what is dogecoin?
In the world of digital currencies, dogecoin is not a top ten contender. Coinmarketcap gives it a meager 1.8% market share, compared to Bitcoin’s 54.98% and Ethereum’s 38.76%. But for doge, this is a major milestone: over $1 billion worth of doge has changed hands since the currency debuted last month. To put that number in perspective, a single doge is worth around $1.30.
There are many reasons why people started speculating on doge. For starters, people use the word “doge” to indicate fun. Also, it’s so clever. Not many currencies are kind to alluring puns. Finally, the digital currency itself is interesting: it’s just one of several competing “virtual coins” based on the same technology that powers Bitcoin and Litecoin.
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| what is dogecoin |
In case you aren’t familiar with Bitcoin and its brethren, they offer users a digital currency with a fixed transaction fee and their own independent blockchain. All of the world’s blockchain transactions happen in a process called blockchain traversal. Bitcoin transactions take less than ten minutes to process, but the blockchain transactions take much longer: two or three days for Bitcoin and around three months for Ethereum. Dogecoin, on the other hand, operates on a blockchain that moves much faster: one second, compared to four days for Bitcoin.
Dogecoin is also one of the first of many cryptocurrencies based on a platform that’s much simpler than Bitcoin’s “node” codebase. In fact, many dogecoin proponents consider this ease-of-use, in addition to its increasingly friendly design, as its main selling point.
So what is dogecoin worth?
If you’re looking to buy dogecoin, Coinmarketcap provides some guidance. The site currently estimates that dogecoin will reach $1.70 in April, a huge increase over its current market cap of $867 million. We can explain that huge disparity based on one day’s worth of trading. On January 14, dogecoin traded at $1.30 per coin, a price it held for most of the day. Because there were so many dogecoins in the marketplace that day, their price rose sharply. Coinmarketcap estimates that on January 14, around 790,000 dogecoins changed hands. If you assume each coin sold for around $0.50, then that means around 10.75 million dogecoins changed hands on that day.
Next, we’ll need to do some math to understand just how much dogecoin is currently worth.
Using the current exchange rate of 1.8% of dogecoin’s entire market value per coin, the price of dogecoin would be around $3.80 per coin. That would give dogecoin a market cap of around $967 million, far higher than its current market cap of $867 million. But remember that it only takes around $1.30 to sell one dogecoin. Thus, at $3.80 per coin, dogecoin has a market value of $914 million.
Does that seem high to you? That’s because it’s the price of a coin that went from under $1 per coin in February to over $1 per coin in January.
Is there anything that prevents the price of dogecoin from rising further? For one thing, the digital currency doesn’t have many users. After one week, the digital currency had only 17,000 users. That’s extremely small compared to other cryptocurrencies. Of course, the company that created dogecoin, called Dogecoin Partners, isn’t launching it on the stock market, so the investors who own the tokens don’t have the same motivations as other investors.
But are those investors buying? Of course they are. Here are a few ways that investors who buy digital currency like dogecoin do so:
They trade for profit. At the time of this writing, people are trading more than $2 million worth of dogecoin per day. Many investors buy for profit, not for speculation.
Many investors buy for profit, not for speculation. They speculate for profit. Speculation on digital currencies is commonplace. As well as trading for profit, many investors also speculate that the price of a digital currency will rise further, thus boosting the value of their investment.
Speculation on digital currencies is commonplace. As well as trading for profit, many investors also speculate that the price of a digital currency will rise further, thus boosting the value of their investment. They have “strategic investment.” A number of wealthy investors, including Tim Draper and Peter Thiel, invest in digital currency to try and gain a strategic advantage over larger financial institutions. In that way, they believe that if they buy more digital currency, it might push the market toward success.
Of course, none of these reasons are necessarily bad reasons to invest. Investors like dogecoin because it offers something that’s new and novel, and is very fun to use. But if the future of digital currency is truly about being used by millions of people in a few years, then those who invest today may have an advantage. Dogecoin has proven to be very friendly to the general public, while many other digital currencies are still struggling to develop a user-friendly interface that makes people want to use them.
There’s no way for us to know for sure which cryptocurrency will become popular, but all signs point to dogecoin being a huge success. The success of bitcoin and its competitors in recent years shows us that it’s possible for a digital currency to gain thousands of new users on the marketplace, and still retain the original intent.
There are many questions left to be answered by the people who created dogecoin, and a lot of obstacles to overcome.
Do you believe in the future of digital currencies, or do you think that dogecoin has peaked, like dogecoin’s founder believes? What’s your investment strategy?
Will the price of dogecoin ever reach $1.90 per coin? How about $1 per coin? Will dogecoin become just as popular as bitcoin in the future? Is there anything that prevents the price of dogecoin from rising further? Are the coins being sold on the marketplace worth $3.80 per coin? What are the obstacles that do you see preventing the price of dogecoin from rising further?