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Dogecoin: the Cryptocurrency Joke That Might Make it Big

Updated on January 26, 2014
No, really, this is the logo.
No, really, this is the logo.

It All Began With Bitcoin

Bitcoin, the original cryptocurrency, is based on primarily on two premises: the decentralization of currency and currency that represents "work" that a user has done. As a cryptocurrency, Bitcoin could be "mined" (or created, to put it more simply) by having a computer run through very complex calculations. This meant that each "coin" represented a specific type of work. To stabilize this currency, theoretically, bitcoin became more difficult to mine as time progressed. Further, bitcoin was a peer-shared currency that was validated against other users, making the system both decentralized and--again, theoretically--completely secure. Bitcoin could be used by anyone in any nation to trade, sell and buy things.

The Problems With Bitcoin

Apart from the tremendous value fluctuations--which were largely to be expected with such a new form of investment--bitcoin had one major flaw: it was easier to mine with very specific hardware. While originally intended to be "created" through the use of CPU cycles, many intelligent miners quickly found out that some very specific GPUs were actually more effective miners. This greatly shifted wealth: only those that were willing and able to sink tons of money into bitcoin mining machines were able to accrue coin.

The Birth of Litecoin

Litecoin was then born as a modification to Bitcoin. Apart from some other changes, and the fact that Litecoin had a much lower and more stable value, Litecoin sought to equalize wealth distribution by making it viable to mine Litecoin on any machine, not just those with specific GPUs. While this was not a perfect solution, it was still overall a more stable solution than Bitcoin. Many individuals likened Litecoin to silver, whereas Bitcoin was gold, and Litecoin became a secondary standard.

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And Then There's Doge...

Dogecoin was then originated through sheer nonsense. Described by a reporter as "dog-based Internet currency," dogecoin is essentially a joke that was forked off of Litecoin. It's basically a rebranded Litecoin that is worth virtually nothing (10,000 dogecoins are roughly $20 as of January 2014) and yet can still be traded and used as a viable cryptocurrency.

Why is Dogecoin More Than Just a Joke?

Cryptocurrencies may seem complex, but really they operate on a very basic premise: they are worth money if everyone agrees that they are worth money. Bitcoin didn't get a foothold until it became highly publicized, at which point the price began skyrocketing. At the same time, both Bitcoin and Litecoin tend to plummet if public opinion turns: these cryptocurrencies are new enough that they are highly volatile and very easily influenced. Therefore, as long as someone believes something has value, it becomes valuable. This is something that the diamond industry has known for a long time.

Current Values (January 2014)

Type of Currency
Unit Value
Units
Bitcoin
$884.22
12,316,600
LItecoin
$24.24
25,177,354
Dogecoin
$0.0016
37,029,031,491

So is Dogecoin Basically a Penny Stock?

In some ways, yes. Dogecoin is a very low value investment that could rise incredibly. While Litecoin is a more intelligent investment in the future--overall, it's likely more stable than Bitcoin due to its core improvements, but it still has only a fraction of Bitcoin's market--Dogecoin has a larger potential to rise. This is even more true because of its publicity: the community behind Dogecoin tends to be extremely vocal, and has taken to doing things like sending the Jamaican bobsledding team to Russia to compete in the Olympics because of the movie Cool Runnings.

So, at the end of the day, it's dog based Internet Money?

Yes and no. No one's ever going to pay a mortgage in Dogecoin, and a bank is not likely to ever accept it. It is first and foremost a joke. However, being a joke doesn't mean that it lacks value. Dogecoin very well could become a major microtransaction facilitator: Dogecoin can be traded in almost indescribably small amounts and has the actual benefit of being incredibly valueless. This actually makes projects such as a real life sequel to Cool Runnings more viable rather than less, because it's essentially taking crowdsourcing and crowdfunding to the next level.

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    • moviesreviews profile image

      Billy Taylor 2 years ago from NY

      You hit it on the nose with the volatility -- ty for sharing

    • EGamboa profile image

      Eileen Gamboa 3 years ago from West Palm Beach

      I've never heard of this before. Thanks for the enlightenment!

    • davidlivermore profile image

      David Livermore 3 years ago from Bakersfield, California, United States

      With all of these coins coming out, I see a lot of them falling flat.

      Dogecoin is the funniest of them all, but I don't see how an internet meme can be turned into a currency.

    • Jodah profile image

      John Hansen 3 years ago from Queensland Australia

      Very interesting hub. I always wondered how these cryptocurrencies worked and I now know much more than I did before. The only one I had heard of was Bitcoin however. Voted up.