How Dogecoin works - Tech Explained #doge #whitepaper - YouTube

Dogecoin is dominating the news! It’s  meteoric rise in 2021 has taken the crypto  

world by surprise, much like what GameStop  did in the traditional financial markets.  

In this video we will look at What is dogecoin 

How it works and The pros & cons of dogecoin

A quick side note before we get  started, if you find this helpful,  

please subscribe to show your support for  more crypto educational content like this  

and also to get updates on future  videos. Now, let’s dive in!

Introduction 

The name Dogecoin is based on the popular “Doge”  Internet meme and it features a Shiba Inu in its  

logo. Dogecoin is a cryptocurrency that was forked  from another cryptocurrency Litecoin in December  

2013. A fork means taking a copy of an existing  software and tweaking it to create a new product.

Dogecoin was created as a payment system that is  instant, fun, and free from traditional banking  

fees. Also, it has predominantly served as a  meme. Especially since the 2017 Initial Coin  

Offering (ICO) boom which saw the creation  of thousands of cryptocurrencies and tokens!

How does it work While discussing  

how dogecoin works, we will compare it  with corresponding aspects of Bitcoin.  

Because from a technical perspective, Bitcoin  and dogecoin have a lot of similarities.  

Checkout our video on How Bitcoin works, if you  want to understand each of these aspects further.

Like Bitcoin, Dogecoin also uses Proof  of Work consensus. So, miners have to  

find a solution to a mathematical problem to  create a new block. Bitcoin’s mining problem  

is built using the SHA-256 hash function  while Dogecoin uses Scrypt. This means,  

you cannot use the special purpose hardware made  for Bitcoin mining with Dogecoin and vice versa.

With Bitcoin new blocks are created about every  10 minutes. Dogecoin targets for a new block every  

1 minute. Network difficulty is a measure of how  hard it is to create a new block. Bitcoin adjusts  

the network difficulty after every 2016 blocks  while dogecoin adjusts it after every block.

Another major difference is Bitcoin has  its total supply capped at 21 million.  

While Dogecoin has no supply cap. In theory,  there is an unlimited supply of dogecoin.

Both Bitcoin and Dogecoin protocols issue  new coins in the form block rewards.  

However the reward quantity and strategy differ  significantly. Bitcoin started with a block reward  

of 50 BTC per block and it cuts the block reward  in half after every 210,000 blocks and eventually  

sets the reward to 0. Dogecoin on the other  hand uses a slightly peculiar reward schedule:

The first 100,000 blocks had a random block  reward in the range of 0 to 1M dogecoin. That is,  

when you mine a new block, you can get anywhere  between 0 dogecoin to 1M dogecoin as a reward. 

The next 45,000 blocks also had a random  reward between 0 to 500,000 dogecoin 

In block number 145,000 the reward was fixed  to 250,000 dogecoin. This change was made to  

prevent large mining pools from gaming the  system and mining only high reward blocks. 

From there, the reward was cut in  half after every 100,000 blocks 

That is until block number  600,000. Which set the reward to  

10,000 dogecoin and it hasn’t changed since. 

As you can see, the reward  schedule of dogecoin is MUCH WOW!

One final fact before we conclude the  technical background. Bitcoin’s protocol  

is well defined in its White paper and  it is made available, symbolically,  

on the websites of multiple organisations around  the world. Dogecoin doesn’t have a whitepaper.  

Everything I discussed here is from a  Readme file in the dogecoin source code.

If you made it this far, please watch  both the pros & cons of dogecoin. Because,  

half knowledge can be very dangerous.

Pros of dogecoin Dogecoin is a Memecoin so some people view it as  

fun to hold and fun to be part of the community. Dogecoin has fast transactions compared to  

Bitcoin. Transactions on dogecoin  are typically settled in a minute. 

It has been used mostly as a tipping  system on Reddit and Twitter to reward  

the creation or sharing of quality content. Since it uses a different hash function to  

Bitcoin, the power of the Bitcoin mining  farms cannot be used to attack Dogecoin.  

Other cryptocurrencies have  faced such attacks in the past.

And now for the Risks of dogecoin 

Dogecoin has unlimited supply and a  very high issuance rate. Currently  

there are 129 Billion dogecoins and about 14.5  million new dogecoins are created everyday.  

So it may be hard to sustain a high price for each  dogecoin without a major utility besides memes. 

Almost 50% of the available dogecoin is  held by only 12 accounts! This makes it  

a very risky coin to hold as most of the supply  is concentrated in the hands of very few people! 

Developers' interest in  dogecoin seems to have died out.  

There doesn’t seem to be any major work or  plans for improving this cryptocurrency. 

As for speed of transactions, there  are many other cryptocurrencies which  

are much faster than dogecoin and have  the potential to offer higher utility.

And that’s everything I have to say  about the technical aspects of Dogecoin.  

Purely from a technology point of view, there  isn’t anything novel about dogecoin. However,  

that never stopped people from putting their  weight getting behind fun and meme worthy ideas!

With that, we are almost out of time. If you  

find this helpful, don’t forget to hit the  like button and subscribe for future videos.  

Thanks for watching. My name’s Praveen and  I will see you again in the next video.