Doge is the native cryptocurrency of dogecoin, a parody cryptocurrency based on a viral internet meme of a Shiba Inu dog. At first, the crypto project was created purely as a mockery of other cryptocurrency projects that were being launched at the time.
The cryptocurrency is essentially a direct copy of Litecoin’s code and can be used to transfer value over the internet like all other digital assets. Doge was never designed to have any real-world utility beyond being a simple blockchain-based payment system; however, it quickly amassed a diehard community of fans who found and developed new use cases for it. Those included a third-party online tipping service, which led to doge becoming a leading tipping coin on social media platform Reddit and crowdfunding charitable causes using dogecoin.
Unlike the case with many other cryptocurrencies, the founders of dogecoin didn’t launch a public sale or “premine
” coins prior to the token’s launch. Instead, a total supply limit of 100 billion coins was set and anyone with a laptop or smartphone could begin mining doge immediately.
What was also unique about dogecoin was its block reward schedule. Copying another project’s schedule called LuckyCoin, doge block rewards were completely random, meaning miners could receive anything from 0 to 1 million doge for mining a single block. The range of coins available for block rewards was tapered every 100,000 blocks until 2014 when the project’s founders decided to change the block reward system to a fixed schedule. After that point, successful miners received 10,000 doge per block for their efforts.
Despite dogecoin’s immediate popularity among early crypto users, it experienced only two short-lived big price jumps during its first almost four years in the market. The first took place almost immediately after the token went live, when its price soared 1,061% in 15 days from $0.0002 to $0.0023. The second big hike took place in March 2017 during the early stages of a crypto bull market. Doge’s price rose by 1,494% to a peak of $0.004 – the highest price it had been since launching.
While many other digital assets continued to rise through the second quarter of 2017, doge prices fell below $0.001. It wasn’t until November 2017, when doge’s price found support again from bullish investors. By January 2018, doge’s price reached a peak of $0.018.
It took over three years for doge to reach that level again, after it experienced a prolonged period of low trading activity as hype for the token waned. Renewed interest spurred by Tesla CEO Elon Musk and other celebrity supporters at the start of 2021 sent doge’s price surging past its previous all-time high. The coin posted a 9,884% gain between January and May. By the end of the rally, doge had peaked at a new all-time high of $0.74.
How Dogecoin works
Dogecoin’s blockchain operates using a proof-of-work
consensus mechanism – the same system Bitcoin uses for network participants to reach an agreement on the data being added to the blockchain.
Dogecoin’s mining code was initially copied from another crypto project called LuckyCoin. LuckyCoin – a fork
of Litecoin, which is a fork of Bitcoin – featured a completely random block reward
schedule where miners could receive zero or potentially thousands of free coins for producing new blocks. Australian entrepreneur Jackson Palmer and American software engineer Billy Markus – the two creators of dogecoin – believed the randomness would annoy dogecoin miners and prevent them from actually using the token long term.
As the community grew around dogecoin, however, Palmer and Markus eventually decided to change
this to a fixed block reward schedule in March 2014. Blocks created under the new schedule contained 10,000 dogecoin, meaning 5.2 billion dogecoins are mined each year.
Dogecoin’s mining difficulty adjustment, which controls how hard or easy it is to find a block, is tweaked every block, unlike Bitcoin, which adjusts every 2,016 blocks.
In 2014, Litecoin creator Charlie Lee proposed
the idea of merge-mining dogecoin and litecoin. This idea of “merged mining
” meant miners would mine both dogecoin and litecoin simultaneously, helping to boost the network security of Dogecoin. Palmer and Markus accepted Lee’s proposal four months later. That resulted in Dogecoin producing faster blocks than Bitcoin (1 minute vs. 10 minutes), meaning doge transactions are significantly faster than Bitcoin transactions.
Risks of owning dogecoin
Despite all the celebrity endorsement, social media hype and internet tribe support, there are a number of associated risks with owning dogecoin that many investors may not be aware of.
• Unlimited supply: Unlike bitcoin and many other cryptocurrencies, dogecoin doesn’t have a fixed supply. That means prices aren’t supported by scarcity and rely on buyers constantly buying new dogecoin that enters circulation to maintain its value.
• High issuance rate: Dogecoin has a fixed block reward where successful miners receive 10,000 dogecoins every minute, compared with Bitcoin where miners receive 6.25 bitcoin every 10 minutes until the next halving of that rate occurs sometime in 2024. Ultimately, that means more dogecoin enters circulation in two days (28 million) than bitcoin’s total supply, which is set to top out at 21 million around the year 2140.
• Infrequent tech development: Dogecoin’s technology development is maintained by a team of voluntary developers who, until recently, had submitted relatively few code updates
and releases. Before the latest Dogecoin Core 1.14.3
release in February 2021, the last update was released in November 2019.
• Concentrated ownership: According to data from IntoTheBlock
, there are nine wallets that collectively hold more than 40% of all dogecoin, with one wallet holding 28%. That means that at any moment one of those large investors could cash out and send the price plummeting, or alternatively could use their huge position to manipulate the market. In contrast, there is only one active bitcoin wallet that holds just over 1% of the entire supply.
Key events and management
Dogecoin was created
by Palmer and Markus in 2013. In an interview
in 2019, Palmer said the idea for the project came from two internet tabs he had open on his computer at the time, including one with a viral internet meme of a Japanese Shiba Inu “doge” and the other with a list of the recently added cryptocurrency projects to the market.
Palmer jokingly coined the phrase “Dogecoin” to himself and took to his Twitter account to post the now-infamous line, “Investing in Dogecoin, pretty sure it’s the next big thing.” It immediately sparked interest from the meme-fuelled crypto community.
Dogecoin officially went live in December 2013, and became an instant hit with the community. After two weeks, the r/Dogecoin Reddit channel had over 19,000 users and the price of DOGE, the ticker symbol for the project’s official token, skyrocketed 300%, even though at the time China announced a ban
on payment companies from dealing with bitcoin.
In 2014, DogeTipBot
, a third-party tipping service, was created that interfaced with Reddit and allowed users to send dogecoin microtransactions to each other for posting favorable content. The service was instrumental in encouraging the early use of doge and also played a huge role in exposing non-crypto users to digital tokens for the first time.
By August 2014, DogeTipBot had become the crypto industry’s leading tipping service with more than 70,000
sign-ups. It ran for three years before it shut down
The same year, the Dogecoin community collectively donated over $170,000 in DOGE to more than a dozen charitable causes
, including a Kenyan clean water charity and an organization that supplied service dogs to blind children.
In 2015, Palmer and Markus stepped away from Dogecoin, calling the community “toxic”
and criticizing it for being “white male dominated” and marred by “buzzword-filled business ideas.” More recently, Markus said
the dogecoin market has been marked by “pump and dumping, rampant greed” and “hype without research”.
The project was left in the hands of volunteer developers from the dogecoin community, who infrequently
update the underlying code.
By January 2018, Dogecoin’s market capitalization broke the $1 billion milestone.
But it wasn’t until 2021 that dogecoin’s popularity went to a completely different level.
In January 2021, community members of a Reddit channel called “wallstreetbets
” orchestrated an attack on Wall Street hedge funds by pumping heavily shorted stocks. That social media-fueled stunt attracted global attention and an increasing number of new followers to the cause. The Reddit channel reportedly grew by 1.5 million users overnight and was so overwhelmed that it had to go offline temporarily
It wasn’t long before the rebellious horde of stock pumpers started to look for the next cool thing to pump, and dogecoin, being a decentralized cryptocurrency with a strong presence in internet pop culture, was an obvious choice. Within 24 hours, doge’s price surged
142% and later soared by another 200% after Musk joined the fray, sharing
a satirical image of “Dogue” magazine to his 54 million Twitter followers.
Since then, Musk – now the self-proclaimed “Dogefather” – has been responsible for pumping doge prices on several occasions
by sharing references and memes relating to the dog-themed cryptocurrency on his social media feed.