By Alisha Tan
What is Dogecoin?
Dogecoin (CCC:DOGE-USD) is a cryptocurrency, which is a digital currency that can be exchanged for goods or services. Most cryptocurrencies, like the most prominent cryptocurrency Bitcoin, are unregulated and decentralised networks based on blockchain technology. Dogecoin is an example of an “altcoin”, a term used to refer to cryptocurrencies other than Bitcoin that are built on the same fundamentals, but aim to provide solutions to the limitations of Bitcoin and ultimately be an improved form of cryptocurrency.
But Dogecoin differs from other altcoins, this is because it was created in 2013 by two software engineers, Billy Markus and Jackson Palmer, solely as a joke. One night after work, Palmer bought Dogecoin.com and created the Dogecoin logo out of boredom, based on the doge meme. Billy Markus then reached out to Palmer via Twitter for permission to turn Dogecoin into a full-functioning cryptocurrency, and reconfigured Bitcoin’s source code to create Dogecoin. Two weeks after it was launched, Dogecoin surged 3000 per cent. Its price started off at a fraction of a penny (US$0.01) and has reached heights of over US$0.08. Over the last five years, Dogecoin has gone up by 25,000 per cent, with large movements in the price occurring in February earlier this year as shown in the graph below.
So how did this cryptocurrency that started out as a joke become viral? And how did it manage to achieve a market cap of US$7.85 billion?
How has Dogecoin become so successful?
In 2014, Dogecoin’s trading volume exceeded all other digital currencies, including Bitcoin. The founders themselves were perplexed by Dogecoin’s popularity. Some theorise that Dogecoin has been highly successful because of its accessibility – because it started as a joke, it appears less intimidating to people who are new to cryptocurrency. The currency was embraced by members of the community who wanted to feel like they were ‘in on the joke’ and who didn’t take themselves too seriously. Functionally, the low price made it ideal for microtipping on Reddit and making small in-app purchases for mobile video games. To further add to its accessibility and popularity, Robinhood also began allowing Dogecoin to be bought and sold for free in 2018.
Most significantly, Elon Musk has had a huge impact on the popularity of Dogecoin. Over the past few months, Musk has been consistently tweeting about Dogecoin, and the price of Dogecoin increases nearly every time he makes a tweet. For example, Musk’s tweet on the 1st of April which stated that “SpaceX is going to put a literal Dogecoin on the moon” caused the price to surge 32 per cent, from around US$0.05 to roughly US$0.07. Other tweets consist of calling Dogecoin “the people’s crypto” and declaring that he “[b]ought some dogecoin for lil X, so he can be a toldler hodler” (“hodler” is a term used in cryptocurrency to refer to an investor who holds their positions regardless of price). Other high-profile celebrities have also tweeted about Dogecoin in recent times, including Snoop Dogg and Gene Simmons from KISS.
The graph below shows Dogecoin’s price movements on the 4th of February, the day that Musk made a series of tweets (such as the one below) and consequently caused the price to rise by 50 per cent.
The founders and users of Dogecoin have used its success for meaningful causes. The Dogecoin Foundation, which was created by the founders, held a fundraiser to raise US$50,000 for Kenya’s water crisis in 2014. Additionally, Dogecoin users also raised over US$30,000 to send the Jamaican bobsled team to the Winter Olympics in 2014.
Does it have any value?
Dogecoin is based on the open-source software project, Litecoin, meaning that there is no limit on its supply – there are over 129 billion Dogecoins circulating at the moment. This figure is rising by the day and has been forecasted to increase by 5 billion each year. By contrast, there is a limit of 21 million Bitcoins that can be mined in total. As such, people are encouraged to actively spend Dogecoin and exchange it for goods and services to prevent the coin from losing value as more continues to be produced.
Dogecoin was meant to be both a joke and a learning tool. As co-founder Palmer stated, “if all we’ve done with Dogecoin at the end of the day is grow awareness in a decentralized currency such as Bitcoin, then I think we’ve done a good job, because for a lot of people who are using Doge now, it’s their first cryptocurrency that they’ve ever used, and they’ve started mining. They’re learning, and I think it’s great that people actually want to learn about it because it’s associated with this doge meme.”
Ultimately, Dogecoin was never intended to have much intrinsic value. Fuelled by rocket emojis, Shiba Inus and Elon Musk tweets, Dogecoin has shown us just how detached from reality cryptocurrency can be.
Sources: CoinDesk, Business Insider, Decrypt, NASDAQ, Yahoo Finance, FXStreet, Benzinga, YouTube, The Motley Fool, InvestorPlace, Forbes, SlashGear, Digital Trends
The authors of this publication are not qualified to provide financial or investment advice and as such the content provided should not be construed in this manner. All information is intended purely for educational purposes and is provided for the personal interest of UNIT members. The opinions expressed within the article do not reflect those of UNIT as an organisation, its partners or its sponsors.