Cryptocurrency: Dogecoin - promising, but dangerous

Cryptocurrency: Dogecoin - promising, but dangerous


Cryptocurrencies such as Bitcoin or Ethereum are now also known outside of the financial tech world - and, above all, are becoming increasingly popular. Last but not least, celebrities like Elon Musk have contributed to the success of crypto. For example, the electric car manufacturer Tesla invested large sums in Bitcoin and now accepts the currency directly as a means of payment. And Tesla boss Elon Musk himself repeatedly fuels the hype about Bitcoin and Co. through his statements on Twitter. He also made himself known as a fan of Dogecoin, just like US rapper Snoop Dogg, for example. Dogecoin, created in 2013 as a parody of Bitcoin, has meanwhile become a valuable cryptocurrency itself, which is traded worldwide and is becoming increasingly popular. Dogecoin therefore has potential - but the currency also harbors a great financial risk.

Table of Contents

1 What is Dogecoin? 2 How does Dogecoin work? 3 Why is Dogecoin so popular? 4 Should You Invest in Dogecoin? Also interesting: New cryptocurrency could soon make hard drives and SSD significantly more expensive

What is Dogecoin?

What actually is Dogecoin? The cryptocurrency was developed in 2013 by Billy Markus (an IBM programmer) and Jackson Palmer (an Adobe programmer) and was originally intended as a fun currency and a parody of Bitcoin. But the exchange rate with the US dollar rose quickly from the start. Since the end of 2020, and especially in the first months of 2021, Dogecoin has grown enormously in popularity and also in financial value. The market capitalization was most recently around 50 billion US dollars, a single Dogecoin is worth around 40 US cents.

For comparison: Dogecoin is scratching the stock market value of the Dax group Bayer, a chemical and pharmaceutical company with a history of over a hundred years and around 100,000 employees. What began as a fun currency has (currently) a gigantic value in classic currency, to which individuals like Elon Musk have made a significant contribution. Incidentally, if you are wondering where the name comes from and why a dog adorns the logo of the crypto currency: It is one of the oldest and most famous Internet memes.

How does Dogecoin work?

Dogecoin describes itself as "fun and friendly internet currency". The functional principle is largely identical to that of Bitcoin. You install a virtual wallet on your smartphone or PC / laptop in which the Dogecoins are stored, and you can then trade the fun currency in various ways or create new coins yourself with the help of computing power ("mining"). In contrast to Bitcoin, there is no limit to the number of coins with Dogecoin; constant inflation is at the core of this virtual currency.

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Why is Dogecoin so popular?

Especially recently, Dogecoin has enjoyed enormous popularity. In addition to the push by celebrities, this is also due to the comparatively "friendly" and simple image of the currency. For many people, Dogecoin is a kind of entry point into the world of the increasingly important crypto currencies. A real fan base has formed around the currency, which is growing steadily and especially very active on Reddit.

Should you invest in Dogecoin?

Investing seriously in Dogecoin also harbors great financial dangers despite the "friendliness" and comparative simplicity of the cryptocurrency. Of course, this also applies to other virtual currencies such as Bitcoin or Ethereum, but especially to Dogecoin. Because: Dogecoin is even more volatile than the competition. The administration and further development of the currency is chaotic and unclear, and few people have the vast majority of Dogecoins in their wallets. Their identity is not only unknown, it is also completely unclear how much the price of Dogecoin will fall in a very short time, should one of these people decide to sell.

The same applies to the favor of Elon Musk and Co. : If it suddenly disappears, which is possible at any time, the general public's interest in Dogecoin could decrease so much that the price falls rapidly and sharply. Anyone who has invested a particularly large amount of classic currency such as US dollars or euros in the crypto currency may have to accept enormous financial losses.

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