Dogecoin is a good investment
What is Dogecoin and how does it work?
Have you heard of the "dog currency"? Dogecoin is the new trend in crypto currencies - and in the beginning the digital currency was nothing more than fun by and for crypto fans. The name comes from a (in 2013) popular meme.
Dogecoin suddenly became known in 2021 - and now ranks fifth among the crypto currencies (measured by the value of the coins on the market). In the article you can find out more about the background.
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What is Dogecoin?
Dogecoin is the invention of two software engineers from the USA, Billy Marcus and Jackson Palmer, from 2013. Palmer had provided the logo of the crypto currency with a meme popular at the time, on which the intentionally misspelled word "doge" could be seen - as a description of a Shiba-Inu dog.
"Doge started to make fun of Bitcoin," says Pat White, CEO of the US financial platform Bitwave. At that time, a group of crypto supporters tried to draw attention to Dogecoin through public campaigns. For example, the group collected donations to send the Jamaican bobsleigh team to the 2014 Winter Olympics in Sochi, Russia.
In early 2021, Dogecoin achieved cult status when a group of Dogecoin supporters promised in a forum on the social media platform Reddit to increase the value “to the moon”. In the same forum in March 2021, investors had agreed to buy the Gamestop share in order to wipe out speculators (hedge funds) who had bet on falling prices.
Today, Dogecoin is no longer a joke. In 2021, the cryptocurrency gained more than 5,000% in value. The cryptocurrency reached its previous all-time high in euros on May 8, 2021: a Dogecoin was worth a good 60 cents during the day. You can follow the current price in the chart.
Dogecoin supporters include Tesla boss Elon Musk, who described Dogecoin as his preferred crypto currency. Musk also called Dogecoin the "people's crypto" and promised on Twitter that he would actually bring a physical Dogecoin to the moon.
How does Dogecoin work?
Dogecoin is a cryptocurrency that is based on blockchain technology, similar to Bitcoin. Blockchain is a kind of digital directory (book) in which all Bitcoin purchases and sales are stored and sealed with computer codes. These transactions can no longer be changed afterwards - and therefore cannot be manipulated.
More precisely: Like Bitcoins, Dogecoins can also be created on the computer. Followers can download the complete book as a copy onto their computer, whereby this is constantly updated, i.e. updated. Like other cryptocurrencies, Dogecoin's blockchain network uses encryption to protect transactions from tampering.
Anyone who produces (“digs”) Dogecoin solves complex mathematical equations with powerful computers. The transactions are then recorded in the Dogecoin blockchain and can be viewed by everyone - the followers can therefore check that everything is going well.
In return for the production of Dogecoins, the miners receive coins, which they can then keep or sell on the open market. Like Bitcoin, Dogecoin can be used for payments and purchases in some places.
However, Dogecoin runs the risk of the coins losing value quickly even more than Bitcoin: The number of Dogecoins is different from Bitcoin not limited. Millions of new Dogecoins are created every day, which dilute their value. So even if you have won money by making a right bet on the Dogecoin course, you have to expect that the equivalent of this profit will shrink quickly.
Dogecoin versus Bitcoin
There are some significant differences between Dogecoin and Bitcoin. First, it is easier and faster for the miners to solve the math equations and save transactions. A transfer can be for example up to ten times faster than with Bitcoin.
In addition, any number of Dogecoins can be created. Bitcoin has an upper limit of 21 million coins. This means that at Bitcoin, the miners are forced to work harder and longer over time to earn new coins. The computing tasks are becoming more and more difficult and the solution requires more and more computing power.
To a certain extent, this helps Bitcoin hold its value over time, and perhaps increase it permanently. Dogecoin, on the other hand, are not a “scarce resource” and are therefore even less suitable as a store of value than Bitcoin. Also read "13 things you should know about Bitcoin".
How do I buy Dogecoin?
You can buy Dogecoin on some cryptocurrency exchanges such as Binance or Kraken. For this you need an account, which you can top up with other crypto currencies or euros, for example. If you prefer to choose an exchange based in the European Union, you can, for example, opt for the Austrian provider Bitpanda.
Compared to the popular crypto currency Bitcoin, however, significantly fewer crypto exchanges and trading venues offer Dogecoin. In addition to the large crypto exchange Coinbase, most German providers also support the purchase of Dogecoin Not. You cannot buy Dogecoin on Bitcoin.de, Bitwala or the Bison App.
However, it is conceivable that some crypto platforms will follow suit in the future due to the high demand. For example, the online broker eToro has also been trading with Dogecoin since the beginning of May 2021.
As with other cryptocurrencies, it is best to move your coins into your own wallet after buying them. Wallets are available online, as an app or as a kind of external hard drive. The wallets are secured with a private password. If you withdraw your digital money from the respective platform and move it to your own wallet, you also protect your coins against hacker attacks. Read our article on buying Bitcoin.
Similar to Bitcoin, you also have the opportunity to mine Dogecoin yourself (see "How does Dogecoin work?"). Before Dogecoin became known to the masses, coins were quite easy to earn. For example, it was enough to click on certain advertisements or take part in a survey. Such websites are called faucets in technical jargon. In the meantime, however, this is hardly possible.
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Is Dogecoin a Good Investment?
Since there is no upper limit to the number of Dogecoins and millions of new Dogecoins come onto the market every day, there is hardly any incentive to keep the cryptocurrency for the long term.
Bitcoin continues to gain in value, among other things, because the number of coins is limited. Historically, the value of a Dogecoin has been very low, trading around $ 0.003 for most of 2020.
Most recently, followers in the USA have used Dogecoin to donate to campaigns or to give tips on social media. But it is not said that it will stay that way. Experts suggest that Dogecoin’s recent gains may not be sustainable in the longer term.
In addition, experts also speak of additional security risks for Dogecoin compared to other important crypto currencies. In particular, transactions with Dogecoin are not checked as carefully as with Bitcoin, for example. There is also no particularly reliable mining community, so the risk of hacker attacks may be higher.
Basically, buying any type of cryptocurrency, including Dogecoin, is associated with risks. You can buy a few coins if you want to have a say or if you want to know how the system works. Better not, however, put your hard-earned money into a cryptocurrency that started as a joke.
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