- Dogecoin was started as a meme-based cryptocurrency way back in 2013.
- Since then, it has mostly been a low cost, simple solution for crypto-related work.
- Dogecoin touched a market value of $50 million earlier this week.
Dogecoin is the protagonist of a cryptocurrency tale that no one could have predicted beforehand. As the fame of the meme cryptocurrency grew, its market value dwindled in the last couple of weeks like a candle flame in the wind. It experienced an unimaginable high and came crashing down soon after.
What started as a joke of a cryptocurrency hit a record peak earlier this week, with a jaw-dropping market capitalisation of more than $50 billion. This made Dogecoin bigger than the automobile giant Ford Motor Co and American food and beverage company Kraft Heinz Co in market value.
The rise was fueled right before April 20, a day that is celebrated as Doge Day. Fans of the cryptocurrency invested in it in the masses and skyrocketed its price to a record high. Dogecoin was hailed on various social media platforms and, of course, had the backing of tech icon Elon Musk.
It was going well until it all came tumbling down. As investors realised that the surge was just too much to hold its value for long, they retracted their money, bringing down around $45 million of the market cap out of $50 million within a couple of days. After all, what else would you expect of a digital currency that came into existence as a joke?
Getting to know Dogecoin
Dogecoin came into being in the year 2013 as a way to lighten up the uptight, all-math cryptocurrency market. Even the name Dogecoin came as a parody based on the Shiba Inu dog, a popular Internet meme at the time.
When Jackson Palmer, an Adobe employee, started it out with his partner Billy Markus, the duo never knew that the digital currency would reach such heights. All because the coin's importance was taken a bit too seriously by a lively community of enthusiasts on online forums.
The mutual thought was the inclusion of a just-for-fun currency in the crypto market that can enthrall very simple transactions such as online tipping or possibly donations. The currency was not taken seriously until around 2018 when it briefly touched a market cap of $2 billion during the crypto surge.
The numbers, however, could not make Dogecoin as famous as Musk did. Several and periodic tweets by the Tesla CEO hailing Dogecoin as the best ever cryptocurrency sent everyone related to the crypto market in a frenzy. People began to start asking about Dogecoin and whether to invest in it or not.
Dogecoin, the technical side
That is probably also why you are reading this article. But before you can grasp the answer, you should know how the cryptocurrency works vis-a-vis other cryptocurrencies out there. In short, the technical aspect of it.
At the surface, Dogecoin is just another cryptocurrency. It is only when you understand its use case that you get to know its pros and cons. An example of this is the fast transaction speed associated with Dogecoin, that too at very low transaction fees. This is one of the biggest pluses of the digital currency.
The reason for this is that Dogecoin was invented to have fun and not make investors money. The cryptocurrency was thus built to exist in excess quantities, and by excess, I mean infinite.
This is also the main difference between Dogecoin and cryptocurrencies like Bitcoin. While Bitcoin has a finite amount of coins on the blockchain, more and more Dogecoin will keep on getting produced every year. In essence, there is an unlimited supply of Dogecoin on the blockchain.
The very nature of the cryptocurrency, thus, keeps its prices much low as compared to others. It also helps keep the value steady in a volatile market, a notion that we saw failing miserably in recent times.
To invest or not
This low value of Dogecoin, and the fact that it will remain so, did not make it an appealing proposition to investors, that is, until recently. Once the world saw Dogecoin's monumental growth, everyone wanted to take a bite of the pie.
The downfall was even more shocking than the rise, as it left many confused about what to expect from the cryptocurrency. We reached out to an expert on cryptocurrencies for some insights into this.
Edul Patel, CEO and Co-founder, Mudrex - a crypto trading platform - said, "Doge is literally a meme coin, built out of the intent to mock the concept of bitcoin. Hence it is extremely volatile and susceptible to random market movements."
Suggesting against putting your money into it, he said, "I would not recommend allocating funds here for the long term. On the other hand, a lot of people would just want to bet and be a part of it for fun and get the 'gamblers rush' That is completely your choice!"
That being said, the Dogecoin community has made extensive use of the currency for philanthropic purposes. People tend to donate to organisations and causes through Dogecoin. As long as the currency stands for such purposes, its follower community is enough to stabilise the crypto in the market.
As for investing in Dogecoin, another big reason for not doing so in India is the impending decisions by the Indian government around cryptocurrencies. In a major move that has been hinted at for since long, the centre might impose an outright ban on cryptocurrency trading in the country, as it has done once before. Any investments in Dogecoin will certainly not be profitable then.
For now, people can evaluate the decision to back Dogecoin or not, as they deem fit.