An Introduction to Dogecoin, The Meme Cryptocurrency
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Dogecoin is a cryptocurrency, like
Bitcoin or Ethereum—although it’s a very different animal than either of
these popular coins. Dogecoin was originally created at least in part
as a lighthearted joke for crypto enthusiasts, and took its name from a
once-popular meme. Despite this unusual origin story, it has exploded in
popularity in 2021—as of writing, Dogecoin has become the fifth largest
cryptocurrency by market cap.
What is Dogecoin?
Software engineers Billy Marcus and Jackson Palmer created Dogecoin
in late 2013. Palmer branded the cryptocurrency’s logo using a meme
popular at the time that featured the deliberately misspelled word
“doge” to describe a Shiba Inu dog.
“Doge was really started to poke fun at Bitcoin,” said Pat White, CEO
of Bitwave. In its early days, a community of enthusiasts arranged
publicity stunts to raise Dogecoin’s profile, gathering funds to send the Jamaican Bobsleigh team to the 2014 Olympics, for instance, or sponsoring a NASCAR driver.
In early 2021, Dogecoin gained cult status on Reddit’s WallStreetBets
message board—the prime instigator behind the GameStop affair in
January—where enthusiasts had promised to propel its value “to the moon”
(that was before all discussion of crypto was banned on the subreddit).
Today Dogecoin is no joke, having exploded in value and gained more
than 5,000% in 2021. Among its boosters is Tesla CEO Elon Musk, who
called Dogecoin his favorite cryptocurrency. Musk also named Dogecoin
the “people’s crypto,” and promised to plant a physical Dogecoin token
on the moon.
How Does Dogecoin Work?
Dogecoin is a cryptocurrency
that runs on blockchain technology, similarly to Bitcoin and Ethereum.
Blockchain is a distributed, secure digital ledger that stores all
transactions made using a decentralized digital currency.
All holders carry an identical copy of the Dogecoin blockchain
ledger, which is frequently updated with all new transactions in the
cryptocurrency. Like other cryptocurrencies, Dogecoin’s blockchain
network uses cryptography to keep all transactions secure.
People called miners use computers to solve complex mathematical
equations in order to process transactions and record them on the
Dogecoin blockchain—a so-called “proof of work” system. In exchange for
processing transactions and supporting the blockchain ledger, miners
earn additional Dogecoin, which they can then hold or sell on the open
market.
Dogecoin may be used for payments and purchases, but it’s not a very
effective store of value. This is chiefly because there is no lifetime
cap on the number of Dogecoins that may be created by mining—meaning
that the cryptocurrency is highly inflationary,
by design. The blockchain rewards miners for their work by creating
millions of new Dogecoins every day, which makes it very challenging for
speculative price gains in Dogecoin to hold up over time.
Dogecoin vs. Bitcoin
Dogecoin has a few significant differences compared to Bitcoin.
First, it’s quicker and easier for miners to complete the mathematical
equations that complete and record transactions on the transactions,
which makes Dogecoin somewhat more efficient for processing payments.
“Where it takes 10 minutes for the process to ratify new blocks on
the Bitcoin blockchain, it takes only one minute on the Dogecoin
blockchain,” said Gary DeWaal, Chair of Katten’s Financial Markets and
Regulation group.
Another significant difference is the absence of any lifetime cap on
the number of Dogecoins that can be created, as we noted above. There is
a lifetime cap of 21 million Bitcoin that limits the maximum possible
number of coins that can be created. This means that miners are forced
to work harder and longer over time to earn new Bitcoin, and to a degree
it helps guarantee Bitcoin’s ability to hold and grow its value over
time.
How to Buy Dogecoin
You can buy Dogecoin on a cryptocurrency exchange like Binance or
Kraken. The exchanges require you to set up and fund an account with
U.S. dollars or crypocurrency. You then are able to buy and exchange
cryptocurrencies, including Dogecoin. Notably, leading crypto exchange
Coinbase does not support purchases of Dogecoin.
Some online brokers,
including Robinhood and TradeStation, also allow you to buy Dogecoin—in
addition to conventional assets like stocks, mutual funds and bonds.
They don’t offer as many of the cryptocurrencies as exchanges, but
Dogecoin is generally available.
As with other cryptocurrencies, once you’ve purchased Dogecoin it’s
best to move your coins to a crypto wallet. Wallets take many forms,
from online services offered by exchanges like Coinbase (while you can’t buy Dogecoin on Coinbase, you can store
it in your Coinbase wallet), to apps on your mobile device or even a
physical hard drive. You secure the wallet with a private password.
Since your coins are held outside of an exchange, there’s an extra layer
of protection against hacks.
Before Dogecoin broke out into the mainstream and rocketed higher in
price, you used to be able to earn free coins for doing basic tasks
online.
“For many years, you could perform tasks at Dogecoin ‘faucets’ to
earn Dogecoin instead of buying it,” said C. Neil Gray, partner in the
fintech practice areas at Duane Morris LLP. “The tasks included things
like watching an advertisement or taking a survey. More recently, it’s
become difficult to find any that work.”
Is Dogecoin a Good Investment?
Since there is no lifetime limit on the number of Dogecoins that can
exist, and millions of new Dogecoins are released onto the markets every
single day, there is very little incentive to hold the cryptocurrency
for the long term. Bitcoin continues to rise in value because of the
system’s lifetime cap on the number of coins that can be created.
“Doge really is less like Bitcoin and more like DASH or Bitcoin Cash,
where the express goal is a spending currency,” said White.
Historically, the per coin value of Dogecoin has been very low,
around $0.003 per coin for most of 2020, so people were more likely to
give them away. “Users on social platforms, like Reddit, Twitter,
Facebook, and others, can use Dogecoin to reward, or “tip,” each other
for posting content,” said Gray.
The gains in Dogecoin that have been seen in 2021 may not be
sustainable over the longer term. Whether the crypto’s tipping and
donating culture will continue remains to be seen.
Should You Buy Dogecoin?
Those who bought Dogecoin to start 2021 have been well rewarded.
Still, White is a little wary about buying Dogecoin, especially as an
investment. The constant flow of new coins onto the market put unending
downward pressure on the coin’s value.
White also warned about additional security risks for Dogecoin,
compared to other major cryptocurrencies. “It just hasn’t had the same
security and code-level scrutiny that Bitcoin or Ethereum
has. Plus, there’s just not a particularly robust mining community
around Doge, so the exposure for a mining level attack is well above
that of something like Bitcoin.”
Buying any sort of cryptocurrency involves risk, and that includes
Dogecoin. It’s always worth buying a few coins and familiarizing
yourself with the system—but it’s probably best to refrain from sinking
more than a token amount of your hard earned money in a cryptocurrency
that started life as a joke.
How to Buy Dogecoin (DOGE) – A Beginner’s Guide
By: Ofir Beigel | Last updated: 5/4/21
Dogecoin is one of the oldest cryptocurrencies around. While it started out as a joke it quickly gained a lot of traction and a loyal community. In this post I’ll explain a bit about what Dogecoin is and how you can buy it online.
Don’t like to read? Watch Our Video Guide Instead
How to Buy Dogecoin Summary
Here’s how to buy Dogecoin:
Get a Dogecoin wallet (Ledger, Exodus)
Locate your Dogecoin address
Find a Doge exchange (Binance, Bitpanda)
Buy Dogecoin
Withdraw your Doge
If Kraken doesn’t work out for you, here are some additional buying options:
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*eToro users: 75% of retail CFD accounts lose money. Your capital is at risk. US users – CFDs are not available for US users. US users can only trade (long) real assets without leverage.
That’s how to buy Dogecoin in a nutshell. If you want a more detailed explanation about Dogecoin and how to buy it keep on reading, here’s what I’ll cover:
What is Dogecoin
How to buy Dogecoin
Get a Dogecoin wallet
Find a Doge exchange
Withdraw your Doge
Frequently Asked Questions
Conclusion
1. What is Dogecoin?
Dogecoin was created in December 2013 by Billy Markus, a programmer from Portland, Oregon. Initially introduced as a joke cryptocurrency, Dogecoin (DOGE) gained a large online following and is now a very popular cryptocurrency. It is also well known for its meme-inspired logo of a Shiba Inu dog.
The original plan was to limit Dogecoin to 100 billion coins. However, it was later decided that there would be a limitless supply of Dogecoins.
One of the greatest strengths of Dogecoin lies in its passionate community, who have done a great deal of fundraising. Notably, supporters raised money to send the Jamaican bobsled team to the Sochi Winter Olympics as well as to sponsor NASCAR driver Josh Wise.
Dogecoin is also used as a form of tipping by the community on platforms such as Reddit and Twitter.
2. Buying Dogecoin in 3 simple steps
Step 1 – Get a Dogecoin Wallet
There’s no shortage of options when it comes to Dogecoin wallets. There are different types of wallets for you to consider, and each wallet can vary in terms of features, usability, and security.
Here are the most popular Doge wallets around:
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Dogecoin Hardware Wallets
While being one of the safest wallet types available, a hardware wallet does require an initial investment. For comparison, software wallets are almost always free. The reason hardware wallets are considered safe is because they keep the private key to your Doge offline on a physical device.
The Ledger Nano S and the Nano X are very popular choices which support not only Dogecoin but over 1000 different crypto assets, you can read my review about them here. Likewise, the TREZOR One and TREZOR Model T are good options as well (here’s my TREZOR review).
Dogecoin Software Wallets
A software wallet will store the private key to your Doge on your device whether it be a mobile phone, a desktop computer or a laptop. These wallets might be vulnerable to malware, so be sure to take the necessary precautions and only download official or highly recommended wallets.
You can choose a Doge-specific wallet such as MultiDoge. This is a wallet available for Windows, Mac, and Linux. Alternatively, you could use a multi-currency wallet such as Exodus or Coinomi. Here is my complete Exodus review and you can read my complete Coinomi review here.
Hardcore Dogecoiners can also download the full client for Dogecoin on the official site, however, this is not recommended for beginners (or if you don’t know what a full client is).
For Android mobile devices, there’s the official Dogecoin Mobile Wallet, which generally has favorable reviews from users. Unfortunately, there’s no such version for iOS.
Locate your Doge address
Once you have your Dogecoin wallet it’s time to get your Dogecoin address. A Dogecoin address is a long string of letters and numbers that starts with a capital D followed by a number or another capital letter. Here’s an example:
DBXu2kgc3xtvCUWFcxFE3r9hEYgmuaaCyD
Step 2 -Find a Doge Exchange
Surprisingly enough, Dogecoin doesn’t receive much support when it comes to finding a reputable exchange to purchase it on. Only a handful of vetted exchanges supply an option for purchasing Doge with Dollars or Euros.
Here are the most reputable exchanges that allow you to buy Doge:
Buy Dogecoin through Binance
Binance, is a leading cryptocurrency exchange that supports the purchase of over 200 cryptocurrencies. The exchange has been around since 2017, is supported worldwide and allows users to buy Doge with a variety of traditional currencies and payment methods.
All you need to do is go to the exchange’s website, click on “Buy Crypto” on the top navigation bar and choose your payment method, as shown below. You can read my complete Binance review here.
Buy Dogecoin through Bitpanda
Bitpanda is an Austrian exchange that was founded in October 2014. Bitpanda allows residents of the EU (and a handful of other countries) to buy Doge and other cryptocurrencies through a variety of payment methods (Neteller, Skrill, SEPA etc.). The daily limit for verified accounts is €2,500 (€300,000 monthly) for credit card purchases. For other payment options, the daily limit is €10,000 (€300,000 monthly).
Buy Dogecoin through eToro
eToro – If you’re only interested in making a profit over Dogecoine’s price changes and you’re not into actually owning the coins, eToro is probably the easiest and cheapest option. The company offers a friendly and intuitive UI to help you exchange DOGE for fiat currency (USD, EUR, etc.).
Due to their relatively complicated withdrawal process, eToro is less recommended for accessing and using the actual coins. So, if you’re using eToro for investment only you can skip step 1 of getting a Dogecoin wallet, as you won’t be using the coins you’ll buy.
Important:
Keep in mind that cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. So keep in mind that your capital is at risk. US users – CFDs are not available for US users. US users can only trade (long) real assets without leverage.
Buy Dogecoin through Kraken
Kraken, Founded in 2011, the US exchange allows you to deposit funds via a credit card or a wire transfer. Users in Europe can benefit from the fast and free SEPA deposits. Once the funds are in your account you can easily buy Doge using the “Buy Crypto” tab in the exchange’s top navigation bar.
It’s important to note that Kraken uses the XDG ticker symbol for dogecoin and not the DOGE ticker symbol which is widely accepted on most exchanges. You can read my complete Kraken review here.
Buy Dogecoin through Changelly
Changelly is one of the few places that will allow you to buy Dogecoin with almost any currency (fiat or crypto). Changelly is a conversion service that works relatively quick and doesn’t require anything more than an email to sign up. The downside is that it can take up a lot in fees (especially if you buy Doge with your credit card).
You can read my Changelly review here.
Buy Dogecoin through Bittrex
Bittrex is a US based cryptocurrency exchange that has grown in popularity in recent years. It offers a DOGE/BTC pair similar to Kraken. This means that you will need to either buy Bitcoin or deposit Bitcoin in order to exchange it for Doge. You can read my full Bittrex review here.
How to Buy Dogecoin with a Credit Card or Debit card
The easiest way to buy Dogecoin with a credit card would be through Binance’s “Buy Crypto” section. Be aware that purchases with a credit/debit card usually have higher fees than with a bank transfer, but are also processed faster. If Binance doesn’t work out you can always use Kraken as another reputable option.
How to Buy Dogecoin with PayPal
There are very few cryptocurrency exchanges that accept PayPal payments. For this reason, there are no options when it comes to buying Dogecoin with PayPal. However, you can use LocalBitcoins, which let you use PayPal to buy Bitcoin. Then you can transfer the Bitcoin to Changelly and trade it for Dogecoin.
Additional buying options
A number of smaller cryptocurrency exchanges, Exrates, YoBit, and Livecoin, all have DOGE/USD pairs. LiteBit.eu and Bittylicious and Cryptomate offer brokerage services for Dogecoin via EUR or GBP.
Remember, it’s always worth checking out reviews of cryptocurrency exchanges before signing up and buying.
Step 3 – Withdraw your Dogecoin
It’s always sensible to store your cryptocurrency in a wallet rather than on an exchange. This reduces the risk of your cryptocurrency being lost or stolen.
So don’t forget to withdraw the Doge you’ve bought out of the exchange and into your own wallet using the address you got in step 1. If you keep your Dogecoins on the exchange, you’ve basically given up the control of the coins—if the exchange gets hacked or goes bankrupt, you may end up losing them.
3. Frequently Asked Questions
Is Dogecoin on Coinbase?
No, Dogecoin is not listed on Coinbase.
Can I Mine Dogecoin?
Yes you can mine Dogecoin. Like Bitcoin, Dogecoin has a blockchain that’s maintained by a mining system. The key difference is that Dogecoin uses Scrypt, a different mining algorithm than Bitcoin’s SHA-256. Originally, the Scrypt algorithm was designed to be ASIC-resistant, however by now ASIC manufacturers found a way around that, so it is only profitable nowadays to mine Dogecoin with ASIC miners.
How do I Convert Bitcoin to Dogecoin?
You can use Binance or Bitpanda to exchange BTC to Doge.
4. Conclusion
Dogecoin is an established cryptocurrency that has been around since 2013. It has a passionate community that enjoys fundraising and using Dogecoin to tip other users on Reddit and Twitter.
While this cryptocurrency doesn’t have any significant advantage over other coins, the adoption it mustered throughout the years makes it seem like it’s here to stay.
Have you used any of the above wallets or exchanges? What do you think of Dogecoin? Let me know in the comments below!
Read more: 7 Ways to Buy Dogecoin instantly (2021 Updated) - Beginner's Guide | 99Bitcoins
Maybe you’ve seen one too many headlines about the explosive rise in value of dogecoin,
or heard one too many stories about someone making a life-changing
profit off the cryptocurrency, and now you’re ready to get in.
You might be thinking, so what if the coin started out as a joke or you can’t pronounce it? It’s soared to 60 cents from under a penny just a month ago, and you don’t want to miss out.
Before you buy, however, below are some helpful things to consider.
1. Suspecting it’s a bubble won’t help you
Most investors can explain what a bubble is: It’s what happens when a good’s price far exceeds its real value.
And those considering buying dogecoin probably know that the digital token’s cost, which is up by more than 12,000% over the year, isn’t backed by much more than the hope that it will just keep getting more expensive.
That speculation is, of course, what fuels a bubble.
But
knowing that dogecoin hasn’t actually become a significantly more
valuable product over the last year isn’t likely to prevent people from
trying to take advantage of the situation to make a profit, experts say.
People buy assets even when they know they’re overvalued, “because they expect prices to go even higher,” said Bruce Mizrach, an economics professor at Rutgers School of Arts and Sciences.
And, he said, “they all believe that they can exit before the bubble crashes.”
Just remember: That’s what everyone else is thinking.
“By the time most individual investors get into a rising investment, it’s often too late,” said Kent Baker, a finance professor at American University.
2. FOMO usually backfires
Stories of dogecoin millionaires. People buying houses, thanks to the currency. How could you not be experiencing a fear of missing out?
Investors
often fall prey to the social bias of “herding,” Baker said. In other
words: They do what the crowd does, believing that everyone else must
know more than they do. And that there’s safety in numbers.
“Generally, such investors are wrong on both counts,” Baker said.
In reality, the other people in “in the crowd,” are believing the same things, with just as little to back them up.
3. You can’t know its real value...or much else
Trying to understand a digital asset’s fundamental valuation is “very tricky,” Mizrach said.
With most stocks, he said, you can at least get a price-to-earnings ratio,
which tells you what investors are willing to pay for a company for
every dollar of its earnings. That figure can help you determine if a
company is over or undervalued.
You’re in the dark with dogecoin.
“The
rise in the cryptocurrencies is reminiscent of the early stages of the
internet bubble with investors trying to evaluate stocks without
earnings,” Mizrach said.
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Being so new, there’s also confusion around how to buy and sell cryptocurrencies, how to keep the tokens secure from losses and hackers and how the taxes work.
Considering all this uncertainty, experts say people shouldn’t invest more into dogecoin than they can afford to lose.
That’s because for all that’s new, some things never change.
“There’s
no free lunch in investing – higher expected returns come with higher
expected risks,” Baker said. “The prices of cryptocurrencies are highly
volatile, which means that they’re highly risky.”
