Too embarrassed to ask: what is dogecoin?
In the first four months of 2021, the value of cryptocurrency dogecoin shot up by around 9,000%. But what is dogecoin and why has it gone up so much?
In the weird and wonderful world of cryptocurrencies, bitcoin is the undisputed king. But recently, one particular cryptocurrency has been grabbing a lot more attention: dogecoin.
Between the start of 2021, and the middle of April (when this video was made), the value of the cryptocurrency shot up by around 9,000%. In other words, if you’d put £100 in it on Christmas Eve, you’d have been sitting on roughly £9,000 come Easter Sunday.
So what is dogecoin and why has it gone up so much?
The first thing to understand about dogecoin is that it was set up as a joke. It was invented in 2013 by a pair of software engineers, Billy Markus and Jackson Palmer.
It’s called dogecoin because it was based on the popular “doge” internet meme. This features a picture of a particularly cute breed of Japanese dog – the Shiba Inu – looking baffled, and surrounded by multicoloured words with spelling mistakes.
The idea was to parody the whole concept of cryptocurrencies and to highlight how easy it was to launch one. Yet some argue that this in itself drew attention to the cryptocurrency, and thus gave it a staying power and traction that has escaped many “serious” rival cryptos.
So what is dogecoin actually for?
Unlike some cryptos, which have specific uses embedded in them, dogecoin is simply a digital currency, just like bitcoin. Unlike bitcoin however, which limits the total number of coins that can ever be mined to 21 million, dogecoin has no maximum.
So technically, there is no restriction on the quantity of dogecoins that can be mined. It’s also easier to mine dogecoin, though you would still need specialist equipment to do so now. All of this should imply that even if dogecoin does have a value, it should be a lot lower than bitcoin’s.
As for its inventors, neither works on dogecoin anymore. Markus has said that he sold all of his dogecoin in 2015. Apparently, he made enough to buy a second-hand Honda Civic.
To find out more about cryptocurrencies and whether they are a real asset class or just a giant bubble, subscribe to MoneyWeek magazine.