Dogecoin is a meme coin and may be the most unique one among dozens of mainstream currencies.
Preface
In May 2021, a managing director of Goldman Sachs made a fortune after investing in Dogecoin. After achieving financial freedom in this way, he decisively left Goldman Sachs, where he had worked for 14 years. This story is a microcosm of the growth of Dogecoin.
Dogecoin may be the most unique among dozens of mainstream coins. Since its creation, it has attracted countless fans with its unique humorous temperament. So, how was Dogecoin created and what is its prospect? What information behind Dogecoin you must know?
The birth of Dogecoin: “humble” and “rebellious”
Dogecoin was born as a joke. If Bitcoin is a rebellion against the traditional financial system, then Dogecoin is a rebellion against Bitcoin and the entire crypto market.
The story of Dogecoin began in 2013, when the price of Bitcoin had just experienced a round of rise. In 2010, 10,000 Bitcoins were only enough to exchange for two $25 pizzas, but in 2013, the price of Bitcoin had reached hundreds of dollars per coin. On December 4, the price of Bitcoin even reached a historical high of $1,147, exceeding the price of gold per ounce for the first time. Bitcoin became synonymous with getting rich overnight, and made countless speculators jealous. At the same time, a large number of "copycat coin" projects with no technical content were created by simply copying the Bitcoin source code, and were hastily listed on major exchanges to make money.
In order to satirize this absurd phenomenon, Jackson Palmer, a marketing specialist in Adobe Sydney Marketing Department, combined the then popular Doge Meme to design a gold coin logo with Doge printed on it, and tweeted, "Invest in Dogecoin, I'm sure this is the next hot spot" (this tweet has been deleted). His words were seen by IBM engineer Billy Markus, and the two hit it off on this funny idea. Markus completed all the programming work based on the Litecoin code in just 3 hours, and Dogecoin was born.
(Left: The dog head mocking face emoticon became popular on Reddit in 2013. Its prototype is a Shiba Inu named Kabosu, who is now 16 years old)
Image source: Gate.io
Markus' work on the Dogecoin code was very simple, basically copying and pasting, and searching and replacing. He changed the concept of "mining" in the Bitcoin code to "digging" (dig), which is more suitable for Dogecoin, and modified several parameters and changed the font to be more lively. This is all the technical innovation of Dogecoin.
In terms of consensus mechanism, Dogecoin uses a PoW mechanism similar to Bitcoin, but does not use the SHA-256 algorithm of Bitcoin or Litecoin, but uses the Scrypt algorithm, and the mining difficulty is greatly reduced. Compared with Bitcoin, which has a very limited total amount, Dogecoin has a faster block generation and no upper limit on issuance. Bitcoin's block generation time is about 10 minutes, and the initial block reward is 50 coins, which is halved every four years. The final issuance will reach 21 million coins in 2140; Dogecoin generates blocks once a minute, and the initial block reward is 1 million coins. The reward decreases every 100,000 blocks and eventually stabilizes at 10,000 coins. At present, the total amount of Dogecoin on the market is about 135 billion, and about 5 billion coins are issued each year. As the total issuance of Dogecoin increases, the speed of new coin issuance will not change, which means that the inflation rate of Dogecoin will gradually decrease, from about 4% at present, to about 3% by 2027, and about 2% by 2035.
Dogecoin’s community attributes: “tip token” on Reddit
The huge total issuance makes Dogecoin very cheap and the entry threshold is extremely low. For a long time after its birth, the price of Dogecoin has been close to zero, and people only need to spend a little money to hold a large number of Dogecoin. In addition, the transaction fee on the chain of Dogecoin is also extremely low. As a token "born for fun", Dogecoin has been welcomed by netizens after it was launched in 2013. Its official website Dogecoin.com received 1 million hits within one month of its launch.
On Reddit, a gathering place for grassroots culture in the United States, someone has written a "tip robot" that uses Dogecoin to reward. When you are satisfied with a piece of content, you can ask this Dogebot to reward the author with a few Dogecoins (the current price is about $0.0005 per coin). This interactive method is lively, interesting, and ritualistic, and it does not cost much, so it quickly became popular on Reddit and several other social media. In addition, Dogecoin is also used for some public welfare purposes. In 2014, the Jamaican bobsleigh team qualified for the Winter Olympics for the first time, but was unable to participate due to lack of funds. For this reason, Palmer and community members launched a Dogecoin crowdfunding campaign, and eventually raised 26 million Dogecoins to help the Jamaican team successfully participate in the competition.
Image source: reddit/dogecoin
Dogecoin has gained a lot of popularity due to its grassroots nature, but due to its low price, the long-term value of Dogecoin is not very optimistic. Dogecoin seems to be only regarded as a "tip token" used to reward others on Reddit and Twitch, and has no more value. Even its founders do not seem to have much expectations for Dogecoin. The two founders not only neglected to manage the community and rarely updated the code, but also sold their own tokens around 2015, gradually fading from everyone's sight.
But what happened later will probably make them regret it. In 2015, Markus, one of the founders of Dogecoin, sold his Dogecoins because he lost his job and bought a second-hand Honda sedan. If he had held on to these Dogecoins until 2021, the value of these tokens would have reached tens of millions of dollars.
Musk supports Dogecoin: Convincing people with its growth
Before 2021, the price of Dogecoin had been tepid. After entering 2021, the price of Dogecoin increased dozens of times in a few months and reached a historical high of $0.68 on May 7. This almost crazy rise is inseparable from the support of a "big boss", that is, Tesla CEO, the world's richest man, and the godfather of Dogecoin - Elon Musk.
Figure: coinmarketcap
At the beginning of 2021, a large number of retail investors in the United States gathered under the banner of "protecting GameStop" and bought a large number of GME stocks to short Wall Street, causing several financial institutions to lose nearly 10 billion US dollars, and even forcing brokers such as Robinhood to announce restrictions on the purchase of related stocks. Perhaps having tasted the sweetness of this "victory of the common people", American retail investors have set their sights on the next target: Dogecoin. Many Reddit users left messages on r/wallstreetbets, saying that Dogecoin will be the next GME, and said they will hold Dogecoin until its price reaches $1. The price of Dogecoin also rose in response, rising nearly 10 times in 24 hours. After that, Musk's joining brought the carnival to a climax.
Dogecoin and Musk were first linked on April Fools' Day in 2019, when the Dogecoin community launched a spoof vote on Twitter, inviting netizens to select the CEO of Dogecoin. As a result, Musk lived up to expectations and defeated Ethereum founder Vitalik, Litecoin founder Charlie Leed and others to become the CEO of Dogecoin recognized by netizens. Musk himself also responded to the vote and changed his Twitter profile to "Former CEO of Dogecoin." Since 2021, he has frequently spoken on Twitter, either explicitly or implicitly supporting Dogecoin.
On January 29, 2021, Musk posted a spoof magazine cover called "DOGUE" on Twitter, and then the price of Dogecoin rose to $0.05; on February 4, he praised Dogecoin as "the people's cryptocurrency" and posted a photoshopped picture of Doge, paying tribute to the classic scene in the movie (The Lion King). On the same day, the price of Dogecoin reached $0.08; on May 10, Musk called Dogecoin a "hustle" on a variety show, which caused the price of Dogecoin to fall 34% in a single day...
Image source: Twitter @elonmusk
During that time, Musk's tweets had a huge influence on Dogecoin and the entire crypto market. Once the price of Dogecoin fluctuated, many people would first look for answers under Musk's tweets. The market value of Dogecoin has been rising all the way, and it once became the fourth largest cryptocurrency in the world. Dogecoin has also spawned a series of meme coins such as SHIB (Shiba Inu coin) and PIG (pig coin), and the concept of "coin zoo" was unique. Musk himself also became the veritable spiritual leader of the Dogecoin community in this process.
Now that the market is a little cold, although Musk's influence on the price of Dogecoin has declined, he still occasionally performs as the "Godfather of Dogecoin", for example, claiming that SpaceX and Tesla will accept Dogecoin payments at some point. Regardless of whether what he said is sincere, hype, or just a joke, objectively speaking, there are still many problems for Dogecoin to truly become the "native currency of the Internet" or the "currency of the people."
The Risks of Dogecoin: A Victory for the People?
Celebrity effect, market sentiment, community pursuit, all these pushed Dogecoin to where it is now. Some people think that what Musk did was to speak for the weak, unite the grassroots forces, build community consensus, and rebel against the Wall Street elite. But unlike the GME incident, there is no counterparty like Citron Research in the Dogecoin market. This makes the situation of Dogecoin last year look more like a so-called "pump-and-dump".
If Dogecoin wants to become a "native currency of the Internet", it still has not done enough in terms of decentralization and scalability. From the perspective of node distribution, the number of Dogecoin nodes is currently around 1,100, of which 45% are located in the United States; in contrast, the number of Bitcoin nodes worldwide has reached 7,500. From the perspective of token distribution, the degree of decentralization of Dogecoin is even less optimistic. According to a report released by Chainalysis, an on-chain analysis agency in August 2021, 82% of the total supply of Dogecoin (106 billion) is held by 535 entities, of which 31 entities holding the currency for between six months and two years hold a total of 37 billion Dogecoin. This makes the actual on-chain liquidity and transaction depth of Dogecoin very limited, and the price is more susceptible to manipulation. In terms of scalability, the block size of Dogecoin is consistent with Bitcoin at 1MB. Considering its block speed of once a minute, the TPS of Dogecoin is about 60, which is far less than traditional payment methods such as Visa.
Image: Chainalysis
Bitcoin’s positioning as “digital gold” has been deeply rooted in people’s minds, which is the basis of people’s consensus on Bitcoin. As the largest meme coin, Dogecoin does not support smart contracts, and its functions are still limited to simple applications such as rewards, with limited value imagination. Once the tide recedes, this value consensus of Dogecoin is also at risk of disappearing. In fact, many of the various animal coins that were popular in the “coin zoo” last year are now on the verge of zero.
Conclusion
Since its birth in 2013, Dogecoin has gone through bull and bear markets several times and has been with us for many years. Looking back at the introduction on the Dogecoin official website, Dogecoin wants to create a "cryptocurrency loved by Shiba Inus all over the world." We recognize the rebellious and grassroots spirit behind Dogecoin, and appreciate the original intention of the Dogecoin community to pay attention to public welfare and the weak.
The story of Dogecoin is far from over. Please pay attention to Gate Academy, we will continue to bring you more popular science knowledge of the cryptocurrency circle and in-depth analysis of projects.
