Dogecoin is one of the foremost standard cryptocurrencies at once. At the time of writing this article, the meme coin has already surpassed many big crypto coins to become one of the highest five coins, by market cap. At the time of scripting this article, Dogecoin has already had multiple rallies simply within the past month. However is it a reliable investment? In this article, we are going to point out why dogecoin is not a good investment
Dogecoin, the technical aspect
That is probably also why you’re reading this article. However before you’ll grasp the answer, you must know how the cryptocurrency works vis-à-vis other cryptocurrencies out there. In short, the technical side of it.
At the surface, Dogecoin is simply another cryptocurrency. It’s only when you perceive its use case that you simply get to grasp its pros and cons. An example of this is often the quick transaction speed related to Dogecoin, that too at very low transaction fees. This is often one of the most important pluses of digital currency.
The reason for this is often that Dogecoin was fabricated to possess fun and not make investors cash. The cryptocurrency was so engineered to exist in excess quantities, and by excess, I mean infinite.
This is additionally the distinction between Dogecoin and cryptocurrencies like Bitcoin. While Bitcoin includes a finite quantity of coins on the blockchain, more and more Dogecoin can continue getting created each year. In essence, there’s a vast supply of Dogecoin on the blockchain.
The very nature of the cryptocurrency, thus, keeps its costs much lower as compared to others. It additionally helps keep the worth steady during a volatile market, a notion that we saw failing miserably in recent times.
How does Dogecoin Work?
Dogecoin is a widespread cryptocurrency that was shaped in 2013 as a joke. Doge was engineered to be a friendly introduction to the thought of cryptocurrency for the overall public and folks who had never heard of cryptocurrencies before. From the beginning, doge had several advantages going for it. Doge was renowned due to its meme status. Individuals trusted doge since it was started as a joke and not as a ‘get rich quick’ scheme, like several different coins. additionally, doge had a low entry value, as a handful of years doge barely cost a couple of pennies. However, because the quality of doge grew, so did the demand. Slowly over the last few years, doge consolidated its position and settled at a worth of $0.05. However, in April, the Dogecoin worth shot up again and again, to succeed in an uncomparable high of $0.65. Even within the crypto trade, this implies important gains and profit margins. Since doge is at the peak of its popularity many people want to invest in it. At this point, people are questioning can dogecoin reach $1? At this point, the chances are undeniably high.
How Is Dogecoin Different From Bitcoin?
Dogecoin was born out of the legendary doge meme and crypto movement at a time once cryptocurrency was slowly picking up pace in 2013. It was engineered using existing open-source code from Litecoin and other projects, with additional tweaks. It’s almost like Litecoin except that it doesn’t have a maximum supply. Dogecoin miners can earn 10,000 doges per block, also the blocks are created each minute.
This implies that every day 14,400,000 new tokens flood into the wallets of miners or are sold out into the market. In a recent interview with the insider, Dogecoin’s co-creator, Billy Markus, said that “The original intent was a parody of all the ‘serious’ clone coins that were trying so hard to differentiate themselves, but all seemed the same. Dogecoin was just another clone coin, but instead of taking itself seriously, it was just Dogecoin.” It’s important to keep in mind here that one of Bitcoin’s primary options and functions was to prevent inflation and decreasing purchasing power that occurs with the dollar and to make a brand new system where that doesn’t happen.
Much of Bitcoin’s current worth springs from its deficiency and finite supply. In contrast, Dogecoin’s supply is sort of literally, infinite. Within the current market, Dogecoin miners are making a killing as speculation and meme culture has driven its worth to cryptic levels. A miner or pool of miners will earn 10,000 doge for solving a block. At Doge’s current worth, miners will earn nearly $5,700 per block or $5,700 per minute. Another issue to contemplate is decentralization. Decentralization is what provides Bitcoin with its security. it’s why it works so well as a currency ruled by the collective of its users.
We can understand the decentralisation level by node counts. While other factors play into this like miner distribution, you can use node count to check the decentralization of Dogecoin and Bitcoin as one can notice little or no knowledge on Dogecoin’s miner distribution. According to the block explorer, Blockchain, Dogecoin has merely 1090 nodes. With such a low count of nodes, this makes it much more at risk of a fifty-one attack. In comparison, Bitcoin has nearly 10,000 nodes distributed across ninety-seven countries. If such an attack were to take place with Dogecoin, it might put holders in danger of losing all worth.
Why is Dogecoin not a good investment?
Before investing in doge, people should understand that doge is an inflationary coin, which means it’s an endless supply that keeps growing more and faster as time goes. Every year, over four Billion Dogecoin are well-mined and added to the supply. In the future, this makes doge unstable for long-run investment, in contrast to deflationary coins like Bitcoin, which contains a high demand and a restricted supply. However, no one expected doge to even reach $0.10 and currently, it’s on the brink of reaching $1 in worth. Crypto markets are often very unpredictable. Edul Patel, chief operating officer and Co-founder, Mudrex – a crypto trading platform – said, “Doge is a meme coin, built out of the intent to mock the concept of bitcoin. Hence it is extremely volatile and susceptible to random market movements.” Suggesting against putting your cash into it, he said, “I would not recommend allocating funds here for the long term. On the other hand, a lot of people would just want to bet and be a part of it for fun and get the ‘gamblers rush’ that is completely your choice!”
Why is it a bad option for investment?
Dogecoin hype is not sustainable.
Even though there have been many doge value momentum recently, it’ll return to an end sooner instead of later. Its current worth of $0.38 isn’t sustainable for a project that has no long plan whatsoever. That is not the most important disadvantage, but considering how there’s no real vision for the long run should serve as a warning call to everybody.
Lack of a supply cap for Dogecoin
Unlike Bitcoin, there’s no limit on what number doge there will ever be in circulation. it should appear insignificant to those who invest for speculative purposes. However, everybody should understand there are 10,000 doges added to the network each minute. There’ll be a time when the supply outweighs demand unless investors keep buying up the freshly generated five billion coins annually. Inflation has proven problematic for each form of currency, either physical or digital. The U.S. dollar and euro are subject to inflation, reducing consumers’ purchasing power and devaluing the present circulating supply. Dogecoin contains a similar cycle which will prove troublesome to break.
What is the solution?
Other than the two potential downsides above, there are different factors to contemplate before investing in Dogecoin. Unlike different crypto assets, it’s minimal utility. Though over 1,000 businesses or merchants accept doge transactions, it’ll stay a very niche marketplace for some time to come. Dogecoin ranks well behind different high cryptocurrencies in this department, with very little or no signs of improvement.
It is normal to check flourishing or hyped-up projects attract attention from developers who suppose they can do better. Dogecoin, at first created as a meme currency for the web, has stayed faithful to its roots for many years now. While that will make some individuals happy, it also highlights the lack of a long vision and appeal. Competing ideas have a decent chance of taking over from Dogecoin in terms of market share and appeal. Due to the volatility of crypto-market, it is very hard to put a sure point across regarding dogecoin, but with time and proper analysis investment patterns can be understood.