Cryptocurrencies have emerged as the most prominent technological innovations for transforming the financial sector. The virtual currencies are based on blockchain technology and offer a decentralized approach to conducting financial transactions; you must have heard about multiple cryptocurrencies such as Bitcoin, Ethereum, and many other tokens. However, one of the popular additions among cryptocurrencies existing today is Dogecoin.
It is an open-source cryptocurrency developed on Dogecoin blockchain network. If you want to find out what is Dogecoin, then you need to learn about its working mechanism and benefits. The founders of Dogecoin created it as a decentralized cryptocurrency for facilitating instant payments. With the arrival of Bitcoin, many other digital currencies also made their way into the market. At the same time, altcoins like Dogecoin have also emerged to cater to the requirements of users in different application areas.
Interestingly, the origins of Dogecoin can be attributed to a joke or meme on social media. It was inspired by a viral meme with the image of a Shiba Inu dog doing funny activities. However, anyone who wants to learn Dogecoin would have to move beyond the viral meme that prompted the origins of the cryptocurrency. In addition, you must be curious about the utility of Dogecoin and its future. Let us learn more about the history of Dogecoin and its working mechanism.
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Understanding Dogecoin
As stated, Dogecoin emerged as a cryptocurrency due to the viral meme. However, almost every Dogecoin guide would help you understand that it has become an important addition to the cryptocurrency ecosystem. First of all, it was created as an alternative to avoid the time and cost-intensive transactions on Bitcoin blockchain.
Over the course of time, Dogecoin has garnered a massive community of supporters, particularly due to its mascot. The cute Shiba Inu is very hard to ignore, even for a crucial asset like cryptocurrency. In addition, Dogecoin has also gained popularity with an active community of investors, developers, and traders.
The answers to ‘What is Dogecoin’ also revolve around the fact that it is a decentralized cryptocurrency without any centralized ownership. It has been developed on codebase of Litecoin and also uses the Proof of Work consensus mechanism. The community of Dogecoin supporters use the cryptocurrency for trading and primarily as tips for viral social media content.
However, Dogecoin lost a significant share of its value after the crypto bubble burst in 2018. On the other hand, a strong community of supporters has helped the project maintain its relevance. Another important highlight in the fundamentals of Dogecoin is the fact that you can trade it on cryptocurrency exchanges or store it in their Dogecoin wallets or exchanges.
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Reason for Developing Dogecoin
The fundamental concepts of Dogecoin would be incomplete without learning about its origins. Who were the founders of Dogecoin, and why they invented such a cryptocurrency? Before you learn about Dogecoin future prospects, you must learn about its roots. Dogecoin was created in 2013 by Marcus and Jackson Palmer, who conceptualized the idea of Dogecoin as a joke.
The software engineers combined two prominent trends of 2013, the cryptocurrency revolution and the viral ‘doge’ meme with the Shiba Inu dog, to create a new cryptocurrency. Even if Bitcoin had started making waves in 2013, it was inaccessible to the general public. Therefore, the founders of Dogecoin created it with open-source software to help any individual view the source code.
The humble beginnings of Dogecoin paved the path for the rise of a new type of cryptocurrency that would have broader potential for mainstream adoption. If you want to know about Dogecoin mining now, then you must know that it has become a serious cryptocurrency along the ranks of other popular cryptocurrencies in the market.
Elon Musk is one of the prominent supporters of Dogecoin, and his tweet in favor of Dogecoin led to a formidable growth in its price in early 2021. In addition, Musk had also announced that his automobile company, Tesla, would accept Dogecoin as payment. The subsequent rise in support for Dogecoin led to its transformation from a meme coin to a major player in the crypto market.
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Working of Dogecoin
The next crucial aspect of a Dogecoin guide for beginners would focus on its working mechanism. It is a blockchain-based cryptocurrency with significant potential for driving change. Dogecoin is a new cryptocurrency that has been developed as a fork of Luckycoin, which is itself a fork of Litecoin. Interestingly, Litecoin is also a fork of the Bitcoin technology. Therefore, the working mechanism of Dogecoin is almost similar to that of Bitcoin.
The explanation for Dogecoin mining could provide a detailed impression of how it works. However, there is a slight change in the functioning of Bitcoin blockchain in Dogecoin. Contrary to the Proof of Work consensus in Bitcoin blockchain, Dogecoin utilizes an auxiliary Proof of Work mechanism. It implies that crypto miners could work on mining through other Proof of Work cryptocurrencies such as Litecoin and ensure mining of Dogecoin without any additional costs.
You can notice that the working of Dogecoin is almost similar to mining in other Proof of Work cryptocurrencies. Miners would have to compete against each other to solve complex mathematical problems and validate transactions quickly to earn coins. Miners could earn 10,000 Dogecoins for every block of Dogecoin they mine.
The working mechanism of Dogecoin transactions shows that you can learn Dogecoin easily if you know cryptocurrency fundamentals. Blockchain technology helps in recording Dogecoin transactions just like other cryptocurrencies, which makes them desirable. On the other hand, Dogecoin is different from other cryptocurrencies in different aspects. Here are the key highlights which establish the uniqueness of Dogecoin in the cryptocurrency ecosystem.
First of all, Dogecoin features a shorter block time or the time required for adding a new block of transactions to the blockchain. It offers shorter block time than popular cryptocurrencies such as Bitcoin and Ethereum, thereby ensuring faster confirmation of transactions.
People who search for a Dogecoin wallet must also know that Dogecoin has a lower market capitalization. It means that the trading volume of Dogecoin is less than that of Bitcoin or Ethereum. As a result, it could guarantee lesser volatility than the popular coins.
Another important aspect of the working mechanism of Dogecoin is the fact that it is fun and friendly. With an active and strong community, Dogecoin has found utility as an incentive for people who create viral social media content. In addition, Dogecoin has also emerged as a popular choice of payment for charitable causes.
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Do You Know about Mining and Supply of Dogecoin?
The introduction to ‘What is Dogecoin’ included brief overviews of its origins and working mechanism. However, it is also important to understand how mining works in Dogecoin and the variations in supply of the cryptocurrency. Proof of Work is a consensus mechanism that requires proof of the miner’s work in finding the answer to complicated mathematics puzzles.
The transaction information would be in the hashed form until users can give an acceptable answer to the network. People could not create a solution randomly by calculating on paper. For Proof of Work consensus, miners would have to use massive computing resources and electricity to find the solution.
The difference with Dogecoin mining emerges from the fact that it uses codebase of Litecoin. It is important to note that Litecoin does not leverage the SHA-256 hash function in the mining process. On the contrary, it uses Scrypt, which is an ASIC-resistant Proof of Work consensus algorithm.
Scrypt ensures that machines that have been tailored specifically for Bitcoin mining cannot compete with ordinary computing systems and GPUs used for mining Litecoin. It could help in creating an effective decentralized ecosystem for mining. However, the introduction of Application-Specific Integrated Circuits for Scrypt changed the equation.
Dogecoin embraced the Scrypt algorithm as a derivative of Litecoin and provided an easier approach to mining. The developers of Dogecoin shifted to the merged or auxiliary mining scheme that could enable Litecoin users to earn Dogecoin as a reward for their mining efforts. It helped in removing any possibility of rivalry with popular cryptocurrencies alongside reducing the concerns of security risks.
Now, the most important highlight for Dogecoin future is that there is no specific limit on the number of Dogecoins that can be produced. As of now, there are more than 100 billion Dogecoin in circulation. Without any upper limit on Dogecoin supply, users could spend the coin according to their wishes. Most important of all, it can help in preventing early adopters from gaining an unfair advantage.
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What is the Technology Used for Mining Dogecoin?
The interest in Dogecoin mining is a prominent highlight for every beginner interested in the meme-inspired cryptocurrency. Miners have to rely on hardware known as Dogeminer or a node in the Dogecoin blockchain for the mining process. It helps in performing the calculations for mathematical equations that help in verifying and validating transactions on the network. Miners can use three different approaches for mining. If you want to fill up your Dogecoin wallet, then you must rely on three distinct approaches such as solo mining, cloud mining, and mining pools.
Each approach has distinct implications for miners. For example, solo mining is all about individual efforts. Mining through mining pools involves groups of miners pooling their computing resources to increase the chances of faster validation of blocks that could help in earning block rewards quickly. The cloud mining approach requires miners to pay monthly or yearly subscriptions for an online data center that would carry the mining work on their behalf.
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Utility of Dogecoin
The utility of Dogecoin or the DOGE token is also an important aspect of any Dogecoin guide for beginners. DOGE tokens serve as a means of payment within the simple token economy. The most crucial detail about Dogecoin is the low transaction fees, which help in ensuring that it is a suitable form of payment.
Processing the transactions on the network gives you the opportunity to earn new Dogecoins, which makes the mining process more attractive to users. On the other hand, inflation of Dogecoin, alongside the low transaction fees, could lead to a loss of value. As a result, it is not reasonable to invest in Dogecoin as compared to other cryptocurrencies. The unlimited supply of Dogecoin leaves little incentive for holding the cryptocurrency for a long term.
At the same time, you could not ignore the uses of Dogecoin in other areas. Most of the resources to learn Dogecoin fundamentals would help you understand that many companies use Dogecoin as a form of payment for transactions. You can find restaurants, product retailers, and web hosting services using Dogecoin. Some examples of companies using Dogecoin include Prodigy, MonsterMeg, and Playhub Casino.
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What are the Advantages and Disadvantages of Dogecoin?
The advantages and disadvantages of Dogecoin are the important highlights that would determine the future of the cryptocurrency. With limited utility, Dogecoin future prospects depend on benefits like faster confirmation time and lower transaction fees. On top of it, Dogecoin has achieved broader levels of mainstream adoption within a limited time. Most important of all, Dogecoin has developed a strong community of devoted followers and creators. The low pricing of Dogecoin also removes the barriers to using the cryptocurrency.
On the other hand, you cannot ignore the limitations of Dogecoin. For example, Dogecoin mining does not offer promising rewards as it has a relatively low value. Dogecoin is an inflationary cryptocurrency that reduces the possibility of using Dogecoin as an investment. Furthermore, it has limited functionality without the use of smart contracts, which also affects security.
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Final Words
The introduction to Dogecoin showed that it has a lot of potential for changing the cryptocurrency landscape. One of the most noticeable aspects of the Dogecoin guide is the fact that it was created with inspiration from a viral meme. It showcases the potential for blending creativity and innovation to create new cryptocurrencies. However, the biggest problems with Dogecoin point to the lack of smart contract functionality and valuable functions. Learn more about cryptocurrencies to discover where Dogecoin would fit in the crypto landscape now.
