Bitcoin may be the poster boy of cryptocurrencies, but over the years, there have been hundreds of other digital currencies that have entered the market. It can be tough to keep a tab on them all, but some have managed to stand out from the pack, such as the world's first meme coin, Dogecoin. One may wonder how a meme coin can be an investment choice, but that's precisely what Dogecoin has managed to do and do rather well.
If you have been thinking about buying Dogecoin, here's a detailed guide that might help you.
What is Dogecoin
Dogecoin (DOGE) started as an online joke. In 2012, Jackson Palmer, a software engineer at Adobe, first thought up the coin as a way to mock the craze of cryptocurrencies. Palmer christened the coin based on a popular meme featuring a Shiba Inu dog, bought the domain name, and set up a website. Billy Markus, a software developer at IBM who had never met Palmer, came across the website and got in touch with Palmer. Over the next few months, he designed the coin's protocol based on another cryptocurrency called Litecoin.
In December 2013, Dogecoin was officially launched and became a runaway success. When China banned its banks from investing in Bitcoin within weeks of Dogecoin's release, the value of the meme coin soared nearly 300 percent. Over the years, Dogecoin's value went up and down with the rest of the crypto-verse. The value of Dogecoin increased in 2019 after it was listed on the crypto exchange Binance and again in 2021 after it appeared that Elon Musk had endorsed the coin in a cryptic tweet.
Speculation is rife that Musk owns a significant share of Dogecoin. Musk's tweets about the altcoin often pump up its price. If Musk were doing this intentionally, it is working rather well, since as of mid-June 2022, the coin was now trading at around $0.044. Although this is a fall from highs of $0.64 in 2021, prior to this the coin spent years trading at about $0.002. However, it remains to be seen what the long-term prospects are for the coin. If you are looking to buy Dogecoin now, here's how you can do it.
How to Buy Dogecoin on a Crypto Exchange
Dogecoin can be bought at most crypto exchanges. A crypto exchange connects the buyers and sellers of cryptocurrencies in the market for a small fee. It works a bit like a stock exchange, but since the cryptocurrency market is not regulated, they do not tend to carry the same security guarantees that stock exchanges offer. Keep in mind that, as with stocks, any investment carries the possibility of losing all of the money you have invested.
To make investments, you will need to set up an account with the exchange. If you are looking to trade only Dogecoin, you must ensure that not only does the exchange allow you to trade this altcoin, but that it also allows transactions in the currency of your choice. Some crypto exchanges allow only USD as payment options for trading purposes. You will also need to ensure that trading complies with any laws in your jurisdiction.
If the platform's fee structure and payment options are acceptable, you will need to set up an account before you begin trading. Setting up an account is usually very simple and involves
- Downloading the app for the crypto exchange of your choice
- Providing details such as name, proof of address, a valid ID, social security number (in the US), phone number
- Verification of data by the exchange
Once the account is set up, verified, and activated, you will need to add funds to it before you begin trading. This can be done using a bank account, debit card, or a wire transfer. Crypto exchanges may also allow credit cards for these transactions; still, banks can charge hefty fees on their use at exchanges, so users need to exercise caution before tapping into their credit limit to buy Dogecoin.
With sufficient funds in the account, one can buy Dogecoin at prevailing market rates, or set up a Buy Order to execute the transaction when the Dogecoin price reaches a specific value. Crypto exchanges also charge a small fee when a transaction is completed, which can be a fixed amount and a percentage of the transaction amount.
How long does it take to buy Dogecoin?
There might be some delay in receiving your Dogecoin into your wallet since the transaction must be confirmed on the blockchain. If you have purchased Bitcoin before, you would be happy to know that the transaction confirmation for Dogecoin usually takes just a minute as compared to Bitcoin, which can take at least ten minutes, if not more.
This is because Dogecoin uses a different crypto protocol than Bitcoin. All transactions on the coin's network are stored in a public ledger in blocks, hence the name blockchain. Like Bitcoin, Dogecoin also uses 'proof-of-work' technology to confirm a transaction on the blockchain. This involves solving complex mathematical problems to arrive at a solution called a hash, which allows a transaction entry to be made on the blockchain.
Although it was created as a joke, the creators of Dogecoin also tried to address the shortcomings of Bitcoin in their design and improved the transaction speed complaints that users had with the first cryptocurrency.
How to store Dogecoin
Most crypto exchanges offer a digital wallet to save the Dogecoin you purchase. However, some unbundle the wallet from their services, meaning you either need to pay additional fees to use their digital wallet or another wallet service to save your Dogecoin holdings.
A secure wallet is imperative since cryptocurrency holdings are in the public domain, and everybody can see how much Dogecoin a wallet is holding at any given time. An unsecured wallet is an easier target for hackers and since Dogecoin is a decentralized currency, there is no mechanism to recover your lost holdings.
One can use two types of wallets: an online wallet and an offline wallet. An online wallet, also known as a hot wallet, is always connected to the internet and can be used for receiving Dogecoin or making transaction payments such as buying merchandise on the Tesla website. However, it is possible to hack hot wallets.
An offline wallet, also known as a cold or hardware wallet, stores your Dogecoin away from the internet so that hackers cannot get to it at all. This is usually done by transferring your Dogecoin assets to a specialized thumb drive-sized device. Not all thumb drives can serve as cold wallets. If you want to use one, you need to
- buy the specialized device from services like Ledger or Trezor
- install the latest version of their proprietary software to secure the device
- transfer your Dogecoin holdings
How to sell Dogecoin
Dogecoin has a history of climbing up in value whenever Elon Musk tweets about it, only for its value to fall again in the following days. If you bought Dogecoin at a lower price and are looking to make some money from a bumped-up price, you will need to sell it quickly.
Any platform that lets you buy Dogecoin will also let you sell it. If your Dogecoin holdings are secured in a cold wallet, you will need to transfer them to a hot wallet before you can sell them.
Crypto exchanges allow users to not only sell Dogecoin but also buy other cryptocurrencies. This can be aan excellentway to diversify your cryptocurrency portfolio, i.e. hold different types of digital coins without investing more money into them.
Investors who hope to make money when the coin rises in value can simply choose to sell Dogecoin for fiat currency like USD or Euros and pocket the difference in the price. As with buying Dogecoin, you can use either a crypto-currency exchange or a peer-to-peer exchange platform.
Just like a Buy Order, you can also set up a Sale Order that the exchange will execute when Dogecoin reaches a certain value or you can sell your Dogecoin at prevailing market prices.
How much is a Dogecoin?
Dogecoin's valuation in relation to the US dollar has varied significantly since its launch. In May of last year, the cryptocurrency reached its all-time high of $0.64 but then dropped sharply to $0.30 by the end of the month.
All cryptocurrencies are highly volatile investments and Dogecoin is no exception. At the time of writing, Dogecoin was at $0.056 which is still a significant growth from its earlier valuation of around $0.004, which it held in 2018 and 2019.
How is Dogecoin different from Bitcoin?
Bitcoin started off as a way to replace traditional currency ,but Dogecoin was initially designed as a joke or a "just for fun" cryptocurrency that later took on a life of its own. Some retailers now accept Dogecoin as a mode of payment but due to its low value, it is not in as much demand as Bitcoin.
Unlike Bitcoin, which has a ceiling on the number of coins that will be created, Dogecoin is an "inflationary coin." This means that its supply is unlimited. Because there will never be a scarcity of Dogecoin, its value is unlikely to ever appreciate to the levels of Bitcoin. However, it is also popular with Litecoin miners, partly because Dogecoin can be merge-mined with Litecoin, meaning both cryptos can be mined simultaneously using the same work.
For a new investor, Dogecoin offers lower barriers of entry due to its llow-costprice and subsequently reduced transaction fees. Many Dogecoin holders use their DOGE to tip content creators on social media platforms. Since Bitcoin is also very popular, the currency's network is prone to congestion. Comparatively, transactions are recorded faster on the Dogecoin blockchain.
What is a peer-to-peer exchange? Can it be used for buying Dogecoin?
A peer-to-peer (P2P) exchange allows traders to trade directly with one another without the need for a centralized third party. One can also purchase DOGE using this method.
Unlike most crypto exchanges, in P2P trading, users pick their own offers and trade directly with other parties rather than using an automated engine to execute their transactions. This means you have more freedom to pick the best rate and payment method for your needs.
Using a peer-to-peer crypto exchange might be helpful if you are looking to pay very low transaction fees, A P2P exchange connects you to cryptocurrency holders from across the world, and you buy or sell Dogecoin with very low or even no transaction fees. The issue with such exchanges is that they have fewer regulations and verification processes which makes them popular places for scammers. As a newbie, spotting a scam can be difficult , so the safest way to buy Dogecoin is at an established crypto exchange.
How do you keep Dogecoin safe?
If you are picking a provider for an online digital wallet, you must ensure that it offers the best security measures to keep your money safe. A wallet service that comes at unbelievable or 'never-seen-before' prices is likely cutting corners somewhere and might be targeted by hackers.
If you are looking to buy up a lot of DOGE, cold wallets would be an ideal way to stash them away from the reach of hackers. For beginners with small holdings that they want to use for buying merchandise on the internet or trading the meme coin from time to time, secured online ("hot") wallets should just be fine.
Like with other cryptocurrencies, Dogecoin holdings are in the public domain,; scammers may also target you to get a hold of your DOGE. You must always remain skeptical of offers for great returns in a short time, as this is the most common way deployed by scammers.
If your Dogecoin holdings are large and you intend to hold on to them for a long period of time, you can even use trusted paper wallet services that allow you to print your public and private keys. You can then store them completely offline, for example, in a deposit box safe, disconnected from the internet.
Is Dogecoin a good investment?
Investing in Dogecoin may not require you to have deep pockets, but as with other cryptocurrencies, Dogecoin investments are also fraught with risk. Elon Musk may be singing Baby Doge from time to time, and prices may spike in reaction to events, but things could also go eerily silent tomorrow and lead to the coin crashing.
As 2022 has shown us, even the valuation of high-flying coins like Bitcoin can drop precipitously in a matter of days, so if you are planning to invest in this space, be aware that you could end up losing all of your investment,. Thereare rarely any insurances on such investments.
Dogecoin has, however, been linked to some exciting projects, such as payment to send a cubesat on a SpaceX Moon Mission, so there might be some jumps in its valuation in the near future. But this may also be contingent on the mission being completed in its planned time frame and no other major news that could take crypto markets further south.
Dogecoin is a risky investment, perhaps even riskier than Bitcoin, but its low valuation means it could be a good way to enter the crypto markets rather than investing heavily in just one coin.
If you are looking for other ocrypto market opportunities,check out our guides for buying Ethereum or NFTs or the good-old Bitcoin.