Dogecoin (DOGE) is a peer-to-peer cryptocurrency similar to Bitcoin. Dogecoin can be used as a medium of exchange and as a way to transfer money between people, either as a payment for goods or services, or simply to send cash, but it is primarily used for tipping content creators on various social media platforms.
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A brief history
Founded in 2013 by software engineers Billy Markus and Jackson Palmer, Dogecoin was created as a marketing experiment based on the popular "Doge" Internet meme and as a lighthearted alternative to traditional cryptocurrencies. Despite its origins as a “joke,” Dogecoin’s scrypt technology (a hashing function that uses SHA-256 but includes much higher memory requirements for proof-of-work) and an unlimited supply of coins set it apart as a faster, more adaptable, and consumer-friendly version of Bitcoin. Like other cryptocurrencies, Dogecoin is mined by the decentralized network of computers that runs the currency. But unlike other coins, Dogecoin does not have a cap on the total number of coins that can be mined- making it an inflationary rather than deflationary coin. In 2014 due to network security issues, Dogecoin agreed to merge mine its network with Litecoin (LTC).
DOGE in practice
The Dogecoin blockchain uses a proof of work consensus mechanism, where miners use computers to solve complex mathematical equations in order to process transactions and record them on the blockchain. In exchange for supporting the blockchain, miners earn DOGE which they can then hold or sell on the open market. DOGE may be used for payments and purchases, but it’s not an effective store of value chiefly because there is no cap on the number of coins that may be created by mining. Because of its historically low cost per coin, DOGE is commonly spent by users on social platforms, like Reddit, Twitter, Facebook, and others, to reward, or “tip,” creators for posting content.