Sometime last year, Dogecoin was the talk of the entire crypto community. It was such that it attracted several miners to its network, and more investors started buying into its ecosystem. However, the main question is, how easy is it to mine or buy Dogecoin, is it profitable, and what do you need to get started?
It is safe to say that Dogecoin began as a joke crypto after the meme coin “Shiba Inu” made waves. It was engineered by Jackson Palmer and Billy Markus to identify as funny as possible. Along the way, it has become one of the top 20 crypto assets with a $22 billion market cap with a huge fanbase.
The rise of Dogecoin in the first half of 2021 was orchestrated by Tesla CEO, Elon Musk when he took a surprisingly significant interest in the project. This took dogecoin mining to a new six-year high. Currently, mining dogecoin is less competitive than mining bitcoin, although it’s still somewhat difficult.
How does Dogecoin mining work?
The same way Litecoin and bitcoin add a new block to their ledger and reach an agreement between their users is the same way Dogecoin works. It runs in a PoW (proof of work) mechanism where organizations or individuals compete for rights to add new blocks which have pending transitions to the ledger using specialized computers.
Miners create a hash with a value equal to or lower than the value of a new block known as the target hash. So, whosoever can create the winning code wins the exclusive right to add new transaction data to the next block and gets rewards in newly minted coins.
However, this process involves trial and error since every hash is generated in a completely random manner. Dogecoin, unlike Bitcoin, doesn’t have a maximum supply cap. So, its circulating supply will continue to increase as new coins are minted via mining.
New blocks are created every minute on the dogecoin blockchain with a 10,000 reward per block. Dogecoin uses a hash algorithm different from bitcoin, although they both run on the proof of work mechanism.
The hashing system it uses is known as Scrypt, which is less complex than bitcoin’s (SHA-256). This means that you get to mine Dogecoin faster with less energy consumption than bitcoin. This could also be one of the reasons why you should buy Dogecoin.
How to mine Dogecoin
During its early days, mining dogecoin was much easier because there were few investors on its network. However, as it grew in popularity and adoption, its mining process became difficult and stressful, causing mining to develop mining pools.
A mining pool, however, is a group of miners mining a crypto coin as an entity or node by increasing their computing power. The reward earned are then distributed amongst the individual miners with an amount proportional to the computing power of each mine.
What this means is that everyone gets the opportunity of mining the coin individually.
You can mine Dogecoin in three different ways, and they include;
These are those who mine Dogecoin for fun. It could be achieved using a GPU (Graphics Processing Unit) via software like easyminer. GPU is a specialized processor that helps improve image processing on a computer screen.
It is worth noting that solo mining could be difficult and rarely profitable unless you shell out a huge sum of money on specialized computers and electrical bills.
As explained earlier, if you’d like to make a fortune from dogecoin mining, you might want to find similar miners like you to create a mining pool with. Once this is done, you can have a high computing power which would help in turn increase rewards.
However, before jumping on mining pools, ensure you are ready to pay about a 3% fee for the privilege to participate. Most importantly, always review the pay-out terms and conditions for members before joining the pool.
You can mine Dogecoin through cloud mining, although it’s not regarded as mining often. It involves getting computing power from a data center and paying it back monthly or annually. The mined coin is shared between you and others based on the computing power you subscribed to with the data center.
With cloud mining, most contracts are timed-locked. And what this means is that you can lose your investment if the doge price drops below the operational and electrical cost associated with the mining.
So, before going into any form of mining, be sure you understand the advantages and disadvantages.