February 9, 2025
Reviews

Dogecoin (DOGE)

  • Price: $0.1153
  • Market cap: $16 billion

What is Dogecoin and How Does it Work?

Dogecoin is a cryptocurrency that started as a playful parody of Bitcoin — yes, it was created as a joke! However, thanks in part to a major endorsement from Tesla CEO Elon Musk, Dogecoin skyrocketed in popularity and value, becoming one of the most widely known digital currencies.

Here’s a closer look at what Dogecoin is, what it does, how it originated, and how you can buy it.

What is Dogecoin?

Dogecoin is one of thousands of cryptocurrencies that have emerged in recent years. Unlike many digital currencies created to solve specific financial problems, Dogecoin was designed as a lighthearted critique of the cryptocurrency world and the notion of buying digital assets that aren’t backed by anything tangible. Despite its humorous origins, Dogecoin has gained significant real-world value.

Key details about Dogecoin’s origin:

  • It was created in 2013 by software engineers Jackson Palmer and Billy Markus after Bitcoin’s rapid rise.
  • The “altcoin” was developed in just a couple of hours.
  • It’s based on the popular “Doge” meme featuring a Shiba Inu dog speaking in broken English.
  • Unlike Bitcoin, which has a finite supply, Dogecoin has no cap on the total number of coins that can be issued, underscoring its parody of the concept of “scarce” digital assets.

Despite its origins as a joke, Dogecoin has captured the attention of investors and speculators alike. It became especially popular among traders on platforms like Robinhood, and as of September 2022, the total market value of Dogecoin was around $8 billion.

As the Doge meme might say, “Much wow.”

What Can Dogecoin Be Used For?

Like other cryptocurrencies such as Bitcoin, Dogecoin can be used to transfer money between individuals, whether as payment for goods and services or simply to send cash. Transactions can be made semi-anonymously, with a public record kept on the blockchain but without needing a traditional intermediary like a bank.

Dogecoin runs on a decentralized network of computers that uses blockchain technology. The blockchain acts like a continuous receipt of all transactions, and the computer network verifies each transaction to ensure data accuracy. Once validated, the information is permanently recorded on the blockchain.

Where Do Dogecoins Come From?

Dogecoin, like many other cryptocurrencies, is “mined” by a decentralized network of computers. These computers perform complex mathematical calculations, and as they process transactions, they unlock new Dogecoins as a reward.

As of September 2022, there were about 132.7 billion Dogecoins in circulation, and new coins are generated every minute. Unlike Bitcoin, which has a hard limit on the total number of coins that can ever exist, Dogecoin has no maximum supply. However, new coins are limited to an annual issuance of 5 billion, which can continue indefinitely.

How to Buy Dogecoin

Dogecoin can be purchased through various platforms, and where you choose to buy it may depend on your goals:

  • Speculating on price: If you want to trade Dogecoin as a speculative asset, you can use online brokers like Robinhood, Webull, or eToro, which allow cryptocurrency trading. These platforms hold your investment for you.
  • Using or holding Dogecoin: If you intend to use Dogecoin for transactions or hold it long-term, you might prefer a cryptocurrency exchange like Coinbase or Binance.US. These exchanges allow you to take custody of the coins yourself, enabling you to send or spend them.
  • Adding protection: To further secure your Dogecoin, you may want to store it in a cryptocurrency wallet, which adds a layer of protection beyond what’s typically offered by exchanges.

Is Dogecoin a Good Investment?

Like most cryptocurrencies (excluding stablecoins), Dogecoin is not backed by any physical assets or cash flow. Its value is determined solely by what other people are willing to pay for it, making it highly speculative. In contrast, the value of stocks is tied to the performance of underlying businesses, which generate profits and cash flow. Dogecoin’s value relies on the hope that someone will be willing to pay more for it in the future, a concept often referred to as the “greater fool theory.”

For this reason, prominent investors like Warren Buffett and Charlie Munger advise against investing in cryptocurrencies, as they believe these assets are unlikely to hold long-term value.

That said, it’s still possible to make money trading Dogecoin, but it’s important to recognize that it is a speculative investment with no inherent backing.

Bottom Line

Traders can buy and sell Dogecoin through various platforms, or they can invest in companies that are helping to build the cryptocurrency ecosystem. By investing in the broader infrastructure of crypto, traders might benefit regardless of which specific digital currency succeeds.

If you decide to invest in Dogecoin or any cryptocurrency, it’s crucial to be aware of the risks. Many digital currencies are not backed by tangible assets, meaning you could lose your entire investment. It’s essential to only invest money you’re willing to lose and proceed with caution in the volatile world of crypto.