Mag Dump Meme Do It Again

From Bitcoin to Ethereum and Litecoin to Tether, at that place are now over iv,000 cryptocurrencies in circulation. Dogecoin, a then-called meme cryptocurrency, began as a joke but information technology is now mined at a rate of 10,000 new coins every infinitesimal.

Dogecoin is one of a number of cryptocurrencies that accept hit the headlines in contempo months, gaining a lot of attention considering of both its price rises and its uniqueness as a 'meme cryptocurrency' with a cult following. It has a market capitalisation of around $44 billion, making it the sixth largest cryptocurrency and the 475^th largest asset in the globe (as of 10 June 2021).

The price of Dogecoin has appreciated dramatically since May 2020 (run into Figure 1), but it remains a relatively cheap coin with a very large supply. But what exactly is information technology – and does it have any value?

Figure 1: Price of Dogecoin

Source: CoinMarketCap

What is Dogecoin?

Dogecoin is a cryptocurrency that began as a joke, taking its name and logo from a meme of a Shiba Inu canis familiaris that became popular online in 2013. It was founded past Jackson Palmer – a software engineer working for Adobe – although he has since walked away from the project.

Palmer had 2 tabs open side-by-side on his computer – ane was CoinMarketCap (an aggregator of data on cryptocurrencies) and the other was a news article about the all-time meme of 2013, Doge. When switching between the tabs, Palmer had the idea to put the ii elements together and apace tweeted about a hot new cryptocurrency called Dogecoin and bought the website domain.

Shortly afterwards, IBM programmer Billy Markus reached out to Palmer via Twitter asking him if he would exist willing to create an actual Dogecoin cryptocurrency and it was officially launched on half dozen December 2013. On 25 December 2013, multiple Dogecoin wallets were hacked merely the Dogecoin community came together and refunded affected users. This marked the first of many large-calibration initiatives by the Dogecoin customs.

Dogecoin is primarily used for tipping users on Reddit and Twitter, simply it is likewise accepted as a method of payment past a few dozen merchants. It can be used to purchase food, household supplies and even website domains. But it was primarily created equally an endeavor to break the stigma surrounding cryptocurrencies, which carried negative connotations at the time. Palmer likewise introduced it every bit an alternative to the greed he saw in the cryptocurrency community and as such, Dogecoin is designed to be unattractive to investors past keeping a permanently low value due to its mining algorithm.

How does it work?

Dogecoin is a version of Luckycoin (at present defunct), which itself is a 'fork' of Litecoin (which is also a fork of Bitcoin). A fork happens when a blockchain diverges into two potential paths and tin can lead to a complete change in protocol and eventually a completely new cryptocurrency. For example, in 2017, Bitcoin Cash was created after a hard fork in the Bitcoin blockchain.

The Dogecoin blockchain can process effectually 30 transactions per second, which is much college than Bitcoin. It uses a proof of work consensus algorithm called Auxiliary Proof of Work, which allows those who mine other proof of piece of work cryptocurrencies (primarily Litecoin) simultaneously to mine DOGE at no additional cost. This procedure is known as merged mining.

Dogecoin's initial block rewards were designed to be random and vary betwixt zero and i 1000000 DOGE and this continued until information technology reached a supply of 100 billion, which occurred in Feb 2018. Since so, each mined cake yields a reward of 10,000 DOGE.

One block is mined every minute and Dogecoin has no supply cap. Palmer has stated that this was a mistake, and that the supply cap should have been set at 100 billion. It was left 'unfixed' on purpose as it keeps the price of DOGE depression.

Like Litecoin, Dogecoin uses Scrypt technology, which has lower hashrates (a measure of computational power per second) and uses less energy than Bitcoin's SHA-256 mining algorithm. Overall, Dogecoin is quite different from Bitcoin, which has a supply cap of 21 million coins, of which over xviii.5 1000000 accept already been mined.

Customs and backers

The Dogecoin Foundation is a not-profit corporation registered in the US state of Colorado, and was created to facilitate the philanthropic initiatives of the community. Back in 2014, the foundation sponsored the Jamaican bobsled team so they could compete at the Sochi Wintertime Olympics and so sponsored NASCAR driver Josh Wise who sported the icon on his machine and jacket at the 2014 Talladega All-Star race. They also sponsored Doge4Water, a project that successfully funded the creation of a clean h2o well in Kenya.

Source: Reddit

Reddit threads proclaim Dogecoin's value as a new global currency and Tesla chief executive Elon Musk commented that 'Dogecoin was made as a joke to brand fun of cryptocurrencies, but fate loves irony. The most ironic outcome would be that Dogecoin becomes the currency of Earth in the time to come.' Musk regularly tweets about cryptocurrencies and his recent tweet criticising the energy usage of Bitcoin corresponded to a 30% autumn in its value.

But he remains more positive about Dogecoin, with his tweet stating that he is working with its developers to ameliorate the network causing a surge in toll – as did his tweet asking followers whether they want Tesla to accept Dogecoin.

Dogecoin thus has stiff bankroll and the recent rise in the prices of meme currencies and shares such as GameStop shows that large groups of small investors can move markets.

Does Dogecoin have any value?

Similar all cryptocurrencies, Doge has no cardinal value, and some debate it has no reason to have any. Jeffrey Halley, a senior market annotator at Oanda Asia Pacific Pte., a platform for trading traditional currencies, is quoted as saying: 'Dogecoin has no apparent commercial or investment employ other than every bit a conduit for speculative mania and the endeavour to brand a cadet. I suspect much of its appeal lies in the fact that it is very, very inexpensive to buy and sell, as opposed to $60,000 for Bitcoin, making it much more outgoing to a retail trader who fancies a flutter.'

The low nominal price may have a psychological effect on investors like 'penny stocks' practice, but whether you put $1,000 in Dogecoin or Bitcoin, you are risking the same corporeality. Curtis Ting, managing manager for Europe at crypto exchange Kraken, suggests that investors buy Dogecoin for the memes equally much equally for the money, stating: 'investors buy Dogecoin to participate in a self-deprecating joke well-nigh their inability to invest wisely, which keeps going as the price of an individual Dogecoin continues to appreciate.'

The huge fluctuations in price look a lot like a 'pump and dump' scheme, where users jack up the price by focusing attention on a inexpensive asset, encouraging investors to buy and and so dumping the coin and leaving backside the investors who are besides slow or not savvy enough. Further, the ownerships of Dogecoin seems to be concentrated in relatively few anonymous easily, so information technology may not take much to go the price moving in either direction.

The hereafter

What the futurity holds for Dogecoin, never mind other cryptocurrencies, is a guessing game. The big problem with the cryptocurrency infinite is the polarisation of stance – commentators, bloggers and YouTubers are either crypto haters or 'moonboys' (believing that Bitcoin and other cryptocurrencies will go to the moon).

But the uptick in attention is part of a wider phenomenon of investors piling into speculative assets. Société Générale SA's global head of quantitative strategy, Andrew Lapthorne, has cited Dogecoin every bit an example of 'an increasingly big number of weird and wonderful signs of market excess.' Indeed, over 50 meme cryptocurrencies are now listed on CoinMarketCap, documenting their rise to prominence.

Like all cryptocurrencies, the greatest inhibitor to its growth is the inability to use information technology for transactions. Yet the specific upshot for meme cryptocurrencies, as opposed to other cryptocurrencies, is that their usage relies somewhat on users being attracted to the meme. If investors lose interest in the meme, so the price will collapse and Dogecoin will be worthless.

Merely 1 matter is for certain: Dogecoin is one of the nearly speculative and volatile cryptocurrencies today.

Where can I find out more?

Are Bitcoin and other digital currencies the futurity of money? Will Quinn explains what cryptocurrencies are and whether they will be the coin of the futurity.
After GameStop, the ascension of Dogecoin shows us how memes can motility markets.
Dogecoin actually is man's all-time friend.
Dogecoin's record-breaking ascension shoots 'joke' cryptocurrency to wider attention.

Who are experts on this question?

Carol Alexander, University of Sussex
Michael Dowling, Dublin City University
Klaus Grobys, Academy of Vaasa
Brian Lucey, Trinity College Dublin
Larisa Yarovaya, University of Southampton
Andrew Urquhart, ICMA Centre, Henley Business organisation School, University of Reading

Writer: Andrew Urquhart

Photo of a Dogecoin cryptocurrency medallion by Forextime.com from Flickr

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Source: https://www.economicsobservatory.com/dogecoin-what-is-it-and-does-it-have-any-value