Is Dogecoin a Good Investment? How Does It Work?

Dogecoin is the most popular and successful meme cryptocurrency out there. In fact, it is so popular we can’t help but constantly ask ourselves if Dogecoin is a good investment. 

The answers vary. The coin is dismissed most of the time because it started as a joke. 

But how could a joke keep going since 2013 and constantly reemerge? Well, that’s what we want to explore in this article. 

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What is Dogecoin?

The official website tells us that Dogecoin is an open-source, peer-to-peer digital currency favored by Shiba Inus worldwide. Most importantly, a Dogecoin’s value is a Dogecoin.  

In 2013, Jackson Palmer purchased a website, photoshopped the Shiba Inu Doge meme over a coin, and made the dogecoin.com website. He aimed to create a fictional currency to mock the market’s greed and the clone coins that kept popping out.  

Palmer had never intended to do anything more than a joke; however, American software developer Billy Marcus contacted him to propose turning the joke into a reality.  

So, Dogecoin came into existence based on a fork of Litecoin called Luckycoin. This means that it is a proof-of-work coin, with its own blockchain, miners, and transaction confirmation. 

The network supports ≈30 transactions per second and confirms a transaction in 5-10 minutes at only one cent. 

Dogecoin Tokenomics Explained 

Now that you have a grasp of Dogecoin’s fundamentals let’s go a little further in understanding Dogecoin’s tokenomics. Don’t worry if you’re unfamiliar with the term, as we will explain its meaning before introducing the attributes accompanying Dogecoin. 

So, tokenomics refers to the study of what makes cryptocurrency valuable. It looks at how many coins are available, how quickly new coins are made, how they are distributed, and how they can be used.  

Why is this important? Because by understanding these factors, experts can try to predict how successful a cryptocurrency will be. 

Next, we will delve into the realm of Dogecoin tokenomics, examining its key aspects based on the following: 

• Token Distribution; 
• Token Utility; 
• Token Supply. 

Token Distribution 

Like many cryptocurrencies, Dogecoin originated with a genesis block, marking the beginning of its blockchain. Initially, the token distribution was set at a staggering 100 billion DOGE. Unlike some cryptocurrencies implementing pre-mining or private sales, Dogecoin’s genesis block was utterly public, allowing widespread participation.  

In 2018, the original supply of 100 billion DOGE was depleted. Following this, each mined block generated 10,000 new DOGEs, resulting in an annual increase of 5 billion coins in total supply. 

That may seem like a lot. But considering Dogecoin’s tokenomics, the inflation is not that high. 

And this leads to a question of another aspect: the inflationary factor.  

While many cryptocurrencies aim for scarcity and limited supply, Dogecoin takes a different approach. This deliberate inflationary nature (5 billion coins annual increase in total supply) is designed to provide plenty of tokens for transactions and usage within the Dogecoin ecosystem.  

Dogecoin’s token distribution is also fueled by its mining mechanism. Dogecoin employs a continuous mining reward system, unlike some cryptocurrencies with limited supplies. Miners play a crucial role in securing the network and validating transactions, and in return, they are rewarded with newly minted DOGE coins.  

Moreover, in order to improve security and miner profitability, in 2014, the meme cryptocurrency adopted merged mining. Thus, Litecoin miners could become Dogecoin miners without increasing costs or using additional resources. 

Token Utility 

When it comes to utility, it should be clear that Dogecoin is not Ethereum or any other top coin. However, believe it or not, Dogecoin has always had a purpose, and that purpose is simple – it’s money! In fact, Dogecoin stands out among cryptocurrencies as one that has been used for its intended purpose right from the start. 

Over time, Dogecoin has been primarily used for tipping Reddit and Twitter users. But weirdly, this meme coin is listed on most crypto exchanges.  

Created as a joke, Dogecoin quickly found its place as a tipping currency, encouraging and supporting various initiatives. The Dogecoin community has rallied behind numerous creative and sometimes mild projects, from backing the Jamaican bobsled team to funding water wells in Kenya. Thanks to its low fees and fast transaction speed, Dogecoin has consistently served as a practical currency for tipping and incentivizing others to achieve their goals. 

In recent years, the adoption of Dogecoin has skyrocketed, with various vendors accepting it. You can use DOGE to buy food, drinks, hosting, and other stuff online. The electronics retailer Newegg has recently implemented Dogecoin as a payment method in more than 70 countries. 

Additionally, prepaid cards supporting Dogecoin as a funding source have emerged, making it even easier to spend it in various outlets. Furthermore, businesses can directly integrate with the Dogecoin blockchain through the JSON-RPC interface.  

So, Dogecoin’s standout utility, and perhaps its most significant utility among cryptocurrencies, is its ability to facilitate seamless transactions. 

Token Supply 

At the time of writing this article, DOGE has a circulating supply of over 139 billion, no max supply, and a total supply of over 139 billion. 

As we said earlier, when Dogecoin emerged, it offered a supply limit surpassing other digital currencies. After mining the 100 billionth Dogecoin, 5 billion coins were introduced annually. While there is no theoretical supply cap, the rate of increase suggests a doubling of coins over 20 years, with the next doubling projected for 2075. 

Dogecoin lacks a hard cap on total supply, but in 2014, its founder announced the removal of the limit to achieve a consistent reduction in inflation. The inflation rate declined from 5% in 2015 to below 4% in 2019. Further declines are anticipated, reaching 3% by 2027 and 2% by 2035. 

By striking a delicate balance between supply dynamics and inflation, Dogecoin aims to maintain controlled and sustainable growth.

Dogecoin (DOGE Price) Performance Over the Years 

Performance Over the Years 

Based on the price at the end of each year from launch to date: 

Based on the all-time high price of each year from launch to date: 

Based on initiatives over time: 

Dogecoin started as a mockery in 2013 at Jackson Palmer’s initiative and turned into a real cryptocurrency with the help of Billy Marcus.  

In 2014, Litecoin founder Charlee Lee approached the Dogecoin team to propose merged mining to secure the network.  

The cryptocurrency was designed to keep a low value and be approachable to newcomers, but that didn’t stop the team from organizing community funding and sponsoring various events.  

The foundation and the community sponsored the Jamaican bobsled team and Shiva Keshavan in the 2014 Sochi Winter Olympics.  

Another famous sponsorship is the fundraising for NASCAR Sprint Cup Series driver Josh Wise. The community raised $55,000, and the car was nicknamed the “Moonrocket,” featuring a Dogecoin/Reddit sponsored paint scheme.  

In more recent news, Dogecoin has fundraised for NASCAR again, as on March 2, 2021, NASCAR Xfinity Series team B. J. McLeod Motorsports announced that the crypto would be sponsoring the #99 car in the Alsco Uniforms 300 at Las Vegas.  

But going back to memes, Dogecoin has always received strong support and engagement on social media. It was always popular on Reddit and Twitter significantly (after all, Twitter changed its logo to Dogecoin’s logo for a while, right?). 

Around these platforms, the DOGE community has popularized objectives such as “Dogecoin to the moon” and “Dogecoin to $1“.  

Elon Musk often tweets about Dogecoin and trolls his followers, driving up pumps. And nowadays, increasingly, more TikTok influencers encourage their audience to get into the Dogecoin hype train.  

Since 2021, the value of Dogecoin has fallen rapidly, bottoming out at around $0.06 in June 2023, but even with all these changes, Dogecoin remains among the top 20 cryptocurrencies.  

Dogecoin Trailmap    

On the other hand, Dogecoin will undergo certain adjustments due to technological advancement. How? The Dogecoin Foundation presented a trailmap at the end of December 2021, indicating that 2022 will bring some modifications to Dogecoin.  

SIDENOTE. The Dogecoin Trailmap is less strict than a roadmap that aims to maintain Dogecoin’s community-driven, consensus-based approach.  

The trailmap’s choice will not affect how Dogecoin was built; it is essential that Dogecoin remains a decentralized project with shepherds rather than rulers, each of whose initiatives and contributions succeed or fall on their own merits. The Trailmap is intended to reflect the contribution to the success of Dogecoin.  

Following the Manifesto project, which was intended to capture what the community desired from the Dogecoin plan, the project team has thought more deeply about this notion. It has set the fundamentals of the Foundation Trailmap, emphasizing simplicity, usefulness, and dependability.  

A new Dogecoin approach that delivers security through network diversification as well as a proven Dogecoin Standard with extensive testing. With the integration of scalable backend solutions such as the GigaWallet Project, there will be new payment methods for providers, merchants, game developers, and social platforms.  

The proposed Dogecoin Keyring App & SDK will address community safety by allowing users to keep custody of their Dogecoin while integrating the GigaWallet APIs so that mobile apps may trade Doge without holding a key.  

This project also intends to engage with Vitalik to develop a unique DOGE concept for a community staking version of PoS that would allow everyone, not just the big players, to participate in a way that recompenses them for their contributions to the network’s operation.  

All this trailmap wasn’t completed in 2022, and as of June 2023, it is still in development. Thus, we have to wait longer to see the improvements that Dogecoin Foundation boasted about. 

What are the Changes that Dogecoin Goes Through?  

Dogecoin.com Makeover & Dogepedia 

Dogecoin is undergoing significant changes, starting with a makeover of its website, Dogecoin.com.  

The updated website aims to provide users with essential information, including links to ongoing projects and teams, details about the network, and guidance on how to participate as a developer, miner, HODLer, or fan.  

Additionally, the website will feature a comprehensive list of frequently asked questions about Dogecoin, known as “Dogepedia.” 

Libdogecoin 

Libdogecoin aims to simplify the construction of Dogecoin-compatible products. Implementing Dogecoin Protocols as a C Library will enable developers with limited knowledge to create their own Dogecoin-based solutions.  

It’s important to note that Libdogecoin will be solely a library and won’t have its own operational node functionality. The team behind this initiative envisions a healthier Dogecoin Ecosystem by reducing reliance on the Core Wallet as the sole representation of the Dogecoin Blockchain. 

The key objectives of Libdogecoin include increasing the number of alternative wallets and node implementations based on standard protocols. This will encourage wider adoption of Dogecoin across different platforms.  

Additionally, the proposal aims to enhance the process of joining the Dogecoin network, making it easier for users to run their own Dogecoin nodes. 

Dogecoin Standard 

The Dogecoin Standard will be a written specification and validating test suite that the Dogecoin Core Wallet will generate as part of the development process for Libdogecoin.  

It serves as a comprehensive documentation resource for anyone seeking to understand the inner workings of Dogecoin.  

This implementation addresses the need for a whitepaper-like document that the community has frequently requested. By providing this functionality, the Dogecoin Standard will make it easier for new developers to engage with DOGE.  

It will offer a new library of building blocks that can assist individuals in creating Dogecoin-related products. This initiative aims to enhance accessibility and support the development of innovative solutions within the Dogecoin ecosystem. 

GigaWallet 

The GigaWallet is a new utility for Dogecoin that aims to simplify the integration of Dogecoin transactions into various platforms. It is an open-source initiative designed to provide developers with a noded/API solution, enabling them to add Dogecoin transactions to their platform quickly and easily, just like any established payment provider. 

This feature offers two levels of API functionality.  

The first level allows for the processing and verifying of traditional Dogecoin transactions using a modern event architecture that can interface with message queues and web APIs.  

The second level involves integrating with the planned Dogecoin Keyring App & SDK, providing additional capabilities for managing Dogecoin keys. 

The GigaWallet aims to streamline the adoption of Dogecoin as a payment method, providing developers with efficient tools to integrate Dogecoin transactions seamlessly into their platforms. 

Future Projects 

But that’s not all that Dogecoin has planned for 2022, and, having not completed that year, it is committed to achieving inclusively in 2023; there will also be some new initiatives. Dogecoin Keyring (APP/SDK), RadioDoge (Starlink + Radio nodes for remote regions), Community Staking (Proof of Stake), and Point of Sale (L2 app) are all projects that will soon be implemented into the Dogecoin community.  

Is Dogecoin a Good Investment? 

A part of the crypto community has been talking about Dogecoin going up since it started. Also, various topics have encouraged Reddit users to invest in Dogecoin for around $25 to get $10,000 when it gets to $1. 

Leaving the hype aside, we can see that Dogecoin is able to go up. But there is a catch. 

Doge’s success and its resilience over time come from a combination of social media popularity, meme culture, influencers, and speculation.  

The truth is that speculators are winning the most from Dogecoin’s pumps and dumps. And a relatively steady price for this coin is quite improbable, especially considering that more than 40% of the coins are kept in 5 wallets whose identity is unknown.  

And if you think of investing in Dogecoin before it gets to $1, you should keep in mind that DOGE has a price of $0.06 at a market cap of $8.6 billion. And considering the inflation, Dogecoin needs a market cap of at least $140 billion to reach $1.  

That’s quite a lot to accomplish. However, the cryptocurrency market is a strange place, and Dogecoin is already an absurd cryptocurrency that has existed for almost a decade.  

We can’t dismiss the possibility of seeing Dogecoin reach $1 through the power of memes and social media. However, speculators are most likely to crush the price afterward. 

FAQ 

Will Dogecoin Ever Be Valuable?  

Yes, Dogecoin’s potential for value growth or to become more valuable is promising. However, it is worth noting that the substantial supply of tokens in the billions imposes a constraint on the extent of its upside. 

Is It a Good Idea to Invest in Dogecoin?  

While Dogecoin may exhibit a moderate rate of value appreciation, it is unlikely to reach the same price levels as Bitcoin, Ethereum, Solana, or other top-tier cryptocurrencies. However, Dogecoin is preparing some significant updates, and considering all the hype surrounding the coin on social media; it can be a good investment if the right investment strategies are used. Consequently, it becomes challenging to consider Dogecoin as a favorable investment option when numerous superior choices exist in the market. 

Does Dogecoin Have a Future?  

Yes, Dogecoin has the potential for a future, but its long-term sustainability and growth trajectory remain uncertain. Factors such as market trends, adoption, and technological developments will significantly determine Dogecoin’s fate in the cryptocurrency landscape. 

Conclusion 

So, Dogecoin’s future remains uncertain despite its popularity and meme culture. While cryptocurrency has demonstrated the ability to increase in value, several factors must be considered. Speculators have played a significant role in driving its price, and the concentration of coins in a few wallets raises concerns about market stability.  

Additionally, reaching a price of $1 would require a substantial increase in market capitalization.  

Although the power of memes and social media cannot be underestimated, it is important to be cautious of potential price manipulation.