There has been a great deal of hype over Dogecoin, but what exactly is it?
In this article we dig down into what Dogecoin is, how it works, how to buy it, and if it is a good investment or not. Keep reading to learn more!
What is Dogecoin?
Before we get into how Dogecoin works and how to buy it, let’s first define what it is. Dogecoin is a Cryptocurrency, like Bitcoin or Ethereum, but it is different from the two. The coin was originally created by two software engineers, Billy Marcus and Jackson Palmer in 2013 as a joke for Crypto enthusiasts. Palmer branded the Cryptocurrency’s logo using a meme popular at the time that featured the misspelled word “doge” to describe a Shiba Inu dog.
However, it exploded in 2021 and became the fifth largest Cryptocurrency by market cap and gained more than 5,000%. Among its boosters is Tesla CEO Elon Musk, who called Dogecoin his favorite Cryptocurrency. Musk also named Dogecoin the “people’s Crypto,” and promised to plant a physical Dogecoin token on the moon.
How Does Dogecoin Work?
Dogecoin is a Cryptocurrency that runs on Blockchain technology, similarly to Bitcoin and Ethereum. Blockchain is a distributed, secure digital ledger that stores all transactions made using a decentralized digital currency. All holders carry an identical copy of the Dogecoin Blockchain ledger, which is frequently updated with all new transactions in the Cryptocurrency. Like other Cryptocurrencies, Dogecoin’s Blockchain network uses cryptography to keep transactions secure. People called miners use computers to solve complex mathematical equations in order to process transactions and record them on the Dogecoin Blockchain, a so-called “proof of work” system. In exchange for processing transactions and supporting the Blockchain ledger, miners earn additional Dogecoin, which they can hold or sell on the open market.
Although Dogecoin may be used for payments and purchases, it is not an effective store of value. This is primarily because there is no lifetime cap on the number of Dogecoins that may be created by mining, meaning that the Cryptocurrency is highly inflationary. The Blockchain rewards miners for their work by creating millions of new Dogecoins every day, which makes it challenging for speculative price gains in Dogecoin to hold up over time.
How to Buy Dogecoin
You can buy Dogecoin on a Cryptocurrency exchange like Binance or Kraken. The exchanges require you to set up and fund an account with U.S. dollars or Cryptocurrency. You are then able to buy and exchange Cryptocurrencies, including Dogecoin. Note that Coinbase does not support purchases of Dogecoin.
Some online brokers, including Robinhood and TradeStation, also allow you to buy Dogecoin, in addition to conventional assets like stocks, mutual funds and bonds. They do not offer as many of the Cryptocurrencies as exchanges, but Dogecoin is usually available.
As with other Cryptocurrencies, once you have purchased Dogecoin, it is best to move your coins to a Crypto wallet. Wallets take many forms, from online services offered by exchanges like Coinbase (while you cannot buy Dogecoin on Coinbase, you can store it in your Coinbase wallet), to apps on your mobile device or a physical hard drive. The wallet is secured with a private password and since your coins are held outside of an exchange, there is an extra layer of protection against hacks.
Is Dogecoin a Good Investment?
Since there is no lifetime limit on the number of Dogecoins that can exist, and millions of new Dogecoins are released onto the markets daily, there is little incentive to hold the Cryptocurrency long term. Bitcoin continues to rise in value because of the system’s lifetime cap on the number of coins that can be created. The gains in Dogecoin that have been seen in 2021 may not be sustainable over the longer term.
Now that you know what Dogecoin is, how it works and how to buy it, as well as the investment value, it is time to decide whether it is the coin for you! Make sure to do your own research and learn more about the Cryptocurrency before investing any money into it!