Wed. Dec 8th, 2021

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Dogecoin is a cryptocurrency that has gained a cult status among the crypto community. The coin was initially created as a joke among a small group of friends before capturing the world’s attention and increasing its value in early 2021. Read on for more information on what Dogecoin is, how it works and if it has meaning for your encryption portfolio.

What is Dogecoin?

The official Shiba Inu logo from the Dogecoin website
The official Shiba Inu logo from the Dogecoin website

Dogecoin is a digital currency or cryptocurrency that started in 2013 two friends as a cheerful joke based on a popular Shiba Inu dog meme on the net. For most of its existence, Dogecoin was worth less than a penny and was hardly recorded as significant to most of the cryptographic community.

But everything changed in 2020 and 2021, when the frenzy of the meme trade began. At the peak of May 2021, dogecoin was briefly worth $ 0.73, with a market capitalization of about $ 96 billion.

The price is highly volatile. It is worth $ 0.23 with a market capitalization of $ 30 billion as of July 6, 2021.

How does Dogecoin work?

Dogecoin is a cryptocurrency that uses blockchain technology. It was created with a software fork behind litecoin. This makes it a much faster and lower cost currency than the dominant cryptocurrencies bitcoin and ethereum.

Dogecoin transfers take place with near-instant trade deadlines and extremely low costs. This makes him the favorite of cryptography “experts” from celebrities like Elon Musk, CEO of Tesla, and businessman Mark Cuban.

As a blockchain-based cryptocurrency, you can buy, sell, and maintain dogecoin anonymously. The system is managed by computers that track all transactions in Dogecoin history through a single public database, the Dogecoin blockchain. You can view the history of any transaction or portfolio with a public explorer of Dogecoin blockchains such as DogeChain.

Dogecoin Vs. Other cryptocurrencies

Dogecoin is not a cryptocurrency that works in a vacuum. It is closely related to many other currencies that operate using fully digital systems. To understand how similar dogecoin is to other currencies, here’s a look at dogecoin vs. bitcoin over the last year.

Dogecoin Vs.  Bitcoin.  The green line is the dogecoin price in USD (left scale).  The yellow line is the dogecoin price in BTC (right scale).  Source: CoinMarketCap
Dogecoin Vs. Bitcoin. The green line is the dogecoin price in USD (left scale). The yellow line is the dogecoin price in BTC (right scale). Source: CoinMarketCap

As you can see, the price of the dogecoin is very close mimics the price of bitcoin. Although the price of bitcoin is higher than dogecoin, the movement of the two is similar, although not exact. And, although dogecoin had a bit of a break in May 2021, the general pattern of dogecoin is similar to that of other major cryptocurrencies.

Although it started as a joke, many traders have made a fortune thanks to dogecoin and take it very seriously today, similar to other currencies. It is currently the sixth largest cryptocurrency by market capitalization.

What has Elon Musk got to do with Dogecoin?

Elon Musk has an excessive influence on cryptocurrency prices, with a single tweet causing bitcoin or dogecoin to soar or fall in value. Musk is a die-hard fan of cryptocurrencies, especially dogecoin, and talks about it and writes about it regularly as if a fan were talking about his favorite sports team.

While I’m not as famous as Elon Musk, I have to admit I also jumped on the bandwagon.

Author Eric Rosenberg on Dogecoin
Author Eric Rosenberg tweets about dogecoin

Musk is far from an official representative of dogecoin, but has become a de facto spokesman and animator for the doge community. He went so far as to discuss his fondness for currency in an appearance at Saturday night live. But outside of the amount of dogecoin he owns, Musk is not an official part of Dogecoin.

How to buy Dogecoin

You can buy dogecoin through any major cryptocurrency exchange that supports the DOGE currency. This includes Coinbase, Gemini and eToro. You need a funded cryptocurrency account to make the purchase.

You can keep dogecoin in your cryptocurrency exchange account or transfer it to an external cryptocurrency wallet. For example, Trezor and Ledger wallets allow you to securely store your dogecoin offline, where hackers are virtually unlikely to lose your currency, which has already happened in some cryptocurrency exchanges. Some exchanges, such as Gemini, also offer portfolios.

Comparison between Dogecoin and Bitcoin

Dogecoin works with the same core technology as Bitcoin. As discussed briefly above, blockchain technology allows for somewhat anonymous financial transactions through a public system.

Dogecoin is based on litecoin, which is based on bitcoin. So in many ways, Dogecoin is a kind of little brother of Bitcoin. However, with a market cap of $ 655 billion, bitcoin is worth about 20 times more than dogecoin as a whole.

The two currencies are highly correlated. This shows that many cryptography operators see them similarly. However, it is possible for one to go “to the moon” while the other to fall to zero. Only time will tell the future of these popular digital currencies.

Risks and Benefits of Dogecoin Trading

The author, Eric Rosenberg, shows a physical dogecoin that is worthless as a cryptocurrency.
The author, Eric Rosenberg, shows a dogecoin token that is just a souvenir, not worth a real cryptocurrency.

With dogecoin, there is a good chance that your investment will earn ten times more in a short period of time. But it could also go down to zero in the blink of an eye. It is extremely risky and extremely volatile. It is certainly riskier than Bitcoin and certainly riskier than a traditional stock market investment.

Dogecoin is a lot of fun, but it’s important to be careful and avoid making more money than you can afford to lose.

Is Dogecoin a good investment?

For most people, Dogecoin is no a good investment. If you decide to enter Dogecoin, proceed with caution and invest only a small amount of money to minimize the risk. Although I have a bit of dogecoin myself, it’s an extremely small part of my wallet and I wouldn’t bother too much if I ran out of value.

If you buy dogecoin as an investment, be prepared for HODL (cryptographic slang for, “Hold on dear life”), as you could have a wild ride ahead.

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