What is Dogecoin? Learn More About the Dogecoin Crypto
You’ve likely heard of the Dogecoin crypto at this point. The cryptocurrency that was originally considered a joke and became a famous currency – Yes, that’s Dogecoin.
Dogecoin wasn’t just a meme or even completely a joke. It’s got its own dedicated blockchain and proof of work system, just like any cryptocurrency, and has maintained its position in the top 20 cryptocurrencies since its launch.
Often, Dogecoin can be found in the top 10 cryptocurrencies – though its value usually lags far behind better-known and more serious or concrete currencies like Bitcoin and Ethereum.
In this article, we'll look into Dogecoin in more detail, from its meme origins to the currency's current performance and projections of how it's forecasted to perform in the future.
Please note, Admirals only offers cryptocurrency CFDs (Contract For Difference) and the opinions expressed are those of the author.
Table of Contents
Introduction: What is Dogecoin?
Even though you’ve probably heard of Dogecoin, it’s still important to learn what is Dogecoin, and what it isn’t. Knowing that there is a currency connected to a dog meme is one thing, but let’s get a little more detailed.
Dogecoin was first introduced back in 2013, by founders Billy Markus and Jackson Palmer, and its name is a reference to the then-popular doge meme of a Shibu Inu dog’s face superimposed over a sun with thought bubbles surrounding the dog.
While the heyday of the doge meme is long past, Dogecoin turned into a serious competitor in the crypto market, much to the surprise of its founders – and the public.
Like many currencies, Dogecoin is based on open-source Litecoin software.
A lot of what’s made Dogecoin work is its appeal to the kind of people who are interested in crypto (including its irreverent name and origin) and its lower barrier to entry compared with other popular cryptocurrencies.
But origins aside, the details about this cryptocurrency and its long- and short-term potential lie in its blockchain and how the coin works. So, let's take a closer look at the details.
How Does Dogecoin Work?
Now that we know doge, let’s talk about how Dogecoin works. Dogecoin is, in large part, similar to Bitcoin in how it works. Like Bitcoin, Dogecoin owns its own blockchain, and miners use computers to solve complex problems that generate additional Dogecoins when completed.
Like many cryptocurrencies, the people who use their computer power to mine Dogecoin, or to support the network by tracking and logging transactions, are rewarded with a small amount of additional Dogecoin for their efforts.
Once Dogecoin crypto is created or earned, it can be traded freely on the blockchain.
There are some important differences under all the similarities, however. Even though Dogecoin uses a very similar blockchain and proof of work system to Bitcoin, the process of creating Dogecoins is much simpler and can be completed much faster than Bitcoin.
Additionally, unlike Bitcoin, there is no limit to the number of Dogecoin that can exist. That means that Dogecoin is more likely to be an inflationary coin, and that’s by design.
The value of an individual Dogecoin can (and sometimes does) go down when the availability of the coin goes up, which puts some limits on the potential value a single Dogecoin can reach.
Dogecoin's all-time highest value (so far) was approximately, $0.68, and that price was only maintained at the very height of the coin’s popularity. Since then, the coin’s value dropped significantly but currently, at this time of writing, seems to be more stable.
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Can Dogecoin go to $1?
It’s technically possible for Dogecoin crypto to eventually reach a value of $1, but many analysts think it's unlikely, and that it will take years for the currency to reach that value if it ever does.
There are a lot of reasons why Dogecoin is unlikely to ever reach the $1 mark. For one thing, the coin has yet to reach the same level of popularity or the same trading density as other more robust and popular cryptocurrency options.
While Dogecoin is a big player in the world of cryptocurrency, it's still competing with other well-known names like Bitcoin and Ethereum, and many investors are more likely to choose the better-known and less meme-able alternatives.
Additionally, Dogecoin is designed to be inflationary. The lack of a limit on the number of Dogecoin that could be created, in theory, without other price control measures means that the value of any individual Dogecoin is likely to go down, even if Dogecoin gets a larger market share and gains in popularity.
There also aren't many features of Dogecoin that would make the currency stand out for its uniqueness. Its origin story and connection to a popular meme are the coin's greatest claims to fame, unlike other currencies that offer unique transaction models or which work to reduce the environmental burden of crypto.
That lack of unique features means that investors looking for a new or more exciting form of cryptocurrency are more likely to consider new crypto offerings than Dogecoin.
Everyone is looking for the next Bitcoin, but Dogecoin is just too much of a Bitcoin clone to earn additional value for its innovation.
Is the Dogecoin Crypto a Good Investment?
Dogecoin is a risky investment in a lot of ways. The question of whether or not it is a good investment is also completely subjective and will vary depending on the trader.
Mining Dogecoin is an option since it's a currency you can create more easily than its higher-valued competitors, but with the volatile value of the currency and its tendency to have high rates of inflation for a cryptocurrency is likely to keep the value of Dogecoin about where it is now.
Instead of investment prospects, Dogecoin is often used as a way to give people small tips on the internet, or as a form of exchange between acquaintances and friends in online communities.
What Can Dogecoin Be Used For?
Currently, Dogecoin is mostly used online in crypto communities and on sites like Reddit and Twitter. It can also be used for some purchases, but only with retailers that accept Dogecoin as a currency.
Dogecoin is also actively traded, so an experienced crypto trader might be able to turn a profit by when they trade Dogecoin, which we’ll discuss more later on.
It’s important to know that learning how to trade Dogecoin effectively is critical. Simply waiting for favourable prices might not be enough to make a Dogecoin trade profitable.
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Advantages and Disadvantages of the Dogecoin Crypto
Every currency, including cryptocurrencies, has its own advantages and disadvantages.
Here are some of the core advantages and disadvantages you should consider if you’re thinking about trading Dogecoin.
- Growing Community: While Dogecoin’s popularity has declined somewhat since Elon Musk was praising the currency, it does enjoy a growing and diverse community. Assuming demand continues to grow, that will help keep the price steady and may even increase Dogecoin’s value.
- Easier To Earn: Since mining, your own Dogecoin is easier and faster than mining Bitcoin, making it a much easier currency to get into. You can also earn significantly more Dogecoin mining than you can expect to earn from crypto faucets for other currencies.
- Early Crypto Offering: While Dogecoin isn't as different from other currencies these days, the truth is that its 2013 release makes it one of the first mainstream currencies, and its early innovations have made the currency more interesting to some traders and investors.
- No Supply Cap: The lack of a limit on the number of Dogecoin in circulation might have been innovative, but it's also one of the biggest weaknesses keeping the currency's value low. Its inflationary nature means that investors don't expect the coin's value to grow much over time, limiting opportunities to profit.
- Limited Technical Support: Dogecoin has a significantly smaller team than Ethereum, Bitcoin, and other major cryptocurrencies, and hasn't been updated or seen any major changes since 2015. On one hand, that offers investors some stability, on the other hand, it means that it can be hard to get help if something goes wrong with your Dogecoin wallet.
- Pump and Dump Prone: Lots of cryptocurrencies are vulnerable to ‘pump and dump’ schemes, and it’s far from a new strategy. Unfortunately, the origin of Dogecoin and its connection to meme culture have made it a particularly popular target for those who apply this strategy.
Can You Trade the Dogecoin Crypto?
You can trade Dogecoin, but there are some risks in doing so, as with any instrument trading.
It's important to learn how to trade Dogecoin before you start trading since it requires a different strategy than other trading assets or even other currencies and crypto.
Since the overall trend of Dogecoin is inflationary, holding onto the currency for too long, or selling at the wrong moment, can lead to significant losses.
The low overall value of Dogecoin also limits its direct trading potential.
However, both of those traits can be used to your advantage if you choose to trade Dogecoin CFDs instead of trading the currency itself.
Trading crypto CFDs (Contracts For Difference) with Dogecoin can be a trading option because the volatility within overarching trends means that you can potentially profit on a significant difference in price within a relatively short period. You can also trade Dogecoin in both directions, whether the price is increasing or decreasing.
Additionally, since you aren’t actually assuming ownership of any Dogecoin for trading purposes, risk management is different with CFDs.
Of course, there are still some risks as with any trade. It’s also important to understand that trading CFDs comes with many risks, as they are complex derivative instruments. It is also crucial to make sure you trade with a regulated broker (like Admirals), to ensure your funds are protected.
Where Will Dogecoin Be in 5 Years?
Despite a recent low-value trend, Dogecoin is expected to increase in value over the next 5 years and could see values reaching or exceeding the currency's current all-time-high values.
Looking slightly past 5 years, if Dogecoin is ever going to reach or exceed the $1 benchmark, it’s likely to happen around 2030, potentially earlier. Of course, at this point, you can only theorize on forecasted trends.
Remember, like any cryptocurrency forecasting, changes in market conditions, buyer interest, or the introduction of new highly competitive currencies could change the markets away from their predicted trends.
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