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.
Why is is so popular, all the sudden?
Dogecoin is no longer a joke. Its popularity has soared — astronomically, this year — buoyed in part by the mainstream adoption of bitcoin and other cryptocurrencies.But Elon Musk is the loudest and most prominent supporter of dogecoin. One of his bizarre tweets to his 50 million followers can send the crypto surging. That’s what happened in April, when Musk tweeted “Doge Barking at the moon” and shared a photo of a painting by Spanish artist Joan Miró, which is titled “Dog Barking at the Moon.”
Dogecoin has also enjoyed something of a cult status on internet message board Reddit, where a popular group — not unlike the WallStreetBets group behind GameStop’s rally — decided earlier this year to propel its value “to the moon.” Dogecoin soared over 600% in the wake of that push.Whether or not its a smart investment remains an active question. The more-actively traded and more-widely accepted bitcoin is subject to extreme volatility, so dogecoin, too, could crumble without warning. But its rise this year has been stunning.Not benefiting from the coin’s soaring growth is Markus, who sold all his dogecoin when he was laid off in 2015. He used it to buy a Honda Civic.