What is Dogecoin?
Dogecoin is a cryptocurrency, like Bitcoin or Ethereum—although it’s a very different animal than either of these popular coins. Dogecoin was originally created at least in part as a lighthearted joke for crypto enthusiasts and took its name from a once-popular meme. Despite this unusual origin story, it has exploded in popularity in 2021—as of writing, Dogecoin has become the fifth-largest cryptocurrency by market cap.
How Does Dogecoin Work?
Dogecoin is a cryptocurrency that runs on blockchain technology, similar 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 all 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 then hold or sell on the open market.
Interesting Facts About Dogecoin
Dogecoin is an open-source peer-to-peer digital currency popular among Shiba Inus around the world. The Shiba Inu is a Japanese breed of dog that has become popular as an online meme and is associated with Dogecoin. Dogecoin has one of the most active and largest communities in the cryptocurrency world. This group has banded together to support a variety of charitable endeavors and other ventures. Unlike Bitcoin, Dogecoin has no upper limit, which means there are actually more than 100 billion doge coins in circulation.
Things to consider before investing in Dogecoin
There are multiple things to consider before you invest in any cryptocurrency. Here are some key things to consider before investing in Dogecoin.
The first and foremost thing to note is Dogecoin’s high volatility. Dogecoin witnessed serious price fluctuations over the past few months as it rallied to an all-time high of around $0.70. However, soon after, it crashed to around $0.45. While Dogecoin has gained notable momentum with more people learning and investing in it, these investors also cash out when it spikes, thus crashing its price as a result.
Not just stocks but cryptocurrency can also be influenced by prominent personalities. Elon Musk, the self-appointed Dogefather, and community dubbed Dogecoin CEO, has repeatedly tweeted about the cryptocurrency. As a result, its prices spiked sharply a couple of times. It only stands to reason that if an individual can influence Dogecoin pricing, it could go either way.
While Musk has always shown support for the cryptocurrency, his recent appearance on Saturday Night Live (SNL) was expected to push its value near the $1 mark. However, that didn’t happen and in fact, Dogecoin fell sharply after his SNL appearance.
Playing with a bubble
The Dogecoin cryptocurrency can be seen as a bubble that crashes soon. However, not considering it as such will be more of an issue since its price fluctuates based on how many people are holding it, how many Dogecoins are in circulation, and how many are being added every day. If one checks out Dogecoin’s price graph, the general expectation will be that it will go up in the future but sadly, there’s nothing backing up that notion.
FOMO and the sheep mentality
With Dogecoin taking over social media and everyone talking about investing in it, there can be real Fear Of Missing Out or FOMO on a lucrative investment opportunity. But before that happens, it should be taken into account that not everyone is as successful as the person who became a millionaire banking their life savings on a transient trend.
Unlike stocks, one can use cryptocurrencies they’re holding to actually purchase something.