What Is Dogecoin (DOGE)? How It Works, Controversies
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Dogecoin (pronounced dohzh-koyn) is a cryptocurrency meme coin that began as a lighthearted reference to one of the internet’s most enduring memes. But in recent years, Dogecoin has become one of the most highly valued digital assets — thanks in large part to a devoted community of users who continue to promote it.
Historically, Dogecoin (DOGE) has seen substantial growth in its market value. However, those longer-term gains have been a product of intense ups and downs that have come to characterize the crypto space.
In recent months, Dogecoin has been trading in the 5- to 14-cent range. But historically, Dogecoin has seen some extreme price surges. A few weeks after Dogecoin went live in 2013, its price jumped over 300% from an 18th of a penny to a sixth of a penny. In May 2021, Dogecoin hit an all-time high of 74 cents.
How did Dogecoin start?
For the uninitiated, Dogecoin is named in honor of Doge, a character based on a picture of a shiba inu that has been passed around the internet since 2010. Doge is often used online as a mascot for good-natured wonder, and the coin inspired by the canine’s image tends to represent a similar point of view.
Billy Markus, a co-founder of Dogecoin, has written that he started Dogecoin as a joke to bring some lightheartedness, kindness and generosity to the crypto world.
Dogecoin was developed as a digital form of payment, similar to Bitcoin or Litecoin. People also use it as an investment product. Primarily, it's known as a meme coin whose users pride themselves on the culture that has grown around it.
“At its heart, Dogecoin is the accidental crypto movement that makes people smile!” a message boasts on dogecoin.com, a prominent Dogecoin website. The project’s primary message is summed up best by a common Dogecoin Reddit rallying cry, which notably forms an acronym of DOGE: "Do Only Good Everyday."
Dogecoin devotees often use social media to hark back to some of the coin’s guiding principles, including charity, fundraising, support of one another, cryptocurrency advocacy and making memes.
In 2014, the Dogecoin Foundation raised more than $50,000 in Dogecoin to help the Kenyan drinking water crisis. More recently, Dogecoin owners have devoted computing power to the [email protected] project, which helps scientific research by running simulations involving proteins.
How Dogecoin works
Dogecoin’s functions are fundamentally similar to those of other cryptocurrencies, particularly those like Bitcoin that were primarily designed for payments.
Dogecoin is built on blockchain technology, a computer networking method that allows cryptocurrencies to run without a central authority, like a bank. Dogecoin uses a proof-of-work consensus mechanism, which means transactions are validated through mining. In exchange for their work, miners receive additional Dogecoin as a reward.
However, Dogecoin (and many other cryptocurrencies) has been criticized for the amount of energy miners consume in a proof-of-work system. Comparatively, cryptocurrencies using proof of stake use far less energy and have a much smaller carbon footprint.
In September 2022, the popular cryptocurrency Ethereum (ETH) completed its migration from proof of work to proof of stake. Ethereum co-founder Vitalik Buterin said the migration will reduce global energy usage by 0.2%. Dogecoin is partnering with Buterin to work on its migration, but they haven't said when the change might occur.
You can establish ownership of Dogecoin with a private key, a code similar to a password that allows you to access a cryptocurrency. These keys are often held in crypto wallets.
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What gives Dogecoin value?
Dogecoin prices are largely driven up or down by popular culture, celebrity endorsements and social media. The hype around the token can sometimes drive prices up significantly.
Dogecoin doesn’t have any use cases. It could theoretically become a commonly accepted medium of exchange but isn’t yet. Because there’s an unlimited supply of Dogecoins, it’s also an inflationary token, meaning the tokens could lose value over time as an unlimited number are produced.
Controversies about Dogecoin
Markus and fellow co-founder Jackson Palmer left the Dogecoin project in 2015. Markus said on Twitter that he left because of harassment from the community; Palmer also criticized the ecosystem as “toxic.”
Palmer has become an outspoken critic of cryptocurrency. In 2021, he posted the following on Twitter: “After years of studying it, I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity.”
In June 2022, a Dogecoin investor filed a class-action lawsuit against Tesla CEO Elon Musk that accused him of running a cryptocurrency pyramid scheme involving Dogecoin. Since the initial complaint, the lawsuit has expanded to include several more plaintiffs and defendants. The suit alleges that Musk and the other defendants purposefully drove up the price of Dogecoin by 35,000% — from 0.2 cents to 73 cents — and then let it crash.
» Another dog-related token: How to buy Shiba Inu
Learn more about cryptocurrencies
Disclosure: Writer Andy Rosen owned DOGE, BTC and ETH at the time of publication. Editor Claire Tsosie owned DOGE at the time of publication. Writer Connor Emmert didn't own any of the aforementioned investments at the time of publication.