The Basics Of CryptoCurrency And What Drives Dogecoin Value
As the cryptocurrency market swells, Dogecoin stands out due to its accessibility rather than stability.
We’ve all cheered for our favorite sports teams, and rooted for likable characters in movies and shows. This shared experience binds people together. It let’s us celebrate shared victories and commiserate over disappointments. But how about money; could it do the same thing? Interestingly, the answer might be yes. Rising among the current cryptocurrency surge, the total Dogecoin value reveals it to be the underdog that’s winning the hearts of the masses.
I’m fairly new to the cryptocurrency “game”. But as I’ve become more familiar with how digital currency works, the varying and ever-changing cyber coins and tokens have given me even more to research. Among them, one has been particularly fascinating to watch: the Dogecoin. Here’s my take on digital money and what makes “doge” so interesting.
What is Cryptocurrency?
As you’ve likely observed by now, the crypto market is booming. With the likes of Elon Musk, Mark Cuban and Jeff Bezos joining the conversation, real credibility is being given to these once easily-dismissed bits of digital data. But that doesn’t necessarily make them easy to understand, so here’s a quick explanation of what cryptocurrency is. According to Wikipedia:
“A cryptocurrency, crypto-currency, crypto is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.”
In simpler terms, they are virtual currency that rely on really strong programming across multiple computer systems to ensure that each coin is unique and can be used for secure online transactions. Notably, their value is driven by their programming, unlike hard currency which is typically backed by stores of gold or other assets.
This may surprise you, but there are more than 7,000 cryptocurrencies worldwide today! A majority of these cryptos have only sparse following or trading volume. However, a growing handful are immensely popular among dedicated communities of backers and investors. But the numbers are trending upward. And despite any recent limited drops, nothing indicates the markets will stop growing anytime soon.
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Different Kinds of Crypto
If you’re like me, you’re probably wondering, why would the world need so many different kinds of cryptocurrency? Well, they all have slightly different uses, and as we’ll get into in a moment, some are slightly less “serious” than others. But in general, cryptocurrencies can be divided into four categories based on their functionality.
We’ll focus on the most famous crypto: Bitcoin. This serves one major basic function: transferring value from one party to another. Because Bitcoin has open source code, it has many spin-offs. The most notable are Litecoin and Dogecoin, which more-or-less serve the same function.
The next group of cryptocurrencies are programmable, which allows them to be used as the basis for applications like games and digital markets. The third type of cryptocurrencies are specially designed with the protection of the privacy of their users in mind. They claim to be “untraceable”; however, the transaction records are still available. (Otherwise, how could they be legitimate, right?) Finally, we get two tokens. These programs are built with smart contracts which serve many purposes, such as being sold to raise funds to build services, and may even be used as tickets for the services.
The basics of Crypto
If you are interested in learning more about Dogecoin and all these various types of crypto, then I suggest starting at Commodity.com. They have published a new guide to Dogecoin that explains:
- How to buy and trade Dogecoin
- Dogecoin vs. Bitcoin: what’s the difference?
- What drives the price of Dogecoin?
Why is Dogecoin so different?
As stated above, Dogecoin is a derivative of Bitcoin’s programming. In fact, it is almost an exact copy; however, it does have two very significant differences that are worth discussing.
Firstly, Bitcoin has a mining cap of only 21 million coins. Thus, it has built-in scarcity which drives up it’s value, much like the way that gold or diamonds are valuable because they are scarce. On the other hand, Dogecoin has no cap whatsoever. In fact, every minute of every day, ‘doge miners’ issue 10,000 more dogecoin. That equates to nearly 15 million doge per day or over 5 billion doge per year. Therefore, quantity and popularity rather than rarity drive the global dogecoin value.
These cryptocurrencies also vary greatly in their original purpose. Satoshi Nakamoto created Bitcoin specifically to provide the world with a viable alternative to the current financial system. He wished to upend the monetary manipulation of the existing institutions, and offer an alternative path to personal prosperity to everyone. Conversely, Billy Markus and Jackson Palmer created Dogecoin as a joke. You read that correctly. Dogecoin was not meant to be taken seriously. It was invented in order to spread joy.
Aha! So now we get to the heart of the difference between Dogecoin and Bitcoin (and all the others)…
Who Let the Doge Out?
By understanding the origin of Dogecoin, we understand why it is so popular. If you didn’t already know, this cryptocurrency gets its name from the popular 2010 Shiba Inu ‘doge’ meme. Memes are packets of cultural information that pass from person to person. And by their very nature, they are meant to “go viral”. So just like the original doge meme, dogecoin was originally created simply to get some laughs.
Even from its onset, the creators of Dogecoin were not trying to revolutionize the monetary system nor even actually make a profit. What made -and still makes- doge so great is that it is available to everyone. It’s low price makes it affordable so that everybody can get in on the joke. This is one of the main reasons that it has outlasted many of the other altcoins; it easily attracts buyers due to low cost. In turn, the value of Dogecoin has remained steadily increasing, which allowed for the sponsorship of the Jamaican Bobsled Team in 2014, as well as a NASCAR driver shortly thereafter.
If you like the social aspect of memes, then you’ll love our “Hangin’ Out” series which is dedicated to sharing good times with good friends.
Inspecting Dogecoin closely allows us to learn a lot about the interplay of technology, culture and economics. As stated, Bitcoin and many other cryptocurrencies are used in many different ways. Importantly, most are adopted as a secure hedge against political and economic uncertainty. Dogecoin, however, is a meme that many people add to their digital wallet simply because they think it’s funny. To own Dogecoin is to participate in a culture.
Should I Invest in Dogecoin?
All the above shows that Dogecoin is mainly a cultural product and social phenomenon. It gives people a sense of belonging. It can also give those same “small voice” power, as demonstrated by the recent surge in doge trading and the push to reach a $1 conversion rate. However, that isn’t to say it doesn’t have strong financial potential. Those sports sponsorships were not cheap. Even more recently, Musk announced that he intends to use Dogecoin to fund a mission to the moon.
At the time of writing this article, Dogecoin was trading at nearly $0.49 per coin, with a total market value of ~$63 billion. Regardless of who you are, that’s a lot of money. So obviously, Elon and others are betting on this to continue increasing.
I seriously wonder whether an infinitely-sourced resource such as Dogecoin can retain substantial per-unit value indefinitely. Professional financial experts are saying it is a risky investment and the bubble is due to burst at some point. But I have several friends who have already made decent profits in just a few month. So my advice is: anybody interested in investing should get in on the action while the getting is good, and before the market crashes. Since the cost is low, so is the risk. At the very least, it’ll give you the taste of the crypto craze.
The Last Byte
Although other crypto-coins may provide more long-term stability, Dogecoin’s virality shows that memecoins can move markets. And its mass popularity, especially among the humor-loving and socially-connected elite, will keep me watching with my popcorn ready. I may even go buy some now, too, because who wants to be left out of the fun?!
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