Dogecoin thereby became a disinflationary currency with a slowly declining inflation rate (4% in 2022, 3% in 2030, 1.5% in 2065, …).Īs a result of removing Dogecoin’s hard cap supply, its price began to decrease and the network’s hashrate declined significantly throughout 2014. However, in the beginning of 2014, 3 months before the last block reward would have been paid out, the developers decided to give Dogecoin a constant tail emission by keeping the block reward at a flat 10,000 coins per block. According to the mining schedule, this would have been the case approximately one year and 160 days after launch. After that, the block reward would be at a fixed rate of 10,000 coins until the 100 billion coin cap was reached. When created, Dogecoin originally had a fixed coin cap of 100 billion coins and the block reward was set to halve every 100,000 blocks until block 600,000 was mined. Unlike its big brothers Bitcoin and Litecoin, Dogecoin doesn’t have a fixed upper coin limit and is therefore an inflationary currency. This mechanism handsomely rewards the miners for providing computational power to the Dogecoin network and thereby making the network secure for the decentralized handling of peer-to-peer transactions. Whichever miner successfully solves this puzzle first and thereby outcompetes his contenders and gets to add a new block to the blockchain is rewarded with some additional Dogecoin in what is called a block reward. The energy used to mine Dogecoin is going into dedicated computer machines, powering processors in a global competition to solve cryptographic puzzles at the cost of computing power. While costs and energy are incurred for Dogecoin miners as well, they are not the result of digging into the ground in the search of precious metals.

The term mining is an analogy that is borrowed from the process of extracting precious metals from the ground as they also need to be mined at the cost of labor and energy. These vital network participants are the ones doing the mining and are in return rewarded with the cryptocurrency. The receivers of the newly issued Dogecoins are the so-called miners. In place of a pre-mine, where the entire stack of Dogecoin would be created in one fell swoop before the network’s launch, Dogecoin is issued and released by the protocol in a pre-programed way. The distribution of coins has therefore been designed in a decentralized manner. As a result, there is no central entity to distribute the cryptocurrency out into the world. Just like Bitcoin, Dogecoin is a decentralized cryptocurrency, whose digital ledger is maintained by a decentralized network of nodes instead of one single party. Even though Dogecoin is a distant Bitcoin fork with several major differences in its source code, mining Dogecoin works similar to mining Bitcoin.

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