditional cryptocurrencies like Bitcoin, which are scarce and limited in supply. Dogecoin has no maximum supply. So, how many Dogecoins can you mine per day? One can mine around 10,000 Dogecoins every minute. That concludes around 14,400,400 new Doge coins per day.

    • Decentralization

    All cryptocurrencies are decentralized, meaning no central authorities govern them but a collection of users spread across the world. The number of nodes generally determines decentralization. The number of nodes is comparatively lesser than Bitcoin, making Dogecoin susceptible to a 51% attack when a single entity controls over 50% of the network.

    • Dedicated Community Support

    Dogecoin has an active and supportive community online. Often, they indulge in social media campaigns, tipping, and other charity events. In fact, the active community played an extensive role in Dogecoin’s recognition worldwide.

    • Uneven Distribution

    A small number of individuals hold the majority of Dogecoins. For instance, around 0.002% of Dogecoin wallets have about two-thirds of the total Dogecoins in supply. Thus, there is a risk of few individuals determining the price fluctuations and market liquidity.

    How does Dogecoin Work?

    Like traditional cryptocurrencies like Bitcoin or Ethereum, Dogecoin has its dedicated blockchain. It has a transparent digital ledger that displays all Dogecoins transactions for users to view.

    Dogecoin follows the PoW consensus mechanism, which requires miners to solve complex mathematical algorithms to validate transactions and update them on the ledger. Miners will get paid in Dogecoins as rewards for contributing their resources and expertise.

    Users can use Dogecoins to make payments and buy stuff. However, it is not ideal to store Dogecoins as the cryptocurrency is highly inflationary in terms of development and design.

    Now, let’s see the steps involved in the Dogecoin transactions in detail.

    • Users can initiate Dogecoin transactions with another person by knowing their wallet ID and public key. Firstly, users will need to make a transaction request.
    • Once the transaction request is made, the system alerts the Dogecoin miners worldwide to validate the transaction.
    • Miners will validate whether the sender has enough Dogecoins to make the transaction. Upon verifying, they will approve the transaction request.
    • Dogecoin miners collect all the pending transaction data called nonce and then apply a mathematical function to generate the correct hash number for that specific nonce.
    • The miners will be rewarded with Dogecoins upon successful generation of accurate hash numbers.
    • Both the sender and receiver will get a confirmation message stating their transaction approval.
    • The requested amount of Dogecoin is credited into the receiver’s wallet within a few minutes.

    How is Dogecoin Different from Bitcoin?

    Dogecoin has a few notable differences compared to the popular cryptocurrency, Bitcoin. Though they are cryptocurrencies that follow the PoW consensus mechanism, the points below make them vary from each other.

    • Dogecoin transactions are quicker and easier. For example, if Bitcoin transactions take 10 minutes, Dogecoin transactions will take only one minute. Thus, Dogecoin is slightly more efficient for daily transactions.
    • Bitcoin has a maximum cap of 21 million. It is designed to be limited in supply to prevent inflation. However, Dogecoin has no limits and is abundant in supply.

    Dogecoin Price History

    Analyzing the price history and past performances of Dogecoin will help you make informed decisions regarding investing in Dogecoin or Dogecoin mining.

    Dogecoin Price History

    The price movements of any cryptocurrency are highly volatile, and Dogecoin is no exception. Thus, users should follow the price movements closely before making potential decisions.

    Check out the latest Dogecoin Miners

    CONCLUSION

    Though Dogecoin has lighthearted origins and is a meme-inspired project, the digital currency operates on blockchain technology and leverages a PoW consensus mechanism. Thus, it attracted many users and eventually turned into an active, dedicated community support. Low transaction charges, fast block generation, and continued community support make Dogecoin unique from other cryptocurrencies.

    FAQs on Dogecoin

    • What is the block time for Dogecoin transactions?
    • Dogecoin is super fast in its block time. The transactions are confirmed and added to the ledger in one minute.

    • Can Dogecoin be used in daily transactions?
    • Dogecoin is ideal for daily transactions due to its low transaction fees and faster block times.

    • How is Dogecoin’s community contribute to its development?
    • The open-source nature of Dogecoin enables the community members to contribute to its code and be involved in discussions about its future development. Dogecoin’s community is quite active, signalling a welcoming change.

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