Dogecoin

Dogecoin is an open-source, peer-to-peer cryptocurrency launched in December 2013. It was created as a joke based on the "Doge" Shiba Inu meme that was popular at the time. Despite its humorous origins, Dogecoin operates as a real cryptocurrency with an active network.

This article explains Dogecoin's technology, its evolution, and practical considerations for holding and using Dogecoin with a Trezor device.

What is Dogecoin?

Dogecoin is a decentralized, open-source cryptocurrency that launched in December 2013. It was created as a joke during a period when many new cryptocurrencies were making ambitious claims about revolutionizing finance.

Instead of positioning itself as groundbreaking technology, Dogecoin embraced being lighthearted and fun. The mascot is a Shiba Inu dog from the popular "Doge" internet meme. This self-aware approach made it the original "meme coin."

Despite starting as satire, Dogecoin functions as a real peer-to-peer network. It's based on Litecoin's codebase and uses Scrypt Proof of Work to validate transactions and secure the network.

How does Dogecoin work?

Unlike essentially all modern memecoins, Dogecoin operates on its own blockchain. This is because there weren't any cryptocurrencies which allowed tokens to be created at that time.

Because of this, Dogecoin is heavily based on Bitcoin. It uses a UTXO model like Bitcoin and Litecoin, and it uses Scrypt Proof of Work as a consensus mechanism.

Dogecoin generates new blocks approximately every minute. This is faster than Bitcoin's 10-minute blocks and Litecoin's 2.5-minute blocks.

The network is a fork of Litecoin, which itself was originally forked from Bitcoin. This means Dogecoin shares many technical similarities with both networks but with modified parameters.

Dogecoin is compatible with Litecoin's mining infrastructure through merged mining. Miners can secure both networks simultaneously without additional computational effort.

History and key events

Origins and launch (2013)

Dogecoin was created in December 2013 as a parody of the growing number of alternative cryptocurrencies. The project used the Litecoin codebase as its foundation.

The network launched on December 6, 2013. Unlike many cryptocurrencies, there was no premine and no initial coin offering. The network started with a fair launch where anyone could mine from the beginning.

The timing coincided with growing skepticism about altcoins making exaggerated claims. Dogecoin's self-aware humor stood in contrast to projects positioning themselves as revolutionary technology.

Merged mining with Litecoin (2014)

In September 2014, Dogecoin implemented AuxPoW (Auxiliary Proof-of-Work). This allowed Litecoin miners to mine both Dogecoin and Litecoin simultaneously.

Merged mining solved a critical problem. Dogecoin's network security was becoming a concern as dedicated miners moved to more profitable networks. By sharing Litecoin's mining infrastructure, Dogecoin could maintain security without requiring its own dedicated mining hardware.

This technical decision significantly strengthened the network. Both chains benefit from increased combined hashrate while miners earn rewards from both networks.

Foundation activity

The original Dogecoin Foundation formed shortly after launch to support development and coordinate the community. It dissolved in 2015 as the project matured and became self-sustaining.

The foundation reformed in 2021 with renewed focus on development and network maintenance. Advisors include Vitalik Buterin, co-founder of Ethereum, and representatives from the original development team.

Dogecoin's monetary policy

Dogecoin has no maximum supply cap. This is a fundamental difference from Bitcoin, which has a fixed limit of 21 million coins.

The network creates 10,000 DOGE with every block. With blocks generated approximately every minute, this results in roughly 5 billion new DOGE entering circulation each year.

This issuance rate is consistent and predictable. Unlike Bitcoin and Litecoin, Dogecoin does not have halving events that reduce the block reward over time.

The annual inflation rate decreases as a percentage of total supply. When there are 100 billion DOGE in circulation, adding 5 billion represents 5% inflation. When there are 200 billion DOGE, the same 5 billion represents 2.5% inflation.

Currently, Dogecoin's inflation rate is approximately 3.9% annually and continues to decline. This inflationary model was designed to encourage spending and usage rather than long-term holding.

Mining and network security

Scrypt Proof-of-Work

Dogecoin uses the Scrypt algorithm for Proof of Work, the same algorithm used by Litecoin. This is different from Bitcoin's SHA-256 algorithm.

Scrypt was originally chosen to be more accessible to everyday users mining with consumer hardware. However, specialized ASIC miners for Scrypt were eventually developed, similar to Bitcoin mining's evolution.

New blocks are created approximately every minute as miners compete to solve the Proof-of-Work calculation. The successful miner broadcasts their block to the network and receives the block reward.

Merged mining with Litecoin

Merged mining through AuxPoW is a key feature of Dogecoin's security model. Miners running Litecoin mining hardware can simultaneously mine Dogecoin without additional computational cost.

When a miner solves a block, they can submit the solution to both the Litecoin and Dogecoin networks if it meets the difficulty requirements for both. The same work secures two separate blockchains.

This arrangement benefits both networks. Litecoin gains additional miner participation, while Dogecoin inherits Litecoin's substantial hashrate without requiring dedicated mining infrastructure.

The merged mining implementation has maintained network security consistently since 2014. The combined hashrate makes it computationally expensive to attack either network.

The cultural impact of Dogecoin

Dogecoin was the first cryptocurrency that focused on being an inside joke rather than revolutionary technology. As the original memecoin, Dogecoin's impact on the cryptocurrency space was significant.

Since Dogecoin's creation, thousands of memecoins have been launched. Some like SHIB and PEPE have achieved substantial market capitalizations, and millions of new tokens are created regularly using platforms like Pump.fun.

Dogecoin demonstrated that cryptocurrencies could succeed based on community and culture rather than technical innovation or ambitious promises.

Dogecoin and Trezor

Your Trezor hardware wallet provides self-custody for your Dogecoin. It secures the private keys for your DOGE addresses on the device itself.

The easiest way to use Dogecoin with your Trezor is via Trezor Suite, either in the desktop or mobile app. Your keys never leave the device, and every transaction requires physical approval on your Trezor.

For more information, please read Manage accounts in Trezor Suite.

Key takeaways

• Dogecoin started as a meme-based joke cryptocurrency in December 2013
• It's the original "meme coin" that became a functioning peer-to-peer network
• Unlike modern memecoins, Dogecoin operates on its own blockchain
• Dogecoin has no maximum supply, with 5 billion new DOGE issued annually
• It uses Scrypt mining and shares security with Litecoin through merged mining
• The network is inflationary by design, with a decreasing inflation rate over time
• Trezor provides secure self-custody for your DOGE with keys stored on your device