- As Dogecoin gains popularity across the world, people are increasingly drawn towards its mining.
- With no limit on Dogecoin mining, unlike Bitcoin mining, Dogecoin miners are being rewarded with millions of dollars every day.
- However, one must have a specific set of equipment to start the Dogecoin mining process.
Crypto mining has been making rounds ever since the first Bitcoin was mined in 2009. Broadly speaking, Crypto mining is a transactional process of gaining cryptocurrencies by decoding cryptographic equations, thereby validating data blocks, and recording data into a blockchain.
Source: Copyright © 2021 Kalkine Media
Let us now delve into Dogecoins and its mining process.
As the name suggests, Dogecoin got its name after the dog meme went viral in 2013. Promoted as a friendly internet currency, Dogecoin is an open-source cryptocurrency derived from Litecoin.
A glance at the Dogecoin mining
This cryptocurrency runs on similar lines as Bitcoin and Ethereum on blockchain technology. It uses cryptography to secure all its transactions.
People known as miners decipher complex mathematical equations and put them down on the Dogecoin's blockchain, also known as the 'proof of work' mechanism, by making use of specific computer equipment. Miners with the winning code earn the right to add the transaction on the blockchains and hence are rewarded with additional Dogecoins, which can later be traded in the open market.
Crypto users and traders can use these Dogecoins for making payments and purchases. However, they are not an effective medium of value storage.
One of the main reasons is that there is no limit on the number of Dogecoins which can be mined, thereby making it extremely inflationary.
Also, as the blockchain provides its miners with millions of fresh Dogecoins every day, it becomes quite challenging to hold the price gains over a span of time.
Dogecoin mining vs Bitcoin mining
Also, while both Bitcoin and Litecoin are marked with digital scarcity, with only 21 million and 84 million in supply, respectively, there is no such limitation with Dogecoin. According to reports, there are over 100 billion Dogecoins in circulation, currently.
Nonetheless, its supply would continue to rise as more and more Dogecoins are minted as miners continue to decode the cryptographic equations.
Moreover, new blocks are being discovered nearly every minute on the Dogecoin blockchain, in comparison to the Bitcoin blocks, which are being deciphered every 10 minutes.
Also, Dogecoin makes use of a less complicated algorithm called 'Scrypt' while Bitcoin uses a relatively complicated algorithm known as ‘SHA-256.’ Hence, mining Dogecoin is swifter than Bitcoin, thereby consuming less energy.
Dogecoin mining can be done through many methods. Miners must have a range of specific equipment like hardware, software, Dogecoin wallet, etc.
- Individual/Solo mining
Individual miners can independently make use of graphics processing units with software like EasyMiner. However, individual mining is a difficult process clubbed with investing a significant amount of money on specific equipment and footing electricity bills as well.
- Mining pool
Crypto miners can mint profits by joining mining pools like Prohashing, Multipool, AikaPool, etc., which offers better prospects of becoming a block validator; however, 1%-3% fees are levied to participate in this pool.
- Cloud mining
Usually, cloud mining involves hiring computing power from a data centre and paying a specific fee for the contract. The desired coin is then mined at the centre through a mining pool.
Is Dogecoin mining profitable?
Dogecoin mining may tend to be profitable if a miner has an efficient hardware system and the mining pool offers a favourable chance to mint good profits. Moreover, other things like transaction fees and energy consumed is also taken into consideration.
It is noted that in early June 2021, mining a single DOGE amounted to a profit of nearly two cents (in US$).