Elon Musk Continues to Back Dogecoin Over Its Competitors: Should You Take a Chance on the Meme Crypto?
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In February, Elon Musk and other celebrities tweeted about Dogecoin — and the value of the coin increased by 37 percent in just 24 hours. These events pushed the cryptocurrency's market value over $10 billion. In May, Dogecoin's popularity skyrocketed again when Elon Musk announced Tesla would no longer accept Bitcoin as a form of payment and proposed Dogecoin as a possible replacement. As Musk tweeted about Dogecoin and took polls to gain insight on public opinion, Dogecoin value increased 20 percent, sitting at 47 cents — that's up from just 8 cents in February.
These events indicate that Dogecoin, a meme cryptocurrency, is here to stay. The coin has a rather unlikely origin story.
What is a meme cryptocurrency?
Dogecoin is a meme cryptocurrency, meaning it was created based on a meme. Memes are humorous viral content meant to be shared online. Often, like with the “doge" meme, the content is an image that is edited to add some funny text or imagery, then reshared.
Although founded on a recognizable humorous base, meme crypto is not necessarily a joke itself. Having a popular meme attached to a new cryptocurrency can actually lead to public buy-on.
Linda Xie, founder of Scalar Capital, a crypto investment fund, and former product manager for Coinbase, believes the link between pop culture and crypto is key. When Dogecoin caught her interest, she did a deep dive into meme crypto. As she points out, it’s incredibly important for crypto to get the interest of the mainstream to be adopted by more than just crypto enthusiasts. A good meme captures attention in a much bigger way than any blog post ever could. As a meme coin gains popularity and grows in price, so does its value. Mainstream adoption is imperative for growth.
What is Dogecoin?
Jackson Palmer, an Adobe data scientist, and Billy Markus, an IBM developer, are the Dogecoin creators. They named the meme crypto after the doge meme — a viral image of an expressive Shiba Inu dog, usually accompanied by captions in Comic Sans meant to be the inner monologue of the doge. Since they created the coin as a way to make fun of Bitcoin, the name was fitting.
Similar to Bitcoin or Ethereum, Dogecoin runs on blockchain technology. All transactions made using Dogecoin and other similar decentralized digital currencies are stored in a secure, distributed digital ledger called a blockchain. Holders of Dogecoin are given identical copies of the blockchain ledger, which holds all new transactions using the meme coin. The ledger is updated often and cryptography keeps the blockchain network itself secure.
People can use Dogecoin to buy things or make payments, so long as the company or person you’re working with accepts Dogecoin. At the time of this writing, there are over 1,300 places, stores and services that accept Dogecoin.
Is Dogecoin and meme cryptocurrency a good investment?
Although Dogecoin and meme crypto are helping cryptocurrency get more mainstream attention and buy-on, that doesn’t mean they’re smart investments. As with any other investment, like in the stock market or real estate, research is key. Dogecoin itself isn’t effective at storing value. Unlike Bitcoin, which has a lifetime cap of 21 million coins, Dogecoin has no cap. With Bitcoin, the limit on coins acts as a way to protect against inflation — Dogecoin does not have this protection.
Dogecoin’s blockchain rewards people for their mining work, creating millions of Dogecoins each day. These coins are mined by people who are referred to as miners. They solve complicated math equations on advanced computers to process transactions. These transactions are then recorded on the Dogecoin blockchain. The miners are creating a “proof of work” system, and they are also rewarded for their work by earning Dogecoins. All of this is to say that Dogecoin is highly influenced by inflation, making it hard to speculate whether the rising value of Dogecoin will hold up or come crashing down.
While Bitcoin changed the world by creating the first cryptocurrency, Dogecoin has changed the world by bringing meme crypto into the mainstream. Although the coin does present its own risks, it has created positive change by bringing the world’s attention to the crypto space, giving it legitimacy.