Dogecoin (CRYPTO: DOGE), which started out as a meme-based parody of Bitcoin (CRYPTO: BTC), turned its earliest investors into millionaires. It launched in 2013 with a trading price of $0.00026, but it now trades at about $0.19 per token.
That’s well below its all-time high of $0.74 from May 2021, but it would still have turned a $2,000 investment into almost $1.5 million in just 12 years. Let’s see why this meme coin became a millionaire-maker token, and if could churn a fresh $2,000 investment into $1 million again.
How is Dogecoin different from Bitcoin?
Dogecoin, like Bitcoin, is mined with the energy-intensive proof-of-work (PoW) validation mechanism. Its miners use powerful mining computers, which run on application-specific integrated circuits (ASICs), to earn its coins as rewards for solving cryptographic puzzles.
Dogecoin was created from the open-source code for Litecoin, another PoW token which was forked (split off) from Bitcoin’s blockchain in 2011. Dogecoin and Litecoin are often mined together because both blockchains accept the same solutions.
Therefore, when a miner solves a cryptographic puzzle on Litecoin’s PoW blockchain, the exact same hashing solution can be submitted to Dogecoin’s blockchain to earn rewards in both coins. However, a miner can choose to mine the two coins separately.
Dogecoin differentiates itself from Bitcoin and Litecoin with Scrypt, a proprietary algorithm that lets it process its transactions at a faster and more power-efficient rate. Unlike Bitcoin and Litecoin — which have capped supplies of 21 million and 84 million tokens, respectively — Dogecoin doesn’t have a maximum supply limit, and has 151 billion coins in circulation. Dogecoin’s supporters believe that design will drive more people to use it for payments instead of hoarding it.
But as a PoW blockchain, Dogecoin can’t support smart contracts, which are used to develop decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets. By comparison, proof-of-stake (PoS) blockchains like Ethereum and Solana support smart contracts.
Why did Dogecoin soar?
Dogecoin can’t be valued by scarcity like Bitcoin, and it can’t be valued by its usefulness for developers like Ethereum or Solana. Yet some glowing endorsements from Elon Musk, Mark Cuban, Snoop Dogg, and other high-profile investors drove its price to an all-time high during the last bull market for crypto in 2020 to 2021.
