Explained: What is Dogecoin, the $34 billion cryptocurrency that began as a joke?
Just as the virtual currencies Bitcoin and Ethereum have surged in value this week, so has Dogecoin– a cryptocurrency started in 2013 as an internet parody.
Based on the “Doge” meme and started as a “fun” alternative to Bitcoin, Dogecoin’s value has risen phenomenally this week– adding around $19.9 billion in the last 24 hours, and now valued at $34 billion, according to CoinGecko, a market data site.
On Friday in the US, the digital token was valued at 28 cents, more than double its value a day before. A top-10 crypto token, it has seen a seven-day rise of 300%.
What is Dogecoin?
According to CNBC, the digital token was created in 2013 by software engineers Billy Markus and Jackson Palmer as a faster but “fun” alternative to Bitcoin. It was started as a satire on the numerous fraud crypto coins that had sprung up at the time, and takes its name and logo from a Shiba Inu meme that was viral several years ago.
Unlike Bitcoins, whose maximum possible number is fixed at 21 million (a figure that is estimated to be reached by 2040), Dogecoin numbers do not have an upper limit, and there are already more than 100 billion in existence.
When the crypto coin first took off, the online community that was backing it invited attention by supporting unconventional causes, such as sponsoring Jamaica’s bobsled team at the 2014 Winter Olympics. Also that year, the Dogecoin community gave $55,000 worth of the digital token to a Nascar driver in the US.
So, what is behind Dogecoin’s rise?
The main reason believed to be behind Dogecoin’s meteoric surge is the same that has propelled the value of Bitcoin and Etherem– this week’s listing of Coinbase, the most popular virtual currency exchange in the US.
Coinbase’s market cap briefly hit $100 billion after it went public on Wednesday, and the values of Bitcoin and Etherem touched $64,000 and $2,500, respectively, during the week. Dogecoin is said to be a part of this frenzy.
SpaceX is going to put a literal Dogecoin on the literal moon
— Elon Musk (@elonmusk) April 1, 2021
“Doge” also has an ardent supporter in Tesla CEO Elon Musk, who frequently tweets have added to the digital token’s mania. Musk had once changed his Twitter bio to “Former CEO of Dogecoin.” Other celebrities, including rapper Snoop Dogg and rock musician Gene Simmons, have also promoted it on social media.
Another reason behind its current success is said to be a Reddit group called SatoshiStreetBets, where members built up an enthusiasm for the cryptocurrency in a manner similar that led to the rise of GameStop earlier this year. The group’s name refers to Satoshi Nakamoto, the screen name of the person or group of persons behind Bitcoin.
Why some are concerned
Some investors have expressed fears that Dogecoin’s rise would lead to a bubble, given that buyers do not see any meaningful value in the digital token, and are only trading to make money while the price keeps going up.
Without having any intrinsic value such as land or gold, cryptocurrencies are considered highly volatile, and may crash as fast as they can rise, experts say, making them susceptible to sudden scares as well as manipulation by small groups who often hold large numbers of the virtual currency in circulation.