DOGE

Most recent update: [June 26, 2023]  

What Is Dogecoin? 

Dogecoin is an altcoin and is often considered a meme cryptocurrency, based on the popular internet meme “doge” and features the Shiba Inu as its mascot or logo. Dogecoin was created at a time when cryptocurrencies were gaining traction. Created in 2013, the cryptocurrency's creators had a vision of creating a fun, light-hearted cryptocurrency that could have appealed to a more mainstream audience than just crypto enthusiasts.  

Dogecoin’s creators wanted to create a currency that was more accessible to the masses and serve as a medium of rewarding the community and content creators. It was also supposed to be a satirical take on cryptocurrencies like bitcoin, thanks to the sudden explosion in their valuation. Today, Dogecoin is the 8th largest cryptocurrency in the world.  

How Does Dogecoin Work?  

In its functioning, Dogecoin works similar to cryptocurrencies such as Litecoin and Bitcoin. However, it is not Turing-complete and cannot support smart contracts. The creators of Dogecoin created it through a fork of Luckycoin, with the founders having copied the Luckycoin software. Luckycoin was a fork of Litecoin, which was a fork of Bitcoin. So no surprise that Dogecoin functions a lot like Litecoin.  

Dogecoin is a peer-to-peer cryptocurrency using the Proof-of-Work consensus mechanism. Transactions on the network are validated by miners on the network who add the blocks to the blockchain after verifying them and securing the network. Dogecoin’s functioning is slightly different from Bitcoin because it uses the Scrypt mining algorithm, which consumes less energy and has a lower hash rate than Bitcoin.  

History of Dogecoin  

Billy Markus and Jackson Palmer founded Dogecoin in 2013 as a meme cryptocurrency. They saw Dogecoin as a satirical take on the crypto market and the ridiculous valuation of cryptocurrencies. They created Dogecoin as a coin that would be easily accessible to the general public and serve as a medium to reward content creators and build community engagement. Palmer bought the domain Dogecoin.com while Markus created Dogecoin’s code based on Luckycoin.  

The creators of Dogecoin did not envision the popularity that Dogecoin would generate for itself, going on to become one of the largest cryptocurrencies in the world. Currently, Dogecoin is the 8th largest cryptocurrency in the world.  

Features of Dogecoin  

Dogecoin has several features and uses that set it apart from other cryptocurrencies.  

• There is no cap on the number of Dogecoins that can be mined. This is significantly different from cryptocurrencies such as Bitcoin that have a cap on the total number that can be mined.  

• Dogecoin uses Scrypt Mining Algorithm, which consumes less energy and has a low hash rate, allowing miners to mine Dogecoins quicker.  

• Dogecoin is a highly community-driven cryptocurrency, and the community has made several donations using Dogecoin.  

• More than anything, Dogecoin is aimed at educating the general masses about cryptocurrency and giving them a safe option to start with should they choose to invest in crypto.  

The Technology Behind Dogecoin  

The Dogecoin blockchain uses the same method as cryptocurrencies such as Litecoin and Bitcoin to add blocks and validate transactions. It uses the Proof-of-Work consensus mechanism, and miners have to compete with each other to add new blocks to the blockchain using specialized computing equipment.  

To get into more specifics, miners have to try and create a code known as a “hash.” The hash has a value equal to or lower than the target value of the new block. This is the “target hash,” and whichever miner is able to create the correct code can add the next transaction to the next block. The miner is rewarded with new Dogecoins for their effort. Other Proof-of-Work cryptocurrencies similar to Dogecoin (Litecoin, Bitcoin) have a supply cap, in the case of Bitcoin 21 million and in the case of Litecoin 84 million. Dogecoin, however, does not have a cap on its supply, with its circulating supply set to keep increasing indefinitely.  

A new block on the Dogecoin network is created every minute compared to Bitcoin’s ten minutes. This is because despite using the same system, Dogecoin functions a little differently than Bitcoin. It uses the Scrypt mining algorithm, making mining quicker and less energy-intensive. Dogecoin and Litecoin both use a common algorithm, allowing them to be “merge mined.” this means that miners can simultaneously mine both coins without impacting efficiency.  

Dogecoin Token Supply and Incentives  

Initially, Dogecoin’s token supply was to be capped at 100 billion, with the block rewards also set to halve every 100,000 blocks. The halving would continue until 600,000 blocks were mined, after which the reward was fixed at 10,000 Dogecoins. However, in 2004 the developers decided to make Dogecoin inflationary instead of deflationary like most Proof-of-Work cryptocurrencies and removed the cap on supply. However, the block reward remained constant at 10,000.  

Once the cap was removed, the cryptocurrency’s price declined rapidly, and incentives for miners to mine Dogecoin were also reduced. With the Dogecoin network’s hashrate also declining, there was a genuine fear in the community that Dogecoin could be hit with a 51% attack. Dogecoin developers initiated merge mining to prevent this, which allowed Dogecoin to be mined simultaneously with Litecoin.  

Dogecoin Risks  

51% Attacks  

Although blockchain technology is safe, and Dogecoin has never been hacked, there was a time after its launch when Dogecoin was vulnerable to a 51% attack. A 51% attack occurs when a group of miners or a single miner controls more than half the blockchain. When the developers removed Dogecoin’s cap, the cryptocurrency’s price declined rapidly, and we saw a decrease in the number of miners as the incentives to mine Dogecoin also dropped. To prevent this, the developers enabled merge mining of Dogecoin with Litecoin.  

Moolah  

Moolah was a Dogecoin exchange created by British citizen Ryan Kennedy. Kennedy convinced several members of the Dogecoin community to donate significant amounts to help set up the exchange. However, it later emerged that Kennedy had used all of the donations to buy over $1.5 Million worth of Bitcoin and ran away with the cryptocurrency, defrauding the Dogecoin community. Kennedy was eventually caught on an unrelated charge and sentenced to prison.  

Due Diligence  

Prior to listing Dogecoin on the VirgoCX Platform, VirgoCX performed due diligence on Dogecoin and determined that Dogecoin is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis including reviewing publicly available information on the following:  

• The creation, governance, and location of Dogecoin and/or its primary development team; 
• The supply, demand, maturity and liquidity of Dogecoin; and 
• Legal and regulatory risks associated with Dogecoin.  

Statutory Rights under Securities Legislation 

VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30, 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada, do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision. 

References  

https://coinmarketcap.com/currencies/dogecoin/ 

https://www.investopedia.com/terms/d/dogecoin.asp 

https://www.bitdegree.org/crypto/what-is-dogecoin#moolah