Dogecoin has enjoyed a lot of attention in recent weeks, largely thanks to Elon Musk of SpaceX and Tesla fame. But while Musk plans to use Dogecoin to partially fund a mission to the Moon, is this cryptocurrency good for planet Earth?
In short, is Dogecoin as sustainable as some of the other sustainable cryptocurrencies we’ve identified?
What is Dogecoin?
Dogecoin is a peer-to-peer digital currency and DOGE is the cryptocurrency’s token. Doge is also the name of the currency’s Shiba Inu mascot who represents Dogecoin in online memes.
Dogecoin was founded in 2013 by software engineers Billy Markus and Jackson Palmer, and is based in Seattle, Washington. The payment system was created by the founders as a joke, with the intention being, in part, to lampoon the wild speculation afoot in cryptocurrency markets but also to get people interested in the concept of cryptocurrencies and blockchain.
Dogecoin caught on though, with the crypto community embracing the mascot Doge and propelling Dogecoin to become, at the time of writing, the most frequently traded digital currency.
Dogecoin was used primarily for online purchases and tips but with its increasing notoriety and price it has attracted straight-up investors. So far, around 127 billion Doge is in circulating, with 113 billion coins mined.
How does Dogecoin work?
Dogecoin is an open-source protocol that forked from the luckycoin blockchain, which forked from Litecoin, which is itself a fork of bitcoin. Unlike some of the newer, arguably greener and more sustainable cryptocurrencies, Dogecoin is not Turing complete or capable of facilitating smart contracts.
While it started as a proof-of-work algorithm, Dogecoin now operates using an Auxiliary Proof-of-Work (AUXPoW) algorithm. This means that miners can mine other Scrypt coins in parallel with DOGE without either currency competing for mining power. In practice, this means that many miners mine Litecoin and Dogecoin side by side.
Interestingly, the decision to switch Dogecoin from a pure PoW algorithm to an AUX-PoW was not based on any desire to reduce energy consumption. Instead, the switch came about because of concerns over the potential for a “51 percent attack” as the price of Dogecoin declined in 2014 and fewer miners felt inclined to mine the cryptocurrency.
A 51 percent attack is where a miner or mining pool could take control of more than half of a blockchain’s power. That would allow the individual or pool to block other participants in the network. Larger, more secure networks don’t face this problem because it’s much harder for one party to mount such an attack and because it would be much less profitable.
To prevent this kind of attack, the Dogecoin developers enabled merge mining, i.e., the AUX-PoW Scrypt algorithm. Dogecoin could then receive ‘work’ from Litecoin and, in theory, other Scrypt-based blockchains.
How to get started with Dogecoin in an eco-friendly way
To get started with Dogecoin (which we don’t recommend if you’re climate conscious), you’ll need a cryptocurrency wallet that can accept DOGE. After you’ve configured your wallet, you can then get some Dogecoin in a variety of ways, including just buying some, trading for some, getting tips through the Dogecoin community, or mining them.
Possibly the most sustainable and charitable approach is to participate in a distributed computing project called Folding at Home. This project, run out of Stanford University, uses contributors’ computer power to help run protein folding simulations that can help researchers find cures for diseases, including for COVID-19. To join the Dogecoin Folding at Home team, check out the guide.
Dogecoin’s environmental impact
The environmental impact of Dogecoin is a bit more difficult to figure out than for some other cryptocurrencies. The AUXPoW protocol means lower hash rates, which makes Dogecoin more energy efficient than a pure PoW protocol such as Bitcoin’s SHA-256 mining algorithm, but not as energy efficient as a proof-of-storage protocol or similar.
According to Blockchair, at the time of writing, Dogecoin’s average 24-hour hash rate was 291.65 Th/s (Scrypt) at the time of writing, where Th/s is a terahash or one trillion hashes per second. The 24-hour average for Bitcoin was 165.14 Eh/s (SHA-256), where Eh/s is one exahash or one quintillion hashes per second. One quintillion is a million trillions, demonstrating how Dogecoin’s hash rate is much, much lower than that of Bitcoin. A hash is basically a sum or puzzle, which miners solve to earn a chance to earn Doge or Bitcoin or whatever currency they’re mining for.
Let’s do some fun math with terrifyingly large numbers. We will start with the often touted claim by serious miners that one gigahash (a billion hashes) per second requires one Watt of power. That means one terahash per second equals one Kilowatt and one exahash per second one Gigawatt.
Dogecoin’s energy consumption could be calculated based on the 291.65 kW required to power the network every second (because 1 Th/s = 1 kw, and Dogecoin’s hash rate is 291.65 Th/s). With 60 seconds in a minute, 60 minutes in an hour, and 8760 hours in a year, this would amount to an estimated annual energy consumption for Dogecoin of 2.554854 gWh.
Compare these numbers to the annual electricity consumption of the entire USA – 3,990 tWh per year – and it’s abundantly clear that Dogecoin already uses a phenomenal amount of energy but that this is still far less than many industries and residential energy consumption.
For Bitcoin, the calculation comes out a 1446.6264 tWh per year, or roughly half the USA’s annual energy consumption (though other estimates have put it at closer to 60 terawatts annually). I checked and double-checked these calculations because the numbers were just staggering. If anyone wants to question and re-do the math with me, that would be great because I still can’t quite believe the numbers myself. [Thanks to Kyle for helping me see where I’d squared the initial kW to kWh calculation!]
All that said, calculating the actual energy footprint of Dogecoin is nigh on impossible because of this piggybacking/mixed mining system. Some advocates claim that Dogecoin uses practically no power at all because of the piggybacking, but if two or more mining operations are piggybacking interchangeably at some point one of them has to take responsibility for the energy being used.
It’s also noteworthy that because Dogecoin is still operating on a PoW algorithm, albeit one that is merged, it only gets more difficult (and energy intensive) to keep mining Dogecoin as the blockchain is constantly growing.
Dogecoin has no specific charitable initiatives itself but has long been used as a token to fund a variety of projects. This is almost entirely because the Dogecoin community is, shall we say, a little outside of the orthodox crypto crowd, with a good sense of humor and a healthy dose of creativity, curiosity, and compassion (especially for dogs).
There are numerous instances of mining time being donated to charity, fully funded projects that help provide service dogs for children (Doges4kids), water infrastructure projects in Africa, and more. You’ll even find some science projects being funded by Dogecoin, such as the West Virginia Water Contamination Relief and Study at the University of South Alabama and TheOceanCleanup project now accepts cryptocurrency donations including Dogecoin.
Is Dogecoin a sustainable investment?
Dogecoin may have started out life as a joke, but it has risen in price more than 12,500% so far in 2021. Compare that to the Dow Jones Industrial Average of about a 12% rise and the S&P gains of around 11% and you can start to see why mainstream investors are seeing Dogecoin as a tasty treat.
With most cryptocurrencies, though, there’s always a concern that there’s little, if anything, in the way of tangible assets to secure the value of the token. Cryptocurrencies are volatile assets and you should always discuss with an investment advisor with knowledge of the blockchain before making any purchase. Ultimately, whether Dogecoin is a good investment for you depends on your portfolio, comfort with risk, and many other factors.
From a sustainability perspective, however, Dogecoin is not a good investment. Sure, it’s a bit better than Bitcoin in terms of energy efficiency, but that’s not saying a lot. And despite the friendly, fun Dogecoin community, the currency itself has no specific ethos supporting environmental initiatives, carbon offsetting or reductions, or other worthwhile endeavors.
So, if you’re looking for a cryptocurrency for your socially responsible investment (SRI) portfolio, you’d be better off looking at greener tokens as described here.