Once upon a time, “Doge” was just a meme of a skeptical dog. Now, it’s the face of a cryptocurrency that’s rivaling Bitcoin in the headlines. Dogecoin’s price has surged over 400% in the last week.
So what is Dogecoin, and why is it getting so much attention?
“It could be the next great investment,” says Hanna Halaburda, an associate professor at NYU Stern School of Business. “Or it could be the next pump-and-dump scheme.”
Here’s everything you need to know about Dogecoin.
What is Dogecoin?
Dogecoin, like Bitcoin, is a cryptocurrency, digital money that can be sent from person to person via a decentralized network — in other words, without a bank, government or other third party.
Back in 2013, software engineers Billy Markus and Jackson Palmer created Dogecoin…as a joke. The pair created the “altcoin” (any cryptocurrency that isn’t Bitcoin) after seeing other altcoins being made daily with claims that they would one day be worth millions. The Dogecoin creators didn’t mean for the cryptocurrency to be taken seriously.
“The original intent was a parody of all the ‘serious’ clone coins that were trying so hard to differentiate themselves, but all seemed the same,” Markus told Business Insider. “Dogecoin was just another clone coin, but instead of taking itself seriously, it was just Dogecoin.”
If you’re on the internet enough to run across most popular memes, you’ve likely seen the inspiration for the digital currency’s image: Doge, a Japanese Shiba Inu dog staring at the camera.
Over the years, Dogecoin amassed a following in corners of the internet where, while some may have been looking for the next big thing, others were just looking for laughs. Then, the cryptocurrency exploded.
How much is Dogecoin worth?
At the start of this year, Dogecoin’s price was around 0.005 cents. Since then, it’s surged.
Last Wednesday, Dogecoin hit 10 cents a coin for the first time ever. Just two days later, on Friday, the cryptocurrency hit another all-time trading high at 44 cents, according to CoinMarketCap. If you invested your three stimulus checks into Dogecoin, it would have been worth over $300,000 by last week, according to Nick Maggiulli, Chief Operating Officer at Ritholtz Wealth Management. (Not that we would recommend this.)
Dogecoin now has a market capitalization of about $50 billion, making it the fifth largest cryptocurrency by market capitalization.
Why is Dogecoin’s price skyrocketing?
There are a few potential reasons for the surge. Coinbase, the largest cryptocurrency exchange in the U.S. made its debut on the public market last week, which many saw as a big vote of confidence in cryptocurrency. Bitcoin’s price also jumped to a record high as Coinbase’s stock became available for trades.
Elon Musk’s tweets probably also haven’t hurt. Just last week, the Tesla CEO wrote “Doge Barking at the Moon,” likely a reference to the phrase “to the moon” traders on sites like Twitter and Reddit use to indicate the possibility of a price soaring. Earlier this year, he tweeted a “Dogue” cover (imitating Vogue, we have to assume). Why? Who knows. But his tweets have certainly caused Wall Street concern.
There’s also the fact that retail investing has been booming, as evidenced by the trading frenzy around the meme stock GameStop earlier this year. The investing app Robinhood and Coinbase have both dominated mobile app stores as more everyday traders turn to the stock market. Dogecoin’s recent rise is further evidence that memes are what drive the attention economy, says Richard Smith, the CEO of the Foundation for the Study of Cycles and a financial cycles expert.
It’s a great way to once again tell the “fancy-pants on Wall Street” that there’s a new sheriff in town: the people, he adds.
Finally: FOMO. The fear of missing out on the next big thing can certainly get people to pile money into the market, no matter how risky it is.
What is the difference between Dogecoin and Bitcoin?
Bitcoin, created in 2009, was the first cryptocurrency and is still the dominant one. It was created for peer-to-peer transactions over the internet. Dogecoin was started as a spin-off, and for a laugh, but it’s picked up steam.
In Dogecoin explainer videos, popular Youtubers like Marques Brownlee and Graham Stephan have called the digital currency less intimidating (since it is, in its origin, a joke) than the rest of the crypto world, which takes itself pretty seriously.
Dogecoin is also more consumer-friendly, says Eric Schiffer, CEO of the private equity firm, The Patriarch Organization. As in, people can actually afford it.
“For the average American, owning a Bitcoin is out of reach at $60,000,” Schiffer says. “People would rather own the entirety than a fraction of something.”
One aspect of Dogecoin that makes it unique is its unlimited supply of coins while other cryptocurrencies have a cap. Only 21 million bitcoins can be mined total, for example, but due to a flaw in its design, dogecoins can continue to be mined over time. That gives miners extra incentive to create Dogecoins but also creates an extra risk that the currency could lose value over time through what would amount to “inflation.”
At least for now, Bitcoin is a lot more mainstream than Dogecoin, and more big companies are allowing customers to use it for everyday transactions. Dogecoin hasn’t gotten there.
What can you buy with cryptocurrency?
You can’t just walk into a store and use digital coins, but more and more companies are jumping on the bandwagon of accepting Bitcoin and some other cryptocurrencies as payment.
Yum Brands, which operates food chains like Pizza Hut and Taco Bell, and Whole Foods are among them. Last year, PayPal started allowing users to buy, sell and hold cryptocurrencies and soon, users will be able to pay millions of merchants with it.
So far, traditional retailers aren’t accepting Dogecoin. Users can use it for small transactions, like tipping content creators.
How do you buy Dogecoin?
You can buy Dogecoin via some cryptocurrency exchanges Kraken. If you’re buying Bitcoin, you’ll need a “digital wallet” for the Dogecoin to be sent.
Robinhood, the favorite investing app among many of the traders that took part in the Gamestop trading frenzy, allows users to trade Dogecoin commission-free. There are also websites called Dogecoin faucets, where people can request a small amount of coins during certain time intervals, like every three hours.
Should you invest in Dogecoin?
No surprise here: Cryptocurrencies come with risks, like volatility. Bitcoin’s price hit a record high in December of 2017 before plunging 50% the first month of 2018. Dogecoin is no exception: while its value has risen in line with some of the other cryptocurrencies, it’s recent 400% surge shows that it’s, at least, unpredictable. Dogecoin may be here to stay but it’s likely to be a wild ride, Smith says.
Cryptocurrency also isn’t regulated like other assets like stocks that trade on exchanges. Money has previously reported that one of the biggest risks to owning Bitcoin is the possibility of it being banned. Just this year, Treasury Secretary Janet Yellen said that the U.S. government may need to “curtail” the use of Bitcoin, adding that it’s mainly used for “illicit financing.”
Investors need to be cautious. Experts advise putting no more than 5% of your wealth into risky investments like cryptocurrency.
“It really needs to be money that you’re comfortable in losing,” Schiffer says.