But What is DOGECOIN? A noob’s guide to crypto.
Everybody would have seen the latest SNL aired on 8th of May starring Elon Musk and would have definitely come across the scene where Michael and Kyle(the hosts) keeps bugging Elon (Lloyd Ostertag aka The DogeFather) with this very question again and again and again “WHAT IS DOGECOIN?” to which he quirkily replied that this is the future of payments and it is going to take over the world!
What you saw there seemingly as a joke is not something that is happening for the first time as it is said that, “History never repeats itself, but it often rhymes”
People have vehemently and violently denied the change, the new normal, the latest trend by merely calling it names like ‘scam’ , ‘fad’ , ‘hustle’ but it has turned out to now become over trillions of dollars worth income to countries globally.
Want an example of the aforementioned denial?
- The stock market
2. The internet
Really? People hated the stock market at a point of time? As a matter of fact many people still do. Just go and talk to your uncle who lost a couple thousand bucks a few years back in ’08 or ’99 and he will explain exactly why it is the creation of the devil. (More on that in another blog)
Okay, I can buy the argument that people hated it because of money they have lost but it is merely because they do not understand it.
And the internet? When it came in the early 90’s people said things like
- Write an letter to someone on the computer? No thanks! I would rather just write it on pen and paper and post it myself.
- You want me to order my clothes online? Are you insane? I would prefer to go the local GAP and get something I like
Well Thank God that the internet outlived both the arguments and it has now changed the way we do things. You’re reading this blog only because of internet!
But, what is DOGECOIN?
Dogecoin much like many other cryptocurrencies is a way of storing and transferring money from one account to another and it works something like this
Well what’s going on? What is that diagram? Am I missing something here? No you’re not. This is a schematic of how the transaction of a cryptocurrency works.
When we use money (fiat Dollars) , we (the owner) transfer the Dollar Bill to the person on the counter at Wendy’s for a Cheeseburger. But can you prove the payment you just made in cash? How about the payment you made last week? Or the one you made last year? We can’t !
To overcome such a problem, humans came up with banks and banks started using technologies like ‘Ledger’ or ‘Bank Statement’ to keep track of all transactions we make. But the system is not safe and is quite prone to attacks. Also not to forget the ever crushing cost of bank charges, fees, interest and much more
To overcome all such problems , the idea of cryptocurrency came to place. Now let’s get back to the diagram and understand it. You are Owner 1 who just received let’s say 1 Bitcoin or 1 BTC (pretty sweet ha?)
You would receive it on your public key — which is the equivalent of your email address or bank account number. The transaction is encrypted — it is made secure by having a layer of security above it to prevent attacks or hacking.
This coin which you receive is Bitcoin or Dogecoin, written in lines of code. Really all the crypto in the world are lines of code? Yes, they are lines of code.
But it can’t be real or legit because I can not touch or see it like a Dollar Bill ! Well you do not see the ‘Internet’ or even the ‘Network’ on your smart phone but they’re pretty real and guess what? Even they are written by means of programming.
Have you ever wired someone money? Well how does it go? It does not get carried by a magic stork in the sky with your money wrapped in a bag on his beak going from coast to coast certainly! It happens because of lines of code.
Now that you received your DOGE in the wallet , you would want to transfer it to the hotdog stand owner standing in the corner because you are not satiated by the Cheeseburger. You go , scan a code (which is that person’s public key) , your app verifies it with your private key (something like your password) and now you have transferred it for a hotdog. The block-chain network stores this transaction in a ledger similar to your bank statement and it is encrypted to prevent it from being stolen from your wallet.
Guess what, if done using the right tools, the transaction costs are very low or even zero in some cases. Don’t believe me? Well you can look up articles where people are paying $21,000,000 in DOGE and what is the transaction fees that they paid? A few cents! That is why Elon says this is future of payments and is gonna take over the world. When your uncle realizes that he is apparently losing a lot of money to Visa and AmEx just to make transactions and he will lose nearly nothing with crypto, that’s the moment it goes from FUD (Fear, Uncertainty and Doubt) to acceptance.
OKAY! Now I understand what is a crypto-currency and how it works. But what gives it the value that it holds?
Stay tuned to answer that for the next article.
Until then , stay focused, stay curious.
