🔎 The Ultimate Guide to Dogecoin
An objective look at one of the most misunderstood blockchains
Alex Valaitis
November 16, 2022
There's no blockchain more polarizing in all of crypto than Dogecoin.
Just the mere mention of "Doge" is likely to elicit either an eye roll or an ecstatic "Doge to the moon!" proclamation.
Considering this, I shouldn't have been surprised by the blow back I received when I announced that I would be researching Dogecoin.
Many people chided me initially, claiming that there was nothing to research about a "meme coin," and that I was wasting my time.
Yet, many of these same people couldn't even describe the basics of Dogecoin's tech such as how its consensus mechanism works or what its TPS is.
Heck, many people didn't even realize that Dogecoin is its own Layer-1 blockchain!
That's why I chose to dive deep and look at Dogecoin through an objective lens. What I found surprised me, and completely changed the way I will look at this blockchain forever.
🎁 Giveaway: I'm giving away $100 of DOGE! To qualify:
1) Go retweet my pinned tweet
2) Follow my Twitter account (Winner announced Friday)
THE DOGECOIN TECH + PROTOCOL ⚙️
As is always the case with Web3 Pills blockchain reports, we will begin by diving into the tech.
Starting with the basics, Dogecoin is a stand alone layer-1 blockchain that is running on a proof-of-work consensus mechanism.
The founders of Dogecoin, modeled the Dogecoin protocol based on other existing blockchains, namely Luckycoin and Litecoin.
While Dogecoin is a PoW like Bitcoin, its use of Scrypt technology means that SHA-256 bitcoin mining equipment cannot be used to mine DOGE. Instead, miners must purchase less powerful FPGA & ASIC devices for mining.
In theory, this should make Dogecoin mining more accessible to the every day person than Bitcoin mining.
On the topic of PoW consensus, it's worth understanding how decentralized Dogecoin is today. Currently, there are 5,896 total nodes, which are well distributed globally. For context, Bitcoin has ~10,000 full nodes globally.
You can get a live view of the Dogecoin node count at this website. Notably, Dogecoin does have solid global distribution.
With the recent pump in price, DOGE mining has become profitable for most miners once again. This will likely lead to more miners joining in.
In contrast, many BTC miners are currently struggling to turn a profit, which is likely why we are seeing many of the top mining operations, such as Core Scientific, suffering from financial troubles.
Dogecoin scalability
Now that we know that Dogecoin's consensus mechanism is decentralized, it's worth turning attention to scalability and throughput.
In terms of TPS, Dogecoin does support a higher TPS of 33 vs 7 on Bitcoin (not including Lightning network).
While Dogecoin TPS is higher than Bitcoin, it's still below other high throughput blockchains such as Solana. However, it's probably safe to assume that Dogecoin has a much higher Nakamoto Coefficient than Solana or other high throughput blockchains.
Elon Musk has mentioned integrating DOGE to enable tipping on Twitter. To support a platform of Twitter's scale, Dogecoin would need to be able to process a high volume of transactions, in a way that is fast and affordable enough to be viable for use cases like micro-tipping.
As of right now, 33 TPS does not seem like a high enough throughput to scale to Twitter. And a block time of 1 minute also leaves room to be desired.
This means that the Dogecoin blockchain would need to scale throughput either through Layer-2 scaling solutions (similar to what Ethereum is doing) or by increasing its block size.
In terms of cost, Twitter user Mishaboar weighed in on one of my threads to clarify that the current recommended Dogecoin fee is only 0.01 DOGE per Kb.
Mishaboar also went on to suggest that since most transactions are well below 1 Kb, the actual fee paid by participants is often closer to 0.002-0.004 DOGE or around $0.018 - 0.036 per transaction. Assuming this is accurate, that means users could complete around 100 transactions for a little over $3.
It's worth noting though, that if Dogecoin were to support Twitter, transaction costs would most certainly shoot up with the increased demand for block space.
Dogecoin Opcodes
One question that came up in my research, was whether or not Dogecoin supports smart contracts, like Ethereum does.
Based on my findings, it does not appear that Dogecoin supports true smart contracts, which constrains the use cases that can be built on the base layer. However, Dogecoin is commonly wrapped and used on dApps like Ethereum.
I will caveat the statement above by highlighting Dogecoin developer inevitable360 who stated on Twitter that while Dogecoin does not have smart contracts, it does support "Script Opcodes".
He went on to state that he had launched an NFT on Dogecoin natively, however a thread in the Dogecoin github repo suggested that the implementation was not a "real" NFT in the traditional sense. However, inevitable360 provided a separate diagram that suggested his Opcodes cover the baseline requirements to be an NFT.
At this point, I'm not willing to consider Dogecoin a fully smart contract-enabled blockchain. Opcodes, do not seem to carry the same power as Smart contracts, and that is likely why they have not been widely adopted on Dogecoin.
However, they could be a possible avenue for continued innovation on the blockchain over time.
The $DOGE coin
DOGE is the native coin of the Dogecoin blockchain. It is used to pay network transaction fees and in various use cases (which we will cover later).
Unlike coins/tokens from other blockchains I have researched, I found it very difficult to dig up detailed info on the DOGE economics.
For instance, Messari, which is usually a reliable source of information for coins/tokens, only states that: "Dogecoin was launched on December 6th, 2013, with no premine or insta mine."
On the surface, this would suggest that DOGE is very well distributed. However, upon further research I found the DOGE rich list, which revealed that a high % of the total coins are concentrated in a small amount of wallets:
The fact that one wallet hold 28.5% of the current supply of DOGE is deeply concerning. For context, Bitcoin's founder Satoshi Nakamoto, is believed to hold ~1 million BTC across all of his wallets, which amounts to a little over 5% of the total supply today.
The situation doesn't get any better when you consider that 50% of the total DOGE supply is owned by the top 11 wallets and 71% is owned by the top 132 wallets.
I will caveat this by saying that the top wallets belong to exchanges, with Robinhood owning the largest wallet with 28% of the coins. However, as we saw with the recent FTX debacle, this can still be a major issue. All it would take is for one of those exchanges to be targeted by regulators or to become insolvent, and suddenly that % of the supply would be at risk.
For this reason, I encourage Dogecoin holders to move their funds off of exchanges and into a self-custodial wallet (We will highlight some of the best wallet providers below).
Now, it is also worth pointing to DOGE's supply schedule. Originally, DOGE supply was to be capped at 100 billion DOGE, however, back in 2014 the supply cap was removed which makes the coin inflationary with a theoretical unlimited supply.
As of today, the block reward is a fixed 10,000 DOGE per block, with one block being mined every minute. This means that there are 5 billion new DOGE mined every year, which sets the current inflation at around 3.87% per year.
Note, this is actually lower than many other inflationary cryptocurrencies (and fiat currencies like the US dollar for that matter).
At the time of this writing, Dogecoin has a total supply of 132.6B DOGE, all of which is in the circulating supply.
DOGECOIN USE CASES 📱
In order for Dogecoin to be taken seriously as a blockchain, and DOGE to be taken seriously as a currency, there must be real world use cases for it.
Over the past few years, there has been a number of retailers that have chosen to accept DOGE, driven largely by the energy of the community. In total, over 2,000 different retailers now accept DOGE.
Below are a list of different companies that accept DOGE as a form of payment:
Dallas Mavericks: Accepts DOGE for both tickets and merchandise.
AirBaltic: Accepts DOGE for flights.
Newegg: Accepts DOGE for online payments.
The Kessler Collection: Accepts DOGE for hotel bookings.
Twitch: Allows users to tip streamers in DOGE.
Tesla: Accepts DOGE for different Tesla products.
Keys4Coins: Accepts DOGE on its digital PC game store.
AMC: Allows people to buy movie tickets with DOGE on the mobile app.
Gamestop: Accepts DOGE as payment for video/PC games.
Bitrefill: Buy gift cards with DOGE.
Sling TV: Pay for your monthly tv subscription with DOGE.
Menufy: Order food with DOGE.
Express VPN: Pay for you VPN service in DOGE.
Sheetz: Pay for your gas or convenience store items in DOGE.
Obviously, the increase in companies that accept DOGE as a form of payment is a major win for DOGE's long term adoption.
What would be interesting to know is whether or not these companies hold DOGE or whether they immediately dump it back onto the market. For the companies that do choose to hold, it would also be good to understand how they account for DOGE price volatility in their accounting.
Elon's Companies — Twitter, SpaceX, Tesla
I would be remiss not to highlight Elon Musk's efforts to help integrate Dogecoin into more use cases. Elon has been a VERY vocal supporter of Dogecoin, and he's leveraging his companies to help drive adoption.
We already touched upon how Tesla is accepting DOGE for payments of some of its products, but he is also leveraging his other companies as well.
For instance, there is a project by the Dogecoin foundation called 'RadioDoge' that is attempting to allow users to send DOGE without internet access. This would be accomplished by leveraging SpaceX's Starlink satellite broadband network, as well as using radio towers.
Perhaps the most compelling Dogecoin integrations related to Elon's portfolio companies will come from Twitter. Aside from leveraging his audience of 115M followers on Twitter to promote Dogecoin, Elon has also hinted at integrating Dogecoin directly into the platform.
This could include as a payments system built on top of Twitter (part of a super app he wants to build called 'X'), to tipping creators in DOGE.
Funny enough, I was actually on a Twitter spaces stage with Elon last weekend and he talked about Dogecoin briefly.
Aside from exclaiming "Doge to the moon" (which caused an immediate 10% pump in the price), Elon also said "I'm working hard on the Doge front."
Elon did hedge a little later on in the conversation when he said that a "crypto wallet was not [coming] soon."
Unfortunately Elon's connection cut out when I asked him which aspects of Dogecoin he was most interested in and how he planned to integrate Twitter with crypto moving forward.
Hopefully I get to ask him again one day!
Dogecoin wallets
If you are going to be using DOGE for any of the aforementioned use cases, you will need a Dogecoin wallet.
For those looking to take the custodial method (which I don't recommend), you can buy DOGE on many exchanges including: Coinbase, Binance, Kraken, and Robinhood.
I personally prefer to use a non-custodial wallet. Dogecoin lists a few different wallet providers on their website, but I ultimately went with Trust wallet since I already had it created.
One wallet that I also found interesting was the SoDogeTip wallet that allows users to connect their Reddit and/or Twitter accounts, in order to receive tips directly through the platform.
To summarize, Dogecoin's most promising use cases seem to be as a payments solution built on top of existing platforms and businesses, such as massive retailers and social platforms.
In other words, Dogecoin seems to want to complement existing businesses.
This sets it apart from use cases built on other blockchains like Ethereum, which are setting out to fundamentally replace existing businesses and applications.
THE DOGECOIN COMMUNITY🤝
I've long stated that for a layer-1 blockchain to be successful in the long term, a large and passionate core community is an absolute necessity.
In the case of Dogecoin, the engaged community is clearly there. Dogecoin has even been nicknamed "the people's currency" by some in the space.
This is evident from it's large online communities on major platforms:
Twitter: 3.5 Million followers
Reddit: 2.4 Million "Subshibers"
Discord: 31, 285 members
One important observation I did seem to find from studying the Dogecoin community, is that there is a clear bifurcation between 2 groups:
1) The "meme coin" group // coin pumpers
2) The serious dev community
From my threads, it was clear that group #2 seems to hold some animosity towards group #1. This makes sense given the fact that it's difficult to attract serious builders to the Dogecoin blockchain, if the culture is that of a "meme coin".
On the flip side, there's no denying the meme coin side of the community has been responsibility for growing the size of the community and getting it on the radar of people like Elon musk (and other large retailers) in the first place.
This is a very important balance that the Dogecoin community will need to monitor over the coming years as it attempts to break out and solidify itself as one of the top projects in crypto.
Conclusion
It would have been easy for me to dismiss Dogecoin and to have chosen to never research it. However, my philosophy is to keep an open mind to every blockchain until I have done proper research.
At this stage in crypto's journey, it is foolish for communities to become too tribal and attempt to tear others down.
While it is important to protect the core ethos of crypto (decentralization, permissionless systems, censorship-resistance, financial sovereignty); I'd argue that Dogecoin doesn't threaten any of these core values.
Dogecoin's consensus layer is very decentralized, a lot more than other recent layer-1 blockchains, and as a payments settlement layer it actually does hold some promise.
While there are some concerns such a high concentration of DOGE holdings in a few wallets, and the lack of full smart contract capability, I would not write of Dogecoin's potential.
Don't be surprised if this so called "meme coin" ends up playing an important part in our global digital economy.
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Disclaimer: Any views expressed above are the personal views of the author and should not form the basis for making investment decisions.
Please do your own research.