The Technology Behind Dogecoin

As we know, all cryptocurrencies are based on blockchain technology. Blockchains are huge digital databases that store transaction information and each transaction that is made with DOGE is stored on the Doge blockchain.

Blockchain information is not stored in one place but is stored across thousands of computers called nodes. This is why the blockchains are called decentralized networks as blockchains do not operate on the centralized server. If person A lives in one part of the world and person B on the other, and they A wants to send B money without using a bank and fees, A can use DOGE. The nodes then will make sure that person A has 10 DOGE to send for example and if more than half of the nodes on the network agree that A has 10 DOGE to send, then the transaction can happen. The transaction can then be added to the blockchain.

The nodes will get a reward for checking the transactions and the reward is a new DOGE which looks like mining. Similar to BTC, DOGE uses a blockchain where the blocks are appended via Proof of Work and all network participants install open-source software onto their machines so they can act as full nodes so for all those that are not familiar with blockchain technology, it means that each participant maintains a full copy of the database. The system is decentralized because there is no administrator that controls it and the users then send information directly to each other and can rely on cryptographic techniques to tell whether their peers are acting in an honest way.

In the proof of work blockchains like BTC, a process called mining is used to create new coins and participants will have to prove to the network that they have done good work which you can think of revealing as an answer to a complex puzzle. The puzzle is then solved by hashing information until the user can provide an output that the network will accept as valid so the solution can not be feasibly produced by hand so the users instead dedicate electricity and computing power to try and find it.

One huge difference between LTC and BTC is that litecoin doesn’t use the SHA-256 hash function for mining which was really an intentional decision because Litecoin relies on Scrypt which is an ASIC-resistant proof of work algorithm. This means that the purpose machines that are used to mien BTC will not be able to compete with the regular computers and the GPUs used to mine LTC. This will result in a decentralized mining landscape.

As a derivative of LTC, DOGE inherited the Scrypt algorithm technology so to avoid any competition and to mitigate the security risks, the developers moved to a merged mining model which means that LTC miners could earn Dogecoin. The mining process targets a one-minute per block time and yields a reward of 10,000 doge. As there’s no maximum supply of units, enthusiasts see this as removal of limits as a good choice because it incentivizes the spending of the coin and prevents the early adopters from profiting.