Dogecoin (DOGE): Network Architecture, Ecosystem, History, and Management

Overview

Dogecoin is an open-source, P2P cryptocurrency. It's regarded as an altcoin, launching in December 2013 and having a logo depicting a Shiba Inu dog. The technology underlying Dogecoin is derived from Litecoin. Other notable features include its unlimited supply and low price and its use of Scrypt,[1] a hashing algorithm utilized on some Proof-of-Work (PoW) blockchains.[2]

History

Dogecoin was first introduced on November 27, 2013 in an "X" post by Jackson Palmer, where he claimed he was "investing in Dogecoin." Back then, it was a made-up name, but it didn't stop Palmer from receiving replies asking him to make a real cryptocurrency from that. Following that, he started working on the project and registered Dogecoin.com. Billy Markus (co-creator) and Palmer were of the opinion "that cryptocurrency was being taken far too seriously and wasn’t much fun."

On December 6, 2013, Dogecoin's mainnet launched. The following year, Markus and Palmer stopped contributing to the project, claiming that the cryptocurrency sector “increasingly feels like a bunch of white libertarian bros sitting around hoping to get rich and coming up with half-baked, buzzword-filled business ideas.” After the original creators departed, a group of around 40 developers formed to continue the development and maintenance of the project. In June 2014, the original core team, along with some advisors, formed the Dogecoin Foundation. The purpose of this organization was to support the advocacy and development of Dogecoin, offer Dogecoin's trademark defense to stop abuse and fraud, and maintain and produce a trail map that outlines Dogecoin's future.[3] According to Pat White, Bitwave CEO, "DOGE was really started to poke fun at Bitcoin." In its earlier days, the community arranged various publicity stunts to increase Dogecoin's profile, where they collected funds to ensure the Jamaican Bobsleigh team's appearance at the 2014 Olympics and even sponsored a NASCAR driver.

In 2021, Dogecoin acquired a cult following on the WallStreetBets message board at Reddit, which was also the prime instigator of GameStop's January affair. Over there, enthusiasts made promises about propelling it "to the moon." However, that was prior to the subreddit banning discussions surrounding cryptocurrency, which was removed later on to include only Bitcoin and Ethereum.

By May 2021, it peaked at around $0.7, a striking contrast to its value at the year's start, which was under a penny. Elon Musk, Tesla's CEO, was partially responsible for such massive growth when he called it his favorite token. By mid-2021, Dogecoin was already polling among the leading tokens by market capitalization.

Since then, its value has fallen substantially, like many other tokens. But, unsurprisingly, when Elon Musk temporarily shifted the Twitter logo for Dogecoin, its price shot back up immediately, albeit briefly, placing it among the top ten tokens by market capitalization.[4]

Architecture and Ecosystem

Dogecoin operates using blockchain technology, enabling it to function without any central authorities, like other cryptocurrencies like Litecoin and Bitcoin. As alluded to earlier, Dogecoin uses a PoW consensus mechanism, which requires miners to solve complicated mathematical problems to secure the network and validate transactions. For their efforts, miners are given some DOGE, contributing to its circulation and security.

Simply put, Dogecoin's blockchain technology allows for a decentralized network that confirms transactions through community participation in the form of mining. Such an approach is what grants it that secure and trustless aspect, with the PoW system deterring malicious activities while ensuring the validity of the transactional ledger.

Mining

Mining Dogecoin involves solving cryptographic puzzles by using computer hardware. It's through this procedure that new transactions are added to the blockchain and the network is secured. And because miners are rewarded for their contributions, further investments and participation can be encouraged, which strengthens the network's decentralized infrastructure even more. Furthermore, Dogecoin mining is executable through several methods, like cloud mining, pool mining, and solo mining, each possessing its own considerations or advantages. Although solo mining provides complete ownership and control over rewards, substantial resources are needed. Pool mining blends resources for a higher likelihood of rewards, with participants sharing them. With cloud mining, you're offered a hands-off approach where mining power is rented from third parties.

As stated earlier, the Scrypt algorithm is used in mining, and this consumes less energy than the SHA-256 algorithm that Bitcoin uses, which makes it more accessible since specialized hardware is not required. But it's vital to note that mining profitability can vary largely depending on factors like existing prices, mining hardware efficiency, and electricity costs.[5]

DOGE Token

The DOGE token is currently valued at approximately $0.1068, implying a market capitalization and a fully diluted valuation of more than $15 billion. The daily trading volume is around $1.65 billion, and its total and circulating supply both come at over 144.18 billion tokens. As for the maximum supply, there is none given its inflationary nature.

DOGE’s previous all-time high was in mid-2021, like many cryptocurrencies, and lately it has seen a resurgence in interest, resulting in its price breaking that $0.2 mark and setting a high of around $0.21 in March 2024. So, from an investment perspective, it's doing well, at least for the time being, despite it being nowhere near its 2021 all-time high of $0.7. According to CoinMarketCap, the DOGE token is ranked 9 in terms of market capitalization and 7 in terms of daily trading volume.[6]

Interestingly enough, its website states, "Dogecoin does not need coin-burning marketing mechanisms that new tokens and other chains have attempted to implement to artificially inflate their prices."[7] There's not much in the way of tokenomics that we could find other than having a "diminished inflation rate," meaning that yearly issuance is fixed at 5 billion tokens. This also implies that every year, the inflation rate will decrease relative to its total supply.[8] As for utility, while it did start off as a joke, the team behind Dogecoin envisions its usage as a proper currency accessible in various outlets—cryptocurrencies and beyond—in the years to come, though that may yet take a while to fully realize. Still, besides digital money, it has already been used in various fundraising initiatives, like building wells in Kenya and more.[9]

So, if you're looking to trade with or buy this token, then its availability on countless exchanges, including well-known ones like Binance, Coinbase, Kraken, Uniswap, and more, shouldn't come as a surprise given its status. Popular trading pairs include BTC, ETH, USDT, and much more.

Additional Stats

Open interest for DOGE is more than $736 million.[10] The daily real volume is $1.32 billion.[11] For the term "Dogecoin," the Google Trends data chart suggests an overall rise in interest, and the current reading is at 37. Interest has generally been range bound, oscillating between 20 and 100. The last time it hit the top reading of 100 was in early March 2024. Note that these readings represent the interest over time over the previous 12 months.[12]

DOGE as an Investment

Historically, memecoins have been regarded as joke assets, usually favored by retailers and those who tend to be more speculative in their investing practices. The lack of seriousness, sheer volatility, and lack of fundamentals can put many off. However, that doesn't preclude them from actual investment strategies.

Some credible individuals have argued that "memecoins are long-tail prediction markets" or "memecoins are continuous attention speculation vehicles" to make justifications for their legitimate consideration. Although there may be some truth to these arguments, let's opt for a more data-driven approach instead and see what the figures have depicted so far.

Memecoins, due to their predictable role within later-stage speculation, are loosely correlated with the bigger, more "legit" tokens, and that can be gamed, historically speaking.

Cryptocurrency bull markets have one thing in common. They're led by BTC and popular smart contract platforms for various reasons, including risk-reward profiles, liquidity backdrops, tech breakthroughs, buyer personas, etc. The appreciation of such assets serves as social signals that cryptocurrency isn't quite as dead as a lot of people like to claim, which has kicked off a wave of interest for both building and speculation.

Speculation usually flows down that risk curve until meme tokens achieve cultural relevance, causing volcanic returns that leave investors of "legit" tokens in disbelief. This brings to mind how DOGE went from below a billion in market capitalization to almost $90 billion in approximately 100 days from January 2021 to May 2021.

But as tokens at the risk spectrum's furthest end, memecoins are usually among the first assets to witness that speculative fire gone with volatile drawdowns. This marks the end of a wider speculative cessation and the start of a drawdown in cryptocurrencies.

To summarize, the general trend involves infrastructure asset upswings climbing out of a bear market preceding memecoin explosions that crash inevitably, which marks the end of speculative periods throughout every cryptocurrency asset, leading to broader downturns.

So, when considering the explosive returns of these tokens and how consistent that cascading trend cycle has been, it props up the notion of focusing more on memecoins like DOGE after a wider upswing has been noticed.[13]

Coinbase Launching DOGE Futures

In a recent turn of events, Coinbase Derivatives launched its futures contracts for Litecoin (LTC), Bitcoin Cash (BCH), and Dogecoin in April 2024. The main goal here is to generate markets, providing retail traders with price discovery, diversification, risk management, price discovery, and margin. These contracts will also enhance accessibility to virtual asset trading, enabling traders to take part in the cryptocurrency market with lower upfront capital requirements within a regulated framework.

Hence, the contracts, sized at 5,000 DOGE, 5 LTC, and 1 BCH, seek to provide a more dynamic and inclusive trading environment and empower retail traders to use price movements to their advantage while hedging their current holdings. According to Coinbase, this is something that both retail enthusiasts and seasoned investors will appreciate.[14]

Tesla Integrating DOGE

Tesla, the renowned electric vehicle (EV) manufacturer, has officially incorporated DOGE on its website as a payment method. With this recent announcement, DOGE surged by more than 35%, according to CryptoPotato.

But there's the caveat that only select products, like merchandise, are applicable to this in Tesla's online shop. In the site's FAQs, the first response advises users to look for the Dogecoin logo next to an eligible product's "order" button. According to its support page, users who are looking to buy from the online shop with DOGE have to possess a "Dogecoin wallet," with another disclaimer stating that “it is the responsibility of the purchaser to ensure that Dogecoin is transferred to Tesla’s Dogecoin wallet accurately.” Meanwhile, analysts have suggested that Dogecoin is now on a bullish trajectory. With that, various indicators pertaining to its ecosystem have experienced notable increases. Throughout the previous three months, the volume of non-empty Dogecoin wallets has risen by 13.8%. For transactions surpassing $100,000, aggregate daily volume has reached almost $1.5 billion, a 12% increase when compared to May 1's figures. Daily active addresses saw a 20% rise, exceeding 66,000. On May 4, DOGE was among the leading performers, marking a rise of around 6%.

This won't be the first time Elon Musk's firms have dabbled in such payments. Musk had already stated a while back that Tesla would begin accepting DOGE as a payment option for its merchandise. For example, Tesla started experimenting with Dogecoin payment schemes in January 2022, providing merchandise in exchange for DOGE, like the "Giga Texas" belt buckle or the Tesla Cyberwhistle. After that, even SpaceX started embracing Dogecoin payments.[15]

Management

Jackson Palmer, Co-Founder

Jackson Palmer's working career kicked off in February 2009 when he worked as a marketing analyst for Business Catalyst, concentrating on content management and market research. Over there, he worked for seven months before Adobe, one of the most popular software development firms, eventually hired him, resulting in a rather extensive career and ultimately landing him the role of Senior Director of Product Management in late 2021.

It should be noted that, despite founding the world's most popular meme token, Jackson Palmer's views on cryptocurrency and blockchain remain far from positive, and he has been quite vocal about them, even going so far as to state, "After years of studying it, I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight, and artificially enforced scarcity.” Nonetheless, such strong opinions have done their part in stirring up quite a bit of controversy, both within the cryptocurrency sector and beyond.[16]

Billy Markus, Co-Founder and Advisor

Billy Markus, the software engineer who co-founded DOGE, is more popularly known by the username ‘Shibetoshi Nakamoto’ on X, which is a wordplay on the pseudonym Satoshi Nakamoto, creator of Bitcoin. Before developing Dogecoin, Billy was among IBM Corporation's (International Business Machines) leading software engineers, the multinational business that sells and creates hardware, software, data, and clouds.

While his views about cryptocurrency aren't as negative as Palmer's, he did state why he thought cryptocurrency was in a bad state after the Terra Luna crash via a tweet: "The reason why people think crypto is 95% scams and garbage and most crypto people are a******* is because crypto is 95% scams and garbage and most crypto people are a*******." This tweet, among various others, where he said that he got a lot of “harassment from the cryptocurrency community,” outlines the reasons why he sold all the DOGE he held and left the project.

As of now, he creates educational software geared towards children as his main job and works from home. Whenever he's free, he uses X to reconnect with the cryptocurrency community. Other than that, he also has his own website, billym2k.net, where you can send him a "crypto tip" and browse his own NFT collections.[17]

Vitalik Buterin, Advisor

Vitalik Buterin should need no introduction. The co-founder and CEO of Ethereum, the world's second-largest blockchain, is a member of the Dogecoin Foundation's advisory board. He joined in 2021, when the foundation underwent a rebirth after years of inactivity. Despite Billy Markus's disassociation with the project and his views on cryptocurrency, that still didn't stop him from returning as an advisor with Buterin and Jared Birchall, the latter of whom happens to be a key person within Elon Musk's inner circles.[18]

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[1] Cryptocurrency Dogecoin (DOGE): What It Is, History, and Uses (investopedia.com)

[2] Scrypt Mining Algorithm Overview (komodoplatform.com)

[3] What is Dogecoin? | Messari

[4] What Is Dogecoin? How Does It Work? – Forbes Advisor

[5] What is Dogecoin? All You Need to Know - Blockchain Council (blockchain-council.org)

[6] Dogecoin price today, DOGE to USD live price, marketcap and chart | CoinMarketCap

[7] Dogecoin and coin burning - Dogecoin

[8] Dogecoin Inflation - Dogecoin

[9] Dogecoin has no utility! - Dogecoin

[10] Dogecoin (DOGE) Open Interest (coinalyze.net)

[11] Dogecoin | Key Metrics & Overview | Messari