Dogecoin is ridiculous, and that’s the whole point. The cryptocurrency that started out as a joke is now a meme come to very lucrative life, with nearly $50 billion worth of dogecoins in circulation today. In fact, the quirky cryptocurrency is red hot, and its value has skyrocketed more than 6,000% this year, making it the fifth most valuable cryptocurrency in the world.
The joke started on December 6, 2013, when a pair of software engineers decided to lampoon bitcoin, which keeps itself and its creator shrouded in mystery and takes itself and the enigma extremely seriously. In contrast, dogecoin was intended to be open and accessible for the masses. To celebrate this lowbrow everyman sentiment, the creators named their cryptocurrency after the doge meme that was ruling the internet back in those halcyon days of yore.
And now, what began as a meme-branded internet jokes has become a bona fide crypto asset, all thanks to an active and enthusiastic internet fan base centered around an oddball Reddit community that has championed the cryptocurrency and carried out dogecoin fundraisers for a huge and hilariously diverse number of causes from charitable giving to crowdfunding a dogecoin sponsorship for Nascar driver Josh Wise.
"Dogecoin is not so much an alternative deflationary numismatic instrument as it is an inflationary leisured exploration of community-building around a crypto asset," economist Usman Chohan wrote in an academic paper about dogecoin. In other words, much playful, very community.
But now the popularity of dogecoin has spread beyond the message boards of Reddit and into the wider crypto community--and it is red hot. Part of the cryptocurrency’s newfound popularity is just thanks to a generalized enthusiasm for crypto assets as currencies like bitcoin have become increasingly adopted by the mainstream. Part of it is just more internet ridiculousness. Cue Elon Musk’s twitter profile. Related: Iran Says It Welcomes Talks With Saudi Arabia
Musk is easily the most influential advocate of dogecoin, and he has been extremely and erratically vocal about it on twitter. “One of his bizarre tweets to his 50 million followers can send the crypto surging,” reports CNN Business. And that’s exactly what happened just this Friday, when Musk sent the currency’s value surging and tweeted an extremely poignant economic analysis of the social and financial benefits of dogecoin. Just kidding. The tweet that sent dogecoin through the roof read "Doge Barking at the moon" accompanied by an image of Joan Miró’s painting titled "Dog Barking at the Moon." In a true celebration of the ridiculousness of doge and the internet, the single absurdist tweet literally doubled the value of dogecoin and even briefly brought down Robinhood's cryptocurrency trading system thanks to a huge spike in demand for dogecoin.
But while dogecoin is easy to dismiss as frivolous, silly, and fleeting, it’s become increasingly clear that the cryptoasset is very, very real. Dogecoin, in addition to proving itself on the market, has also become an increasingly impactful contributor to cryptocurrencies’ major carbon footprint. Mining cryptocurrencies, which involves huge amounts of computing power to solve complex puzzles to establish “proof-of-work” requires a truly staggering amount of energy. But while dogecoin is no exception, it’s actually one of the most energy-efficient cryptocurrencies thanks to the algorithm that it uses for mining.
While bitcoin mining requires the ultra-complex SHA-256 algorithm, dogecoin is mined using Scrypt, which is several times more energy efficient, not to mention a lot quicker. The drawback is that it’s not as safe as the ultra-secure SHA-256. But the benefits of dogecoin’s lower greenhouse gas impact and quicker mining process shouldn’t be understated, as cryptocurrencies are increasingly adoped and their environmental impact becomes more important and more widely scrutinized. Not to mention the fact that dogecoin’s efficiency and accessibility for amateur miners and environmentally conscious crypto-enthusiasts falls in line with dogecoin’s ethos of being a cryptoasset by and for the people. Long live the doge.
By Haley Zaremba for Oilprice.com
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Mining a bitcoin block means finding such x in y = f(x) that resulting y meets specific conditions. f is so called cryptographic hash, basically function without inverse function.
In case of bitcoin: f function is SHA256, and x and y are 256 bit numbers. Special condition is that n of the bits of y are zeros. Number of required zero bits (n) comes from mining comes from mining difficulty.
In practice one needs to simply try with different x values to find y value witch is has enough zeros in the end. This takes lot of calculation, since one needs to calculate SHA256 for really many x values before finding working y. And no-one has succeeded to crack SHA256, I like millions of others have tried and failed to find partial inverse function. Once found, a new block is added to chain and it miner gets 3.125 bitcoins (block reward) number of bitcoins. Block reward drops over time with process called halving, but it doesn't effect this text. Important is that adjusting Bitcoin difficulty makes sure that blocks are found on average every 10 minutes, so we produce constant cake of bitcoins to share.
What is important to realize that number of bitcoins is independent on computing power, adding computing power by better tech or consuming more energy will only increase miner's share of the cake, but no more bitcoins will be produced.
Second loop is closed by market economy. When bitcoin price is high, more will be invested in bitcoin mining in fight of the share of the cake. End result is that always ~60% of price of new bitcoin is energy, ~20% computer, building, etc costs and ~20% miner profit.
Same applies to Dogecoin. When price is going up quickly that new mining investment cannot keep up, it may be produced for short while with less energy and much better miner profit.
But in the end it is the same, loops are closed by adjusting difficulty and market economy. So energy use to make new Dogecoin will be same ~60% of price, as with bitcoin.
This is the beauty of "proof of work concept". It always balances out and adopts to environment.