Dogecoin is a cryptocurrency, the first of the larger category of meme coins to be released on the market. It was designed by Jackson Palmer and Billy Markus, two software engineers who created the payment system as a joke to poke fun at the rampant speculation taking place in the cryptocurrency ecosystem at the time. Apart from being the first meme coin, Doge is also the first “dog coin”, featuring the face of Kabosu, a Shiba Inu from Japan who became an internet celebrity and the face of the Doge meme.
While meme coins are typically believed to be devoid of value, Dogecoin has nonetheless grown in popularity over the last few years and can currently be found in many more portfolios than ever before, as people are increasingly confident in the potential and possibilities that cryptocurrencies offer. The dogecoin price is impacted by the same fluctuations and volatility that affect the entire marketplace, so remember that when you take your first steps into this ecosystem. And while the coin has been around for quite a few years at this point, it doesn’t mean that it doesn’t still have the potential to keep growing and evolving.
At the moment, one of the most important things in this regard is that Dogecoin could soon shift to a different protocol, a fundamental shift that cannot be ignored.
The overview
The question of whether Doge will shift from a proof-of-work consensus mechanism to a proof-of-stake has been at the root of considerable discourse in the crypto community over the last few weeks. It is understandable considering the fact that such a decision would naturally have serious repercussions for the marketplace and the way in which the assets operate. A few years ago, Ethereum co-founder Vitalik Buterin started a debate after suggesting that Doge could eventually migrate from PoW to PoS as part of an experiment.
At the time, many even believed that the idea was wishful thinking, but four years later, it appears much more likely that it will become a reality. But what exactly would happen if that took place? To fully understand the ramifications, it is essential to comprehend the nature of consensus mechanisms in crypto projects. Decentralized ecosystems such as the blockchain need such a system, or they wouldn’t be able to process transactions at all.
The full procedure involves validating different entries and integrating them into a distributed database to ensure their security. This means that users must agree on the authenticity of proposed transactions, with consensus denoting that all nodes agree on the state of the network.
Proof-of-work
Proof-of-work protocols have become increasingly commonplace and are consuming more and more energy as mining has steadily become a more lucrative means of generating income. The fact that this system is known to be a power guzzler has led many climate activists to call for a ban on it, while others have started regarding all cryptocurrencies as fundamentally unsustainable, advocating for all to be outlawed. According to Swedish regulators, mining a single Bitcoin is the equivalent of driving a medium-sized electric car for about two miles. Right now, BTC is responsible for 0.5% of the global energy consumption, more than all of the Netherlands.
When the price of coins increases, the electricity consumption goes up as well, draining grids and resources even further and attracting more criticism as a result. An additional issue is that the proof-of-work protocols typically have a much more difficult time scaling, as the approximate TPS is five, while proof-of-stake can complete 65,000 transactions. As a result, scaling ends up being a major bottleneck.
Proof-of-stake
When it comes to replacing consensus protocols, it is typically about replacing proof-of-work with proof-of-stake. The latter exchanges cryptographic puzzles with a model where the native crypto holders stake a predetermined number of coins for a particular period of time in order to have their own validator nodes. Using proof-of-stake means that the miners have to stake coins before they can go on to validate transactions. The capacity they have in this regard, therefore, depends entirely on the number of coins staked and the time they have been completing these tasks for.
Naturally, the algorithm favors those who have staked more coins, but a different group of miners is chosen to validate each set of transactions. The validators are also in charge of completing the transactions and creating new blocks.
Which one is better?
This question remains the root of considerable debate in the crypto ecosystem, particularly since the implicit idea is that PoS is inherently superior to PoW. However, those who prefer proof-of-work to its faster peer outline the fact that the former is better equipped to address security concerns and ensure that all transactions take place in a secure environment. This is indeed a crucial thing when it comes to crypto since the assets are often targeted by hackers who want to access substantial amounts of capital. Many experts indeed regard the level of security in PoS to be far below that of PoW.
However, if you focus on scalability, efficiency, and sustainability, then proof-of-stake is definitely the winner. Some consider PoW to be an outdated concept for today’s crypto market, believing that it was suitable for the time when it was created, but that it is now time to switch to something better equipped to handle the demands of the ecosystem. Another advantage of the proof-of-stake is that it allows any crypto holder to become a miner and earn special rewards in that way.
The future
Currently, the costs associated with running Doge deter many validators from participating, while the energy usage has drawn the line of those concerned about the environment. With the adoption of PoS, everyone can stake a certain number of coins and become involved in network operations, eliminating the risk of centralization via the concentration of mining power in the hands of only a few network members. The holders’ community will have the opportunity to become more involved and engaged in what’s happening in their own space.
This transition is nothing new, but it will resolve any lingering issues the platform is still dealing with so that it becomes easier to work with.
