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The Dogecoin Phenomenon - what is that?

The Dogecoin Phenomenon

 

The hype around the coin" for fun " continues. Dogecoin (DOGE) was conceived for the sake of a joke, but was able to achieve incredible results. In 2021, its yield is already 2 times higher than the S&P 500's profit together with dividends, if you count from the very foundation of the index, that is, since 1988. The capitalization of the meme cryptocurrency exceeded $ 64.5 billion, which is more than that of Ford Motor Co. and Marriott International Inc. Cool, right? Note that Dogecoin was not conceived at all for enrichment, its holders were not given rosy promises of a huge increase in the value of the coin. Moreover, the project managed to survive, despite a lot of fundamental shortcomings, low developer activity, and even the departure of the founders from the project. In this article, we will talk about what is unique about Dogecoin (DOGE) and how it managed to break into the top five cryptocurrencies.

 

An unusual history of the meme cryptocurrency.

 

Many experts agree that Dogecoin is a phenomenon that shows the true power of cryptocurrencies. Note that this is one of the oldest altcoins, which came out even before ethereum, not to mention many other well-known assets. The authors of this project are programmer Billy Marcus and Jackson Palmer from the marketing department of Adobe Systems. They decided to "parody" other cryptocurrencies and released their own coin – Dogecoin in 2013. Naturally, there was no question of any marketing or presales. It was so much easier. If we consider Dogecoin from a technical point of view, then this coin is a fork of Luckycoin. If you hold the chain further, then Luckycoin came from Junkcoin, and that in turn is a fork of Litecoin. In terms of technology, LTC is similar to bitcoin, but there is a fundamental difference. DOGE has no limit on the number of coins that can be created within the system. By the way, with merged mining, you can simultaneously mine DOGE and LTC. The "dog-coin" is based on the PoW-hashing algorithm.

 

Where did the name Dogecoin come from?

 

As for the name, Palmer also chose it "for fun". In fact, Doge is a popular meme from the Internet in 2013-2014. Back then, pictures of shiba inu with various funny captions in the form of "thought bubbles"went online. In one of the tweets, Palmer then wrote: "Invest in Dogecoin. I believe that this is a know-how that is worthy of attention." And the authors of the project thoroughly approached the promotion of their meme coin. They made the legend as detailed as possible and even launched a website dogecoin.com, where you can learn more about this cryptocurrency, as well as download a wallet for storing it. And what is interesting, the people of this topic went well. In the first month after the launch of the project dogecoin.com visited by about 1 million people.

 

What role Reddit played: "the power of the crowd" over Dogecoin hype meme-currency

 

Dogecoin was quickly picked up by members of the popular cryptocurrency community Reddit. At that time, the coin was already trading on exchanges in the range of 0.0002 to 0.0018 dollars. In December 2013, one of the participants of the r/Dogecoin subreddit suggested that other people post addresses here for exchanging and receiving coins. The popularity of this forum thread grew at a crazy pace. In just a year, there were already about 35 thousand subscribers (note that now there are more than 1 800 000 participants). By the way, for comparison, we can say that the bitcoin community has 2.9 million users, and the ethereum subreddit has 890 thousand subscribers. Dogecoin a cheap cryptocurrency began to be actively used for donations. People transferred these coins to each other as a sign of gratitude for useful posts, interesting ideas and important information. By the way, to encourage high-quality content in Reddit, they even launched a bot. CNET then quoted Palmer as saying, " Dogecoin was actually in the possession of every member of the community." Comic coins cost a fraction of a cent, but even then they managed to raise impressive amounts: 32 thousand dollars as part of the Doge4Water campaign to provide Kenyans with clean water; 30 thousand dollars to support the Jamaican team in the Winter Olympic Games in bobsleigh (2014); the amount is unknown, but fans of the meme coin supported the racer Josh Wise several times.  Thanks to the "power of the crowd" and the growth of popularity in the Reddit community, the capitalization of the dogecoin has grown to $ 8 million. Despite the fact that the founders of this project did not plan to create a "bitcoin killer", in terms of trading volume, Dogecoin was able to overtake BTC in 2014. Yes, it was for a short period of time, but the fact remains. Three years ago, when bitcoin was going through its next "bull rally", the dog-coin also took a new historical record. The market capitalization of the coin has grown to two billion dollars (for one DOGE on the exchanges gave an average of 0.017-0.018 dollars).

 

 From success to disappointment is one step

 

By the way, by that time, Marcus and Palmer had long been disappointed in their offspring. They did not think to create a tool for speculation, as they pursued a completely different goal. They just wanted to achieve a hype in social networks, a rapid increase in interest in cryptocurrency, and media attention. Over time, the project was supposed to fade and be forgotten, but the situation got out of control. DOGE no longer corresponds to the original idea. Then Markus said that he was not going to support this " sect” and left the project in 2014. And recently, he said that he does not understand the self-serving talk about a rally to $ 1 (such a flash mob was launched in TikTok in 2020). He was tired of rampant greed, bad faith, and fraud. According to Markus, the coin was originally created for something else – to bring good, joy, inspiration. This was its key value. Palmer also failed to survive the race for new price peaks. He first unsubscribed from the Dogecoin community on Reddit, and in 2015 he took an "indefinite leave of absence". Over time, the founder of the meme cryptocurrency even deleted his Twitter and YouTube pages.

 

Elon Musk is involved in the development of the Dogecoin project

 

The head of Tesla and SpaceX, Elon Musk – is a long-time fan of the cryptocurrency meme, and he regularly fuels interest in DOGE with his tweets. For example, he recently stressed that he actively cooperates with Dogecoin developers and sees great potential in this. In his post, the entrepreneur noted that he wants to increase the efficiency of transactions in the DOGE ecosystem. Against the background of such news, the cost of a dog coin usually jumps to new heights. This time the price increased by 26%. Although such a sharp jump in the exchange rate is due not only to the statements of Elon Musk, but also to the message of Coinbase that it plans to list Dogecoin (and this should happen soon). Note that in February, Tesla announced its desire to purchase BTC for one and a half billion dollars. Moreover, the company decided to accept this digital currency for payments. And recently, Elon Musk made a "knight's move". He said that a lot of fossil fuels are used for mining cryptocurrencies, and this is worrying. That is why it was decided to abandon the use of bitcoins. Naturally, this news hit the rate of the first cryptocurrency hard. It has collapsed by almost 17%. At the time of writing, bitcoin continues to be in the red zone. On "Binance" for one coin they give 45,126 dollars. The creator of Dogecoin, Jackson Palmer, has long since moved away from the crypto world and stopped keeping in touch with the project, but just recently he published a tweet about Elon Musk, calling him a "narcissistic swindler". This post was "inspired" by the businessman's participation in Saturday Night Live, where he acted as a financial guru. In the show, which took place on May 8, 2021, Musk talked about Dogecoin. According to him, the dog-coin, created "for fun", has now gained real scale and is ready to become the future of finance. However, a little later, he added that all this is a joke and in fact Dogecoin is just a cryptocurrency that can be exchanged for fiat.

 

The success of the phenomenal meme currency in 2021

 

In 2021, Dogecoin has more search queries than Bitcoin. According to Yandex statistics.Vordstat, 386,499 people were interested in the meme currency during the month. Bitcoin, as you can see, was interested in 2 times less Network users. Above we have already said that interest in dogecoin is actively fueled by Elon Musk and other celebrities. Against the background of tweets that this is a "popular cryptocurrency", "Dogecoin barks at the Moon" and others, the rate of the comic coin is growing by leaps and bounds. Plus, a lot of things have changed in the crypto market since the coronavirus pandemic. If due to unprecedented actions of governments, monetary measures of central banks, many industries have suffered, then digital currencies have only increased in price. They showed that they are really worthy of attention. And Dogecoin was among those coins that became even more popular. Moreover, the growth rate of the dog-coin was able to bypass bitcoin and Ethereum. The news about the addition of DOGE to the list of traded currencies on several top crypto exchanges had a positive impact on its rate. In the wake of the hype meme-cryptocurrency has been added as a payment tool by many advanced companies. By the way, even Musk on Twitter conducted a survey among users whether to enter payments in DOGE. About 80% of users supported this idea.

 

Clones of Dogecoin: price growth due to someone else's popularity

 

Against the background of the meme coin hype, other projects decided to play. Recently, many Dogecoin clones have appeared. And the value of these coins is growing along with the price of a comic cryptocurrency: Shiba Inu (SHIB) is a popular clone of Dogecoin, which is currently traded on various crypto exchanges, including Binance. Thanks to the adoption of top platforms, the liquidity and value of SHIB is actively growing. The capitalization of SHIB is already more than $ 11 billion. 505 trillion SHIB belongs to Vitalik Buterin. The network flashed information that the businessman had already withdrawn assets from the Uniswap pools and gave them to charity; increase in profitability since the beginning of the year, Akita Inu (AKITA) – this token was launched at the end of February 2021. Over the past couple of weeks, the coin has jumped in price more than 300 times. The daily trading volume is about $ 379 million, which is more than that of Compound and Avalanche. AKITA has already been listed on many cryptocurrency exchanges, including Gate.io, Poloniex, Uniswap, etc. The developers position this project as a "decentralized experiment". 50% of the tokens are held by Vitalik Buterin, and the rest are locked in the Uniswap pool. The project's website also says that AKITA is very similar to SHIBA INU, but tokenomics is different; Dogeswap (DOGES) is another clone of Dogecoin, which also shows a good price increase against the background of the popularity of the meme cryptocurrency. Over the past two weeks, the value has increased by 1918%; DogeFi (DOGEFI) is a cryptocurrency that appeared in September 2020. The asset is also growing. For 14 days, the increase in the value of this coin was 5675.3%. The positive mood around Dogecoin is also reflected in the price forecasts. Many financiers and experts are confident that this cryptocurrency will continue its rally to $ 1. In particular, this was stated by a well-known businessman Mark Cuban. He is confident that the unlimited issue will play a big role in this (recall that every year about 5.2 billion new coins are released in the Dogecoin ecosystem). Anthony Scaramucci of SkyBridge Capital is also positive about the cryptocurrency meme. He believes that Dogecoin wave can become a "digital silver". Although there are also zealous opponents of dog-coin. For example, Charles Hoskinson considers this cryptocurrency a "soap bubble" that can burst at any time. Moreover, the head of IOHK is sure that after this there will be a tightening of regulation in the crypto market, and many users will again lose faith in the digital currency.

 

Technical features of Dogecoin

 

 We have already mentioned above that DOGE is a fork-based LTC cryptocurrency. Among its main technical features, we can note the following: the block generation time (60 seconds, and in the litecoin network it takes 2.5 times more time); unlimited issue (maximum number of LTC coins-84,000,000 pieces); transaction speed-6 min. It should be noted that the amount of rewards for mining one block is now 10,000 DOGE (previously it was more). New coins are mined in the combined mining mode in parallel with the base currency of the algorithm-LTC. It turns out that the owner of the miner works with the pool litecoinpool.org or another server, participating in the collective production of litecoins, and along with this "hunts" for DOGE. By the way, miners in Cryptonight and SHA-256 work in the same way. At one time, the founders of the Dogicoin project provided for an artificial inflation of 5% within the system and introduced such a condition in the program code.

 

The fundamental shortcomings of the comic cryptocurrency

 

Dogecoin took over from bitcoin UTXO (unspent transaction outputs), as well as the Script language. But in fairness, it is worth noting that in many fundamental indicators, the comic cryptocurrency lags behind bitcoin. This applies to the development of the infrastructure, which consists of regulated services for lending and trading, custodians, as well as other attributes of the modern crypto market. Among the important metrics that Dogecoin developers should pay attention to, experts also note on-chain activity, the cost of an attack of 51% and the distribution of assets. We want to present you a small comparison table so that you can understand how Dogecoin differs from its older counterpart – BTC. Indicator Dogecoin Bitcoin Number of addresses with a zero balance 3.6 million 35 million Distribution of coins Every minute for 10,000 DOGE (a total of 14.4 million coins were mined, the issue is not limited) Rewards are issued every 10 minutes (issue of 21 million coins, of which 89% is mined) Halvings No Yes (the next one is scheduled for 4.05.2024) Share of retail participants Little Much In 2020, DOGE woke up after "hibernation", about 60% of coins were in motion. Galaxy Digital Research believes that this is due to the transition of coins from old participants to new ones. If this were the case with bitcoin, many would say that the future bearish trend, as investors perceive this cryptocurrency as a protected asset and consider it for investment in the long term. As for DOGE, it is difficult to predict what this activation in the ecosystem implies. It is possible that new users of Dogecoin already consider this cryptocurrency-meme as a tool for speculation, and this was not the case before. Due to the weak infrastructure, the number of options for using this asset is limited, so the comic cryptocurrency is significantly inferior to bitcoin in terms of trading turnover and the number of transactions. The hype around the dog-coin led to a certain increase in the volume of the transferred value, and accordingly, the exchange fees increased.

 

 What can negatively affect the value of Dogecoin?

 

Experts say that the price of Dogecoin can fall if: media personalities, such as Elon Musk and others, pay attention to an alternative trading tool and form a hype around it; due to pressure from regulators and governments, crypto exchanges where this coin is traded will be closed (naturally, in this case, the price of the coin will go down); a limited number of users will have a large volume of coins concentrated (they may well start mass sales and artificially collapse the rate); listing on the Coinbase trading platform will fail or be postponed to a later date.

 

Conspiracy theory

 

Some detractors say that the catalyst for the growth of Dogecoin could be a certain "secret society of owners" or a mysterious investor who inflates the value of a joke coin before it falls. There is information on the Web that 28% of the coins are in the hands of a "whale", which works on behalf of its own customers and may well influence the Dogecoin rate. Whether this is true or not, it is difficult to say, there is no evidence or refutation of the "conspiracy theory". Most likely, there is a "golden mean", and the reason for such an active increase in the price of dog-coin was several factors. They have merged into a single catalyst, and that is why we can observe the "Dogecoin phenomenon".

 

To sum up

 

Dogecoin is not a newcomer to the cryptocurrency market. This digital currency appeared not much later than bitcoin. It was released "for fun" - without any rounds of venture financing, presales and premines. Despite the obvious fundamental flaws, the lack of active development of the project, poor infrastructure and many other shortcomings, this cryptocurrency shows a significant increase in value. However, it is difficult to predict the further movement of the exchange rate, it has about the same chances to go up and down. When investing here, you need to understand that there are big risks of losing them, so you should act very carefully and keep your finger on the pulse. The only thing that can be said for sure is that the dog coin has already ceased to be a coin for fun. It can be used to diversify your investment portfolio.

 

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