How Dogecoin Works?

Tanya Sharma
Tanya Sharma

Updated on March 16, 2023 07:47 PM

Published on December 12, 2022 12:03 PM

Dogecoin is based on blockchain technology, which functions similarly to most cryptocurrencies in that it employs a distributed, secure digital ledger to record and add all transactions done on its network.

How Dogecoin Works?
Source: Unsplash

Cryptocurrencies have grown in popularity in recent years, with many people investing in and trading them. Dogecoin is a cryptocurrency that has attracted the interest of many. Dogecoin, which began as a joke, has since developed a devoted following and has even been praised by celebrities such as Elon Musk.

But how does Dogecoin work exactly? In this post, we will look at how Dogecoin works and how it differs from other cryptocurrencies such as Bitcoin. We will go into the mechanics of Dogecoin and how its Scrypt algorithm works.

How Does Dogecoin Work?

Dogecoin is built on the coding of the original cryptocurrency, Bitcoin, in an indirect way. It was formed as a hard fork of the now-defunct Luckycoin, which was itself a hard fork of Litecoin (LTC). When it separated from Bitcoin, Litecoin became recognized as the first hard fork ever produced. 

Dogecoin adopted Litecoin's Scrypt-based consensus process, which explains why DOGE shares many capabilities with Bitcoin and its hard fork "derivatives." Because Scrypt is utilized in Dogecoin's Proof-of-Work (POW) algorithm, miners are unable to employ ASICs, the specialized equipment used in Bitcoin mining.

Like Bitcoin, Dogecoin blockchain network users utilize their processing power to safeguard the network and fuel block production while confirming transactions. The distinction is that Dogecoin has a "light" design, which allows DOGE to process transactions more quickly than Bitcoin. 

Dogecoin may be mined using network users' computational resources to produce new blocks and validate transactions by solving mathematical equations. Miners are compensated with 10,000 DOGE for each created block.

The blockchain compensates miners for their efforts by producing millions of new Dogecoins every day, making speculative price rises in Dogecoin difficult to sustain over time.

working of dogecoin

Source: Dogeconomist | Reddit

Dogecoin operates on its blockchain. Dogecoin's digital ledger is regularly updated with new transactions, and the network employs cryptography to ensure the security of all transactions.

Miners employ computers to solve complicated mathematical equations to process transactions and record them on the Dogecoin blockchain, which uses a proof of work consensus method. Miners receive more Dogecoin in return for supporting the blockchain, which they may then keep or sell on the open market.

Dogecoin may be used to make payments and purchases, but it is not a particularly good store of value. This is mostly because there is no lifespan limit on the number of Dogecoins that may be generated through mining, implying that the cryptocurrency is extremely inflationary by design.

Dogecoin’s Scrypt Algorithm

To know how the Scrypt algorithm is employed, let’s understand what is Scrypt first.

Scrypt is a key derivation function (KDF) that uses a password. A KDF is a hash function in cryptography that uses a pseudorandom function to generate one or more secret keys from a secret value such as a master key, password, or passphrase. In general, KDFs are effective at stopping brute-force password-guessing attacks.

The Implementation

The Litecoin scrypt algorithm was adopted by the developers, which allows for faster and safer transactions because of the reduced hash rate (the measure of processing power per second) necessary to function. This encouraged early adopters to utilize Dogecoin as a mode of payment for minor transactions, such as tipping.

It is mined using an auxiliary proof-of-work method (AuxPoW), which differs from PoW in that it may be mined alongside other cryptocurrencies that use the scrypt algorithm.

Scrypt is simpler to use than Bitcoin's SHA-256 (the cryptographic hash, or signature, required to validate the validity of a file or text), mostly because it does not require specialized mining equipment such as the application-specific integrated circuits, or ASICs, used in Bitcoin.

How Does Dogecoin Mining Work?

Dogecoin mining is similar to Bitcoin mining in that it requires the solution of complex mathematical equations in order to verify transactions on the Dogecoin network and add new blocks to the blockchain. The procedure is known as "proof-of-work," and it entails competing against other miners to solve these equations and win Dogecoin rewards for their efforts.

Here's a quick rundown of how Dogecoin mining works:

  • Transactions in Dogecoin are broadcast to the network and gathered in blocks.

  • Miners compete by solving tough mathematical problems using their computer hardware to validate these transactions.

  • The miner that solves the problem and adds a block of confirmed transactions to the blockchain first wins a block reward in Dogecoins.

  • The newly added block is broadcast to the rest of the network, where other miners validate the block and the transactions included within it.

  • The blockchain is updated with the new block, and the process begins all over again with a fresh set of transactions.

As opposed to Bitcoin, Dogecoin employs a mining method known as scrypt, which is supposed to be resistant to the use of specialised mining hardware known as ASICs. This creates a more fair playing field for miners by making it harder for those with expensive equipment to dominate the mining process.

Dogecoin Vs Bitcoin

Dogecoin differs significantly from Bitcoin in several ways. First, miners may finish the mathematical calculations that complete and record transactions faster and easier, making Dogecoin slightly more efficient for payment processing.

"Whereas the procedure to validate new blocks on the Bitcoin blockchain takes 10 minutes, it only takes one minute on the Dogecoin blockchain," stated Gary DeWaal, Chair of Katten's Financial Markets and Regulation group.

Another key distinction is that, as previously stated, there is no lifetime limit on the number of Dogecoins that can be created. The maximum amount of coins that can be minted in a lifetime is limited to 21 million Bitcoin. This implies that miners must work harder and longer over time to earn new Bitcoin, which helps to ensure Bitcoin's ability to hold and grow in value over time.

Here's a comparison table for Dogecoin and Bitcoin; To know more, Click here





Initially created as a joke, now used for transactions and tipping online

Decentralized digital currency, alternative to traditional currencies


Uses a modified version of Litecoin's blockchain with faster block times and lower transaction fees

Uses its own blockchain with longer block times and higher transaction fees

Consensus Mechanism

Proof-of-work (scrypt algorithm)

Proof-of-work (SHA-256 algorithm)


Uses mining to verify transactions and add new blocks to the blockchain, rewards miners with Dogecoin

Uses mining to verify transactions and add new blocks to the blockchain, rewards miners with Bitcoin

Total Supply

Unlimited supply with a set inflation rate of 5 billion Dogecoin per year

Limited supply of 21 million Bitcoins, with a decreasing rate of new Bitcoin creation over time

Transaction Speed

Faster block times (1 minute) allow for faster transaction confirmation times

Slower block times (10 minutes) lead to longer transaction confirmation times

Features of Dogecoin

  1. Unlimited Supply
  2. Decentralization
  3. Fast Transactions

Unlimited Supply

Dogecoin, like other cryptocurrencies such as Ethereum, has no limited supply. Miners get 10,000 DOGE for each block, which is generated every minute. It requires the creation of 14,400,400 new DOGE tokens every day, which are subsequently sold on the market or saved in miners' wallets.

There is around 132.67 billion DOGE in circulation at the time of writing, with a market value of $13 billion and a price of $0.09.


Decentralization is part of the security that governs most cryptocurrencies, which means that security is in the hands of a global community of users. A cryptocurrency's decentralization is often measured by the number of nodes on its network and the distribution of miners.

According to Blockchair, Dogecoin has around 1,090 nodes, compared to 10,000 nodes spread over 97 countries for Bitcoin. As a result, the Dogecoin network is vulnerable to a 51% assault, in which a single person or organization controls more than 50% of the network.

Fast Transactions

Dogecoin executes one block in one minute, making it ten times quicker than Bitcoin. It can complete 30 transactions in one minute after receiving confirmation from cryptocurrency exchanges.

The time it takes to conduct a Dogecoin transfer is determined by the type of wallet utilized. Dogecoin Core, the official wallet, offers faster transfer speeds than a cryptocurrency exchange.

For example, moving DOGE to Coinbase or Binance, which both require 60 confirmations, can take up to an hour. However, because just 40 confirmations are required, the transaction time on Kraken is roughly 40 minutes. Other factors, including network congestion and wallet addresses, play an equal role in Dogecoin transaction speed.


How does Dogecoin gain value?

Dogecoin blocks are 1MB in size, much as Bitcoin blocks. However, due to the Scrypt nature, which allows for faster and cheaper transactions, Dogecoin's blocks are generated every minute as opposed to Bitcoin's 10-minute interval, allowing it to handle a larger number of transactions per second.

How does Dogecoin trading work?

Dogecoin is a cryptocurrency that enables fast payments on its ledger by employing a proprietary Proof-of-Work consensus method. The coin price of Dogecoin is determined by trading activity, technical value, mainstream use, adoption, collective trends in the crypto market, and a variety of other variables.

Does Dogecoin have any real value?

Dogecoin may be used to make payments and purchases, but it is not a particularly good store of value. This is mostly because there is no lifespan limit on the number of Dogecoins that may be generated through mining, implying that the cryptocurrency is extremely inflationary by design.

What makes Dogecoin so special?

Its scrypt technology and limitless supply argued for a speedier, more versatile, and more consumer-friendly form of Bitcoin. Dogecoin is regarded as an "inflationary coin," whereas cryptocurrencies such as Bitcoin are deflationary due to a cap on the number of coins that can be issued.

Who founded Dogecoin?

The spoof cryptocurrency was created by software developers Billy Markus and Jackson Palmer as a method to mock Bitcoin and the other cryptocurrencies claiming ambitious aspirations to take over the world. The website quickly gained popularity with Reddit's assistance.




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