What is Dogecoin and why has it gotten so popular? For starters, it is based on the same blockchain technologies that underpin Bitcoin, the Ethereum platform and its original Ether cryptocurrency, and the Cardano platform and its local Ada cryptocurrency. Similar to the Litecoin and Luckycoin blockchain platforms, the underlying technology leverages scrypt cryptography and proof-of-work consensus.
It all began as a joke. When Jackson Palmer tweeted about Dogecoin on November 28, 2013, he was mocking the excitement and crazy assumptions surrounding cryptocurrencies. He said he would be investing in this then-unknown cryptocurrency because it will be the next best thing in the future. It was, in essence, a meme. The Dodge meme provided the inspiration for the name. The Shiba Inu dog breed is featured prominently in the company's logo.
Palmer works for Adobe as a product manager. On Twitter, his tweet garnered some traction. In another statement, he claimed to have obtained the domain name dogecoin.com. This message was taken up by a number of websites and social networking sites. Billy Markus, an IBM software engineer, contacted Palmer with a proposal to develop software that would allow Dogecoin to be launched as a fully functional cryptocurrency. What began as a satire evolved into one of the most widely discussed cryptocurrencies and altcoins in the industry.
On May 5, 2021, the cryptocurrency has a market capitalization of approximately USD 85 billion. Even Elon Musk, the CEO of Tesla and SpaceX, and Mark Cuban, the billionaire entrepreneur, agree that it is the "strongest" cryptocurrency when used as a means of trade because of its large and growing network of users and advocates. It's worth noting that Musk has been collaborating with Dogecoin developers to increase transaction speed.
The attractiveness of this meme-inspired and satirical cryptocurrency comes down to mass appeal. Thousands of crypto-coins and crypto-tokens are available on the market. The more well-known ones can be difficult to comprehend, while others appear to be untrustworthy. Dogecoin appears to be more approachable and less scary. Furthermore, it appears to be more legitimate than less popular cryptocurrencies because it is backed by renowned figures such as Musk and Cuban.
So the upper mention details are more of the basic information you need to know about Dogecoin. Its actually funny and yet a humble beginning. Don't you think so?
Now, let's proceed on the pros and cons of investing in Dogecoin. Do not be carried away on the current performance of DOGE now.
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Pros of investing in Dogecoin
Users' Community Expanding
One of Dogecoin's advantages is that it has a well-established and expanding community of users and advocates. In terms of market capitalization, it is one of the top ten cryptocurrencies in the world. On one occasion, it even came in fourth place. Its expanding user base, according to Cuban and Musk, makes it an excellent medium of trade.
It's worth noting that the community contributed USD 30,000 to pay the Jamaican bobsled team's trip to the 2014 Sochi Winter Olympics, USD 11,000 to build a well in Kenya, and USD 55,000 to sponsor NASCAR driver Josh Wise.
Compatibility with Decentralized Exchanges
On decentralized exchanges, this cryptocurrency can be traded and transacted. The Ren Project has enabled it to access the decentralized finance network as well as work on the Ethereum blockchain platform. This means it's compatible with the bitcoin market's burgeoning decentralized finance trend.
Furthermore, it can be "wrapped," which locks it in a state that is compatible with a contract until it is later released, despite the fact that it runs on its own blockchain and has a built-in smart contracts capability.
Volatility has a Positive Side
Due to their vulnerability to speculation-related events, increasing competition intensity, and lack of universal consensus as a collective class of assets, cryptocurrencies are extremely volatile by default. Their past performance has seen extraordinary highs and rapid price decreases in a short period of time. Dogecoin is in the same boat.
Volatility, on the other hand, might have some advantages, particularly for day traders or those who purchase and sell assets in a single day. Cryptocurrency traders can profit handsomely on price swings in a single day through day trading.
These are the good things about Dogecoin but don't ever forget the bad ones. Let me list them down.
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Cons of investing in Dogecoin
There is no limit to the amount of product available
One of Dogecoin's main drawbacks is the lack of a supply cap. It is deflationary, unlike Bitcoin and Cardano's Ada cryptocurrency, which are deflationary in nature because they have a predefined supply cap to generate scarcity and perhaps raise its value in the future. Cryptocurrencies with no supply limit are unsuitable investments for inflation protection.
Furthermore, the ever-increasing supply will eventually necessitate more extensive blockchain mining operations. Because this cryptocurrency uses a proof-of-work consensus process, it will need to enlarge its pool of miners and their strong computers in the future to accommodate an increasing number of transactions.
Dogecoin's Detractors
The mainstream media and financial professionals had a hard time accepting bitcoin as a legitimate currency. A few analysts have also stated that it is an exceedingly risky investment due to pump-and-dump behavior and increased sensitivity to speculations and fads fueled by herd mentality. Others have referred to it as a pyramid scheme.
David Gerard stated in a Foreign Policy piece from 2021 that there is no good purpose for cryptocurrency other than trading. He went on to say that these "assets" have no applications. Individuals who aren't sure what they're doing and are simply jumping on the bandwagon are frequently victims of personal finance and investment fads.
Inadequate Technical Support
Despite its increasing network of users and supporters, Dogecoin has insufficient technical support. The development staff is smaller than that of Bitcoin, Ethereum, or Cardano. Furthermore, the product plan is not as well-defined as that of these crypto market behemoths.
Since 2015, there have been no significant technology advancements or improvements. It's also worth mentioning that in terms of technology, it doesn't offer any unique selling propositions. In comparison to the big participants, the stated goals or aspirations of this coin and the overall blockchain platform are not as grandiose.
One of Dogecoin's most appealing features is its novelty. Its mainstream success is due to the fact that it began as a joke and references a well-known meme. Furthermore, the same widespread appeal has stimulated people's curiosity in cryptocurrencies, allowing them to learn more about them.
Of course, it shares the critiques leveled at cryptocurrencies, as well as the risks and factors that affect the cryptocurrency market and the drawbacks of blockchain technology. When opposed to other cryptocurrencies, however, one of its primary disadvantages is that, because to its hype-driven value and vulnerability to speculation-related events, it may not be a desirable asset to invest in or trade.
Note: Do not take this as a financial advise. Its been created for information dissemination only.
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Lead Image by Trever Gearhart from Pixabay
In fact, it is very difficult to talk about trading or coins. No one can say when or how it will increase. Be it dogecoin or other coins. Dogecoin have become quite popular for the time being.