Dogecoin Explained – What You Need to Know

Dogecoin Explained – What You Need to Know

Photo Courtesy: baona / iStock

Welcome to the wondrous and wacky world of cryptocurrency! This untamed frontier where the internet meets speculation and an unregulated financial sector, where fortunes are made – and destroyed – in seconds. If you’ve never spent time learning about this before, there are a number of key concepts that are absolutely essential to know in order to understand cryptocurrency in general and everyone’s favorite digital dog-themed currency, Dogecoin.

The Fundamentals of Cryptocurrency

Currency, in general, serves two purposes: a means of exchange and a store of value. “Means of exchange” means that you can trade the currency to someone else in exchange for goods or services such as ice cream or massages. “Store of value” means that it is likely to hold onto some or all of its value for the future. That’s why, when you have $1000 in your bank account, you can choose to spend it today for food, gas, rent, plane tickets, etc., or hold onto it and expect that you’ll get something close to the same value next month or next year.

Almost all proper currencies today are issued by central banks, which control the majority of the money supply in nearly every nation on Earth. Cryptocurrencies, in their most idealized form, were created as a way to balance that central control and have a form of currency that is free from central banking influence. By their design, they should be regulated as little as possible, if any form of regulation is even possible.

At their core, all cryptocurrencies are digital tokens that can be created, destroyed, kept in digital wallets, and traded between people. They have their own unique strengths and weaknesses, as well as some of the same strengths and weaknesses as regular currency. However, it should be noted that currently, cryptocurrencies do not usually function as forms of currency. That is, most people look at cryptocurrency as a form of commodity, investment, or as a get-rich-quick scheme. This fact creates a kind of catch-22, as coins and tokens need to be stable to be useful as a currency, but much of their popularity comes from the fact that they’re unstable.

The Kinds of Crypto

Called “crypto” for short, there are several kinds of cryptocurrencies.

  • Bitcoin – This coin is on its own, as it is the most resilient, highest-valued, and respected of all crypto. At this point, it has a permanently limited supply that can only decrease as people lose it. It’s inefficient as a medium of exchange but is largely secure and entirely free from central banking regulations.
  • Altcoin – This term refers to every other crypto on the market. “Altcoin” simply means that it’s an alternative to Bitcoin. They range in quality from the second-most-trusted coin, Ethereum, to coins that most in the crypto space look at as various forms of scams and digital garbage. Many altcoins start out worth little more than a cent but occasionally explode in value to dozens, hundreds, or even thousands of dollars before crashing back down. While most crash back to nothing, some still retain a portion of their value. Ethereum, for example, was valued at almost $5k at its peak but still is worth more than $1k per coin today.
  • Memecoin – This term (also referred to as “meme coin”) refers to any altcoin that is based on a meme or other form of silly internet culture. Usually, these coins start out as a joke. Then, somewhere along the line, people take them seriously for a brief period of time. Once the humor wears off, the coin’s value crashes and never returns.

Dogecoin: The First Memecoin

At last, we come to Dogecoin. It was originally created as a joke, playing on the meme of an image of a Shibu Inu dog popularized on the internet nearly a decade ago. It can be used for legitimate transactions, and since its creation in December 2013, it has had a tumultuous journey. It started out worth much less than a cent, then gradually increased in value until, in 2021, it had its big explosion. It jumped up to 7 cents per coin, then started to get a lot of attention online and even from some businesses and celebrities.

Following this increase in attention, the price ballooned ever higher, reaching nearly $0.70 per Dogecoin. As with Icarus, who flew too close to the sun until his wings melted, Dogecoin quickly fell from such heights and sank back to a much more modest value. Since May of 2022, it has been bouncing between a low of $0.05 and a high of $0.12. This volatility continues to make it a target for those who want to make a lot of money fast by “investing” in crypto and pulling out the investment as soon as they’ve made a quick return.

Should You Get Involved?

Honestly, probably not. Crypto in general has a lot of potential for the future, especially with the introduction of Web3 and the idea of incorporating digital currencies with smartphones and all other uses of the internet.

It’s a good idea to become more familiar with crypto, as it is likely to have a big impact on the future. Nevertheless, for most people, taking a gamble on any form of crypto is likely to lose them money. Instead, continue to read up about it and only start purchasing it if you’re interested in using it as a form of money instead of a get-rich-quick scheme. The more that people look at crypto as an alternative to the dollar instead of a way to make money, the more legitimacy it will gain over time.