You’ve seen the #memes. 
You’ve read the #headlines. 
So how did we rate #Dogecoin? 

Available today for our Premium Members, the #DOGE CORE Report details the strengths and weaknesses of this asset. We look at hundreds of different factors and metrics to give you a comprehensive review of each crypto asset.

Take a deeper look at Dogecoin's nine-year history and subscribe today to gain early access to our DOGE CORE Report, latest research, and much more - https://lnkd.in/gQ4cgCr!    

Overview

Dogecoin (DOGE) is an open-source peer-to-peer (P2P) digital currency based on a December 2013 fork of LuckyCoin, which is a fork of Litecoin. It was created in the early days of cryptocurrency as a parody cryptocurrency, deriving its name from the “Doge” meme featuring Shiba Inu dogs popular at the time. Its original creators, Billy Markus and Jackson Palmer wanted to create a cryptocurrency to bring positive awareness to the cryptocurrency space and appeal to a broader audience. Billy Markus, co-creator, said of Dogecoin, "The original intent was a parody of all the 'serious' clone coins that were trying so hard to differentiate themselves, but all seemed the same." Despite its numerous deficiencies when compared to other cryptocurrencies such as Bitcoin and Ethereum, DOGE has accumulated a large and passionate community that has helped the project remain relevant for nearly nine years.

DOGE Strengths

• DOGE boasts tremendous network effects and "viral meme" status among younger traders.
• The Dogecoin project is a fork of Luckycoin which was derived from Litecoin, meaning the code has been meaningfully tested and reviewed.
• Due to its popularity, especially in 2020, DOGE is now listed on most top exchanges, providing substantial liquidity and trading volume to the asset.
• DOGE is merge-mined with Litecoin, meaning they share the same hashing algorithm and therefore (mostly) the same miners. This design decision made it easy for Litecoin miners to also mine DOGE, bolstering the to network's security.

DOGE Weaknesses

• While DOGE is a favorite among speculators, it is inferior to Bitcoin in nearly every conceivable fundamental aspect which produces a reliable, robust, and decentralized form of digital currency.
• DOGE has fewer nodes, users, volume, transactions, hash rate, miners, developers, merchant adoption, exchange listings, and wallets than Bitcoin.
• DOGE suffers from extreme wealth centralization. Eight large whales (individuals/entities who own large amounts of DOGE)  control ~43%  of the supply.
• Due to Dogecoin's 1 minute block times, latency issues among the distributed nodes has resulted in only ~60% of the network nodes syncing to the tip of the blockchain. This makes the network less reliable and harder for new nodes to join the network. Both result in a more centralized and fragile network.
• Dogecoin development has been stagnant since 2017 and also seen the creators abandon the project.

Important Links

• Website
• Github
• Reddit
• Twitter
• Telegram
• Block explorer
• Wallets - Ledger and TREZOR
• Where to buy? Coinbase and Gemini

Vulnerabilities

Dogecoin is an open-source, publicly accessible cryptocurrency. Code contributions come from a variety of different programming languages, including 67.6% in C++, 15.1% in Python, and 10.5% in C. On the website https://dogecoin.com/, the source code is readily available to be accessed and contributed to, which allows developers to access it with ease. The last consistent contribution to the code base was in 2017, during a retail-driven altcoin bull market. Bull markets generally pique people’s interest in crypto and allow for Dogecoin and other projects to resurface in the headlines. The early 2021 bull markets coincided with a significant amount of demand for Dogecoin. The increased public interest and awareness of Dogecoin combined with an almost 1,000% increase in the number of nodes has created deep scaling issues. These scaling issues, along with the immense popularity with influencers and on social media, are the catalyst for the minor increase in recent developments to the codebase. 

Dogecoin’s network uses a PoW consensus algorithm to prevent spam and attacks. The way it does so is by requiring a fee/cost with each transaction, thereby making mass spam attacks prohibitively expensive. PoW uses electricity, which costs money; thus, sending a spam block would cost money and result in a loss of profit if the block is not approved by other nodes. Regardless, there could be an instance in which the fraudulent miner wins the block reward and puts out a fraudulent block.

Additionally,  Dogecoin’s PoW consensus is vulnerable to a 51% attack. Any cryptocurrency that utilizes PoW is vulnerable to miners taking 51% of the hashing power, but having a distributed and diverse hashing distribution makes this attack less probable. Since Dogecoin is merge-mined with Litecoin (i.e. they share a hashing algorithm and nearly all LTC miners also mine DOGE), we can use LTC miners as a proxy for DOGE miners and mining distribution. Dogecoin’s current hash rate is ~260 TH/s. Using this hash rate figure combined with the price of renting SHA-256d hash power from NiceHash, a hash rate marketplace, it can be (roughly) calculated that the cost to 51% attack DOGE is only ~10% of what it would cost to attack Bitcoin. While the exact numbers are always changing, the fact remains that DOGE is approximately an order of magnitude less secure than Bitcoin.

LTC mining pool distribution is a good indicator for DOGE mining distribution. Five pools make up over 70% of the hash rate. Source: Litecoinpool.org

A Dogecoin wallet company was hacked on May 11th, 2014. Online wallet service, Doge Vault, allowed for the storing and buying of Dogecoin with individual addresses with a supposedly securely tied encryption to it. In 2014, the Doge Vault service became compromised by attackers, and by the time the administrators noticed, the hackers had escaped with 280 million Dogecoins and destroyed any trace of infiltration. Doge Vault issued a statement saying: “It is believed the attacker gained access to the node on which Doge Vault’s virtual machines were stored, providing them with full access to our systems. It is likely our database was also exposed containing user account information; passwords were stored using a strong one-way hashing algorithm. All private keys for addresses are presumed compromised; please do not transfer any fund to Doge Vault addresses.” The 280 million Doge was valued at $55,000 in 2014 but would be worth around $80 million at the time of writing. The Doge Vault wallet service was forced to shut down and go out of business due to this massive heist. 

As of May 2021, only ~60% of Dogecoin nodes were synced within 5 blocks of the chain’s tip (as opposed to 90%+ in Bitcoin). Lower numbers of fully synced nodes make it harder for new nodes to connect and sync to the network, highlighting certain deficiencies at the network layer. This sync issue has major implications for the robustness and ability to remain a permissionless network. Average, non-technical users without expensive hardware are mostly incapable of running their own node. This severely limits the number of people who are capable of running a node much less the subset that is actually interested in doing so. The lack of commitment from the community and (nonexistent) development team around this issue illustrates that the project is not interested in an actual reliable, open, P2P payments network but something else. That something else seems to clearly point to price speculation.

Source: GalaxyDigital

There hadn’t been any recent development activity with Dogecoin’s source code since 2019, but that changed in 2021 with the rise of Dogecoin price. Ross Nicholl, one of the lead maintainers/developers for Dogecoin has made several pull requests this year to make some changes to the code. Dogecoin also includes a community-donated developer fund, which held 21 million+ DOGE at the time of writing. Nicoll said that the developers share access to the fund via a multi-signature wallet. This should allow for ample resources for the developers to ensure its code is maintained properly. 

Source: Twitter

Finally, Dogecoin and its community suffer from extreme wealth concentration. As of Q3 2021, 0.002% of Dogecoin wallets hold 2/3rds of the coins' total supply. There are 8 large whales (individuals/entities who own large amounts of DOGE)  with a 42.78% (55.36b) concentration of Dogecoin. The next leading wallet concentration is retail with 34.73% (44.94b). Lastly, investors make up 22.49% (29.11b) of the wallet concentration. This extraordinarily top-heavy wealth concentration hinders the project from being used as a currency and contradicts the narrative among retail investors that it is a coin for the “average person.”

Bitcoin wealth distribution versus Dogecoin. A much larger percentage of the DOGE supply is held by large whales than compared to Bitcoin. Source: GalaxyDigital