Is it possible to make a profit mining Dogecoin? | Matjaž Škorjanc
Mining cryptocurrencies for profit isn’t restricted to the biggest and most well-known coins. People tend to focus on BTC and ETH for obvious reasons, but this blog is for people considering mining Dogecoin.
You’ve probably heard that Dogecoin started as a joke, using as it does a meme as its visual branding. Before we look at mining Dogecoin and whether it’s worth dipping into, here’s a (very) brief history of the coin itself.
Dogecoin mining — the background to the ‘memecoin’
Founded by Jackson Palmer and Billy Markus, Dogecoin actually started as a satirical joke. It was launched as a parody of the biggest crypto communities to poke some fun at the often-over-enthusiastic flights of fancy members can fall prey to.
Palmer initially simply launched Dogecoin on Twitter to amuse himself. Soon he found himself building a website. And in 2013, Dogecoin was released as a bona fide cryptocurrency, with the idea of making the whole concept more approachable for newbies and generally a bit more light-hearted.
Initially, the community used Doge almost exclusively to fund sponsorships and charitable fundraising projects. For example, so far, Dogecoin is responsible for financing the Jamaican Bobsleigh team’s foray into the 2014 Olympic Games, bringing clean water to a struggling, remote village in Africa and for sponsoring a NASCAR driver at the Talladega Superspeedway.
All good fun and for worthy causes. But more recently, Dogecoin has also been increasing in merchant adoption. So, while some continue to dismiss the altcoin as just a meme or a sort of urban legend within cryptocurrency, it has a large, supportive and enthusiastic community (almost half a million on Reddit) and a large market cap.
The coin is designed with more than 100 billion tokens in total, compared with BTC, which caps at 21 million. You can mine it and buy it on pretty much every exchange, and it’s a crypto, just like any of the others.
Musk’s comments on Twitter boosted Dogecoin’s value.
Elon Musk’s championing of Dogecoin on Twitter in July 2020 boosted interest, as it tends to do. He’s expressed support for the crypto a few times on Twitter, each time causing a spike in its price. For example, in December last year, a three-word Tweet from Musk caused a 20% increase in price for the token.
This is, by now most people know, almost par for the course for cryptocurrencies. There is a strong underlying volatility in the sector, often driven by emotional responses to people like Musk. And for any trader or miner, this should always be taken into consideration.
And just like with all other tokens, it’s not possible to predict exactly how its valuation trajectory will go. It’s susceptible to volatility and price changes and could swing in any direction. So, if you’re considering investing in Dogecoin, you must be prepared for it to lose value as well as potentially gain.
Dogecoin grew substantially throughout 2017 and 2018 as the media began to pay attention. It went through its strongest growth yet in January 2021, when Reddit community r/ Wallstreetbets went wild buying stocks in Gamestop.
It’s widely available on most exchanges, with the most popular including Poloniex and Bittrex. So, while it definitely started as a joke, Dogecoin’s strength lies in its community. It’s now been around for five years and is very much part of the crypto landscape.
Comparisons between Dogecoin, Bitcoin and Litecoin
Dogecoin uses Scrypt hashing algorithms in the same way as Litecoin. This has allowed merged mining between the two and means that they can be mined simultaneously — sort of a ‘two for the price of one’ deal.
Here are some similarities and differences between Dogecoin, Bitcoin and Litecoin in terms of hashing:
- Algorithm: Scrypt.
- Block time: One minute.
- Block Reward: 10,000 DOGE
- Coin Supply: 116, 696,031,816
- 2050 Coin Supply: 280,853,172,058
- Algorithm: SHA-256
- Block time: Ten minutes.
- Block Reward: 12.5 BTC
- Coin Supply: 17,339,662
- 2050 Coin Supply: 20,983,495
- Algorithm: Scrypt.
- Block Time: 2.5 minutes.
- Block reward: 25 LTC
- Coin Supply: 58,865,752
- 2050 Coin Supply: 83,883,478.
Three different ways to mine Dogecoin
For the newcomer, there are three main ways you can mine DOGE. The first is solo mining, where you use your computer’s hashing power and confirm blocks for yourself. Obviously, it’s more difficult to make money from Dogecoin in this way.
It’s even possible that ASIC’s Litecoin miners have killed off solo mining for Dogecoin by bloating the hash rate so high that any rewards are indirectly down to merge mining Litecoin rather than directly mining Dogecoin.
This leaves pooled mining as the more profitable approach, giving a higher chance of rewards. This collaborative mining effort means more people combining hashing power, and when block rewards are achieved, they’re split between those contributing.
As with all other hashing endeavours, you’ll need some decent hardware. This can be any Windows, Linux or Mac OS system. Scaling will inevitably require some more power, such as ASICs and GPUs. You’ll also need the right software and a Dogecoin wallet.
Or, for the easiest method of all, start cloud mining. This allows you to buy straight into a mining operation. You don’t need hardware or power; you just rent it. This is always a good option for people who don’t want to layout for any hardware or don’t have access to a powerful computer to get going. Contracts tend to be time locked so that you can take a hit in that way, should the price of DOGE fall below the outlay for electricity and mining.
NiceHash works differently as a hashing power marketplace. We pair hashing power with buyers and a simple way to buy into hashing power from many sellers.
Is it worth getting involved with mining Dogecoin?
Given everything we know about mining cryptos, is it worth even getting started with mining Dogecoin?
This year started with a massive surge in value for Dogecoin, which inevitably attracted many new miners. Today it’s still a Top Ten alt coin with a $32 billion market cap and a huge global base of fans and supporters.
Despite the crypto’s recent success, mining DOGE remains less competitive than mining BTC. New blocks are found much quicker, and the reward is higher (see the above comparison table for more on this).
New blocks are discovered around once a minute with Dogecoin, compared with once every ten minutes for BTC. Because Dogecoin uses the Scrypt hashing algorithm, it’s much less energy intensive to mine.
However, solo mining is difficult, and you’re unlikely to make any kind of real profit without paying out a lot for energy use and hardware. Mining pools offer a better bet, but you’ll still be on the hook for an outlay of between 1% to 3% in fees. Be sure to find out how each pool works out member pay-outs before you jump in.
Mining with NiceHash is the hassle-free way to get going. Whether you will make lots of profit rather depends on a bit of luck and how the coin’s value fluctuates. Either way, mining Dogecoin is unlikely to make you rich, but it is a good entry into the world of mining crypto.
Originally published at https://www.matjazskorjanc.com on October 21, 2021.