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What is Dogecoin, and why is Elon Musk so into it

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In the world of memecoins, cryptocurrencies inspired by internet memes, Dogecoin stands out as a remarkable player. Not only has it managed to stay in the market, but it has also secured a spot in the top 10 in terms of market capitalization. Moreover, Dogecoin has gained one famous fan. Let's learn how DOGE works and why Tesla founder Elon Musk loves it so much.

Dogecoin story

Dogecoin was born from the inspiration of a meme with a Shiba Inu dog named Kabosu. The idea is that users write words and phrases, such as "wow" and "what are you doing" on the image of the dog. Depending on the context, the meme can express surprise, suspicion, and other emotions.

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Dogecoin was launched in December 2013. In terms of the crypto market, DOGE is a relatively mature project, especially when compared to the likes of Ethereum, which was rolled out only in 2015. 

The memecoin was developed by programmer Billy Markus and marketing manager Jackson Palmer. DOGE turns out to be the first major project for both of them. It was originally conceived as a satirical response to Bitcoin. The developers wanted to show how easily cryptocurrencies, lacking unique technical solutions, could gain popularity. However, DOGE’s evolution got out of control: it attracted an audience and famous fans, and Dogecoin solidified its position in the top 10 most capitalized cryptocurrencies. 

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Dogecoin ranks eighth in the top 10 most capitalized cryptocurrencies. The coin was kicked out of the top 10 and turned back several times; for instance, it happened in March 2021 when DOGE was replaced by LUNA (Terra).

On May 8, 2021, Dogecoin reached its highest price of $0.7376. As of September 20, 2023, the coin’s value has plummeted by 97%.

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The correlation between DOGE and Bitcoin is lower in comparison with other cryptocurrencies. This can be attributed to Elon Musk’s influence, details below.

How DOGE works

Dogecoin runs on its own blockchain based on the Proof-of-Work (PoW) algorithm, which means that DOGE can be mined just like bitcoin. 

Mining is the process of issuing new coins on a cryptocurrency network. Miners connect their computing equipment with computational power to the network in order to earn money for completing network tasks. 

➡️ Learn what PoW is and how PoW-based coins work.

In September 2022, Ethereum transitioned from Proof-of-Stake (PoS) to Proof-of-Work (PoW), making DOGE the second most capitalized PoW-based coin after Bitcoin. 

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The BTC network conducts 10 times more transactions than the DOGE network. But Dogecoin overtakes bitcoin in terms of block production speed (1 minute vs. 10). This means that transactions with DOGE are faster than with BTC. 

US regulators believe that some PoS cryptocurrencies are unregistered securities, whereas PoW coins like DOGE are typically considered commodities. This means that the coin is potentially safer from an investment standpoint.

How is Elon Musk related to DOGE 

Elon Musk, the founder of Tesla, first mentioned Dogecoin in 2019. He says that cryptocurrency serves as a hedge against inflation, and his personal holdings include Dogecoin, Bitcoin, and Ethereum.

The majority of market participants credit Musk with DOGE’s success. In 2021, analysts found that 36% of American investors are guided by the businessman's tweets when making investment decisions. Each DOGE’s mention in Musk's Twitter has been known to trigger coin’s price spikes.

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In April, the coin gained nearly 40% when Elon Musk replaced Twitter's bluebird logo with the Dogecoin logo.

When Musk bought Twitter in the fall of 2022, rumors arose that he might make Dogecoin the social network's official currency. The coin reacted with a rapid surge in value. 

There was also speculation online that Musk might introduce a new Twitter cryptocurrency. However, in August 2023, he denied these claims. Investors interpreted his response as a signal to integrate Dogecoin into Twitter, further boosting DOGE’s value.

To invest or not to invest in DOGE

Elon Musk's backing has undoubtedly played a role in DOGE’s ascent, turning it into the most capitalized and popular memecoin. Nevertheless, Dogecoin, which was originally a joke, lacks any fundamental value. Unlike deflationary assets like Bitcoin, which can serve as a savings tool, or Ethereum, which can be used to create new crypto projects on top of it, Dogecoin does not possess such functionality. 

Many in the crypto community believe that once Dogecoin loses Elon's shoulder, it will collapse. However, for as long as Musk remains a DOGE pump maker, the coin can be considered a good investment.

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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.

Maria Kachura
Maria Kachura

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