As a cryptocurrency, Dogecoin has the following main characteristics:
A digital currency
Dogecoin is a dematerialized currency. So there are no Dogecoin coins or notes. The whole point of Dogecoin is therefore to allow transactions electronically. To send money to someone, nothing could be simpler! You will only need an internet connection and a device such as a smartphone, tablet or computer.
A decentralized network
No bank or agency performs the middleman in a Dogecoin transaction. The transaction is carried out directly peer-to-peer. This decentralization allows Dogecoin not to be impacted by decisions taken by central banks, for example.
Like most cryptocurrencies, Dogecoin uses a blockchain to operate. The blockchain is a public ledger that saves transactions while protecting the anonymity of its users.
Broadly, the blockchain used by Dogecoin is the same as that of Litecoin. Proof-Of-Work (POW) is the method used to validate transaction blocks. The algorithm is called Scrypt and is different from the SHA-256 used on the Bitcoin blockchain for example.
How does Dogecoin work?
In principle, Dogecoin works like Bitcoin. Once you have purchased Dogecoin, you can store it on a Dogecoin wallet . Then you use your Dogecoin funds to send money to someone or pay for a transaction.
Each transaction is traced on the blockchain. Transactions are grouped into blocks which are then validated by network miners. These miners thus make it possible to ensure the security of the network . Once the mining has been completed, the new block is definitively registered on the blockchain and the transaction is validated.
The Dogecoin Blockchain Explained
The Dogecoin blockchain is very similar to that of Litecoin. Like many cryptocurrencies, Dogecoin uses the Proof-Of-Work (POW) method.
POW is characterized by a competition between minors when a block needs to be validated. The network miners then use their computing power to find the correct mathematical solution (called a hash) as quickly as possible.
The algorithm used on Dogecoin is called “ Scrypt ”. It allows faster and less energy-intensive mining than that of Bitcoin . Since validation is faster, Dogecoin can handle more operations than Bitcoin. This is a major strategic advantage for any crypto – like Dogecoin – that carries the ambition to supplant cash.
What is Dogecoin used for?
To summarize, we present below the different possible uses of Dogecoin:
- Send money to someone . From your wallet, you can send Dogecoins to another wallet. The recipient can choose to keep these Dogecoins or convert them into fiat currency. Since Dogecoin works in a decentralized way, the operation is fast and without bank charges.
- Buy a product or pay for a service . Admittedly, the Dogecoin ecosystem remains for the moment less developed than that of Bitcoin. However, some stores or websites allow payment in Dogecoin.
- Giving a “tip” . This is a little known but yet widely used function with Dogecoin. Indeed, the Dogecoin allows you to easily send a “tip” to a person to thank them for their post or their contribution. Basically, it’s kind of like a like except you pass Dogecoins to it.
- To engage in financial speculation . Like any cryptocurrency, the price of Dogecoin is very volatile. This is why Dogecoin can also be considered an investment product. By buying Dogecoin when its price is still low, you can potentially realize a nice capital gain in the event of an explosion in its price. You can also choose to mine Dogecoin instead of buying it.
Why use Dogecoins?
Cryptocurrencies have unique advantages compared to the traditional banking system. These features are increasingly seen as important strategic assets by users, especially in times of crisis. Below are some advantages of using Dogecoin:
- Low cost transaction . Since it is a decentralized system, there is no intermediary to be paid with Dogecoin during a transaction.
- Secure network . Thanks to the blockchain and its mining system, the risk of falsification is very low. Transactions are carried out securely.
- Anonymous transaction . The advantage of the blockchain is to be a public ledger while protecting the anonymity of its users. Thus, no one can go back to you during a transaction on the sole basis of the information contained on the blockchain.