In a twisted turn of events, Dogecoin has become the 4th largest cryptocurrency by market cap, at a mere $75 billion. At the same time, Bitcoin’s market cap sits around $1 trillion. The meme coin has been chosen by the people, but does it have a chance at beating the giant?
Dogecoin originated as a joke to help teach people about the capabilities of blockchain in a fun, and meme-y way. Dogecoin’s creators, Billy Markus and Jackson Palmer, copy-pasted the Bitcoin source code, gave it a shiba inu logo and let the doge out.
Dogecoin is an open source project that has been developed over the years and now has some legitimate technological differences from the Bitcoin code it began with. But, what are these differences, and do they really add value to the digital currency compared to Bitcoin?
What is Bitcoin?
Bitcoin was created by Satoshi Nakamoto in 2008, and launched in 2009. Satoshi Nakamoto is the pseudonym of a person still unknown to the world. Satoshi believed that a product such as Bitcoin could not have a public creator, as it would distract from the ethos of decentralization.
Bitcoin’s decentralized ledger became the first real application of blockchain despite similar concepts existing within the crypto community since the 80s. Satoshi figured out that by requiring energy-intensive, hard computations a network could make spam uneconomical. This method, called proof of work (PoW), enabled those who were willing to pay a fee for access to the network to complete trustless, peer-to-peer transactions for Bitcoin.
The fee was sent to the miners, a decentralized network of individuals running these hard computations for a cut of the rewards. PoW simultaneously erased spam, and gave random people across the world access to a form of passive income with their home computers. More and more people decided to add their computing power to Bitcoin’s network, which in return added value to Bitcoin itself.
Many experts suspect that this network size to coin value relationship is modeled by Metcalfe’s Law.
What is Dogecoin?
This Bitcoin copycat was created amidst a wave of insanely overbought Bitcoin copycats. Billy Markus and Jackson Palmer did not intend on becoming overbought, they just wanted to meme on the other shitcoins. And that, they did.
Markus explained in a Reddit rant that the project took around 3 hour to put together, and that he spent “the bulk of that time making alterations to the client to make the text Comic Sans”.
If that doesn’t convince you of the almost $75 billion dollar market cap of this project, check out Is Dogecoin a Good Investment to learn how it got there.
Similarities and Differences
Since the early days of Dogecoin’s inception, it hasn’t seen a whole lot of major updates to its core software. While the framework is almost entirely the same as Bitcoin, there are a few notable changes.
1st, Dogecoin processes blocks of transactions every 1 minute, compared to Bitcoin’s 10. This is intended to make the currency more transactional, as payments can process in around the same time as the block size. It also means that 10x the relative rewards are given out each minute to Dogecoin miners vs. Bitcoin miners, which lowers transaction fees for the users. From a purely transactional perspective, this is Dogecoin’s only real advantage over Bitcoin.
2nd, Dogecoin’s supply has stopped halving. Unlike Bitcoin (whose supply halves every 210,000 blocks), Dogecoin’s supply stopped halving after the 600,000th block. Since then, the reward for Dogecoin miners has remained at 10,000 Dogecoin per block. Dogecoin will continue to inflate at this rate permanently, whereas Bitcoin will continue to halve its block reward until all 21 million Bitcoin have been mined (sometime around 2140). Economists and crypto enthusiasts alike continue to debate which inflation policy is optimal. Spoiler alert, it’s probably Bitcoin’s.
3rd, the Dogecoin network is immensely less secure. Dogecoin’s network boasts a hashrate currently around 464 TH/s, whereas Bitcoin’s is a much more mature 176,000,000 TH/s. This means that a 51% attack on Dogecoin isn’t really that expensive. For an estimated $10 million, anyone who had the dough could take over the network and send the $75 billion market cap plummeting in seconds.
Where to Buy Dogecoin
Dogecoin is available from Gemini starting May 4, but has been available on Robinhood, Kraken, Voyager and Changelly for some time. If you don’t already have an account with one of these centralized exchanges, you can get started with the link below.
Just like Bitcoin, Dogecoin must be stored in a cryptocurrency wallet. Crypto wallets are often tricky for beginners, so here’s a basic rundown.
Crypto wallets store the private key needed to open up your address on the blockchain. Just like how home addresses are publicly displayed above the door, but there is a separate key needed to actually get in, your Dogecoin balance is tied to your public wallet address only accessible via a private key. Keeping this private key safe is of the utmost importance. Losing a key with no backup means losing all your dogecoin along with it.
To keep things simple, some exchanges store your private key for you. While this may seem like a benefit, it actually means that you don’t own (or even have access to) your own money. Additionally, this presents a centralized choke point for a high-value hack. If control of your funds is something you value, then it may be worthwhile to download or purchase a dedicated crypto wallet. Find out which one is right for you on Benzinga’s guide to the Best Crypto Wallets.
Where to Buy Bitcoin
Bitcoin is available almost everywhere these days – even at the gas station. Although, we wouldn’t recommend spending your hard earned money on usurious Bitcoin ATM fees. Instead, you can pick some up from Coinbase, Etoro, Gemini, Robinhood, Kraken, BlockFi and more. If you are new to crypto, check out Benzinga’s guide to the Best Cryptocurrency Exchanges.
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