Dogecoin (DOGE) was launched in 2013 as a joke. It aimed to satirise the wildly speculative trends around cryptocurrencies. Created as a meme coin, it rightly derives its name and logo from a popular meme known as the ‘Doge’. Today, DOGE is among the top ten most popular cryptocurrencies as an open-source blockchain-based digital money. 

Since Dogecoin is a cryptocurrency, many people find it hard to trust the transactions. The lack of a central authority that oversees the movement of Dogecoin might be one of the reasons why people are still sceptical of it. But there is no reason for doubting DOGE.

In this article, we try to understand how Dogecoin works so that people can get a clearer understanding of the whole process. 

1

The Dogecoin Network

The Dogecoin network is based on the Dogecoin blockchain. The source code of the network is tweaked from Litecoin. The network works on Proof of Work mining.

2

Maintaining the Blockchain

Dogecoin transactions are blockchain-based. Blockchain involves information-carrying units, known as blocks. These blocks keep on adding as each block reaches its maximum storage capacity. The blockchain essentially functions as a ledger, which records all transactions. It is shared by all systems acting as peer nodes of the network.

To add the details of the transaction, miners have to solve mathematical problems, known as the Proof of Work system, and this is the system that most cryptocurrencies follow. DOGE transactions are recorded quicker than Bitcoin because mathematical problems are more straightforward.

3

Mining Dogecoin

Cryptocurrency mining refers to the process of adding more tokens to circulation. When cryptocurrency transactions take place, they need to be uploaded to the peer node ledger so that the transaction can be recorded.

Miners have to solve complex maths problems to be able to upload these transaction details. The miner who solves the equation the quickest gets to upload the information and is rewarded with cryptocurrencies. This increases the number of cryptocurrency tokens in circulation.

Initially, the block reward (the rewards for adding the information to the block) was not fixed. It was set at 10,000 DOGE later.

Dogecoin mining also follows this same process, similar to Bitcoin mining. But the maths problems are way easier, which makes adding transactions to the ledger quicker.

While BTC transactions take 10 minutes, DOGE transactions are usually added within a minute. This contributes to the popularity of Dogecoin mining cryptocurrency miners.

Initially, miners would be rewarded with a random amount of Dogecoins. Still, presently, the block reward has been fixed at 10,000 DOGE per minute.

To mine Dogecoins, you need to use hardware (Dogeminer) and software combinations that are compatible with each other. Dogeminer hardware includes Computer Processors, Graphics Cards and the most popular ASIC miners.

The hardware is a node in the blockchain where users can solve mathematical equations. DOGE mining software is the application that connects the number to the node. Prominent software includes CPU miner, EasyMiner, and CGMiner, among others.

4

Dogecoin's Value

Dogecoin is an inflationary cryptocurrency. To put it simply, as time progresses, the buying power of DOGE will keep decreasing. This is because there is no cap limit on the production of Dogecoin. So, each time a miner solves a maths equation, 10,000 DOGE are injected into the market.

In 2021, DOGE rates experienced a bullish trend, with prices going as high as USD 0.30 in April 2021. This trend was triggered by Elon Musk when he declared Dogecoin to be his favourite cryptocurrency.

Even in March 2022, Dogecoin rates increased after announcing that Dogecoin would be available at cryptocurrency ATMs. However, rates remained constant at USD 0.11 throughout March 2022. The lowest rates Dogecoin witnessed were in 2015, when rates hovered around USD 0.0001 for months.

Despite its inflationary nature, DOGE rates have skyrocketed. It has happened primarily due to the rising popularity of cryptocurrency.

FAQ

What is blockchain technology?

Blockchain is a format that stores transactions’ details in blocks. These blocks are connected to other nodes and act as a digital ledger.

What is the highest value that Dogecoin reached? 

Dogecoin was valued at 0.30 US Dollars in April 2021, which is the highest value that the cryptocurrency has attained till now.

What is an inflationary cryptocurrency?

An inflationary cryptocurrency is a currency whose buying power will decrease over time. This means you will be able to buy more minor things within the same amount.

Why is Dogecoin an inflationary cryptocurrency?

Dogecoin is inflationary because there is no limit to the number of produced Dogecoins. With Dogecoin mining, thousands of DOGE have been added to the circulation each time a miner solves the mathematical problem to add transactional information to the ledger. 

What is Proof of Work?

Proof of Work is a system of decentralised consensus mechanisms. Peer nodes of a network have to solve mathematical problems to add information to the network.

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