How Dogecoin works – Tech Explained #doge #whitepaper

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..

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