RecordCoin.io
The coin, which was originally created as a joke token, has seen explosive growth in early 2021 and is now the 9th most-capitalised cryptocurrency. Part of the reason the token has gained such popularity is that Elon Musk, the CEO of Tesla, has been actively promoting it on his social media accounts. This helped it attract the attention of major investors and make Dogecoin something more than just a hype project. The Dogecoin blockchain runs on the Proof-of-Work consensus mechanism, which means that mining is the key principle here to create new blocks on the network.
In this article we will try to understand how you can mine Dogecoin, what you need for that, what pitfalls can wait for you and will it be profitable in 2023?
What is Dogecoin?
Dogecoin is a distant bitcoin fork with a few major differences in its source code. Dogecoin, like most cryptocurrencies, is a decentralised cryptocurrency whose digital ledger is maintained by a decentralised network of nodes rather than a single party. Rather than issuing all the coins at once, Dogecoin is mined block by block, by so-called miners. These are vital members of the network who develop the Dogecoin blockchain and are rewarded with a certain amount of DOGE in return.
What is Dogecoin mining?
Mining is a process in which a computer performs certain algorithmic tasks to generate new cryptocurrency tokens or coins. As we have already said, miners receive a reward as a result of mining a coin. The amount of reward in the form of coins can vary depending on the cryptocurrency.
The process of mining Dogecoin involves solving complex cryptographic equations, just like mining other cryptocurrencies. Most likely, mining this coin will not make you a millionaire, but you can still make money if you approach it the right way. A series of transactions within a block on the Dogecoin blockchain consists of data at the time of the transaction. Once the block is mined, the information is broadcast to all other miners in the network. By updating the records, the network is protected against any double recording of transactions. This is the main advantage of the Proof-of-Work mechanism.
Differences between Bitcoin and Dogecoin mining
As I mentioned earlier, Dogecoin is a fork of Bitcoin and has similar source code. However, there are a few crucial differences between the two:
Algorithm: Bitcoin and Dogecoin use different hashing algorithms. While Bitcoin uses the SHA-256 algorithm, Dogecoin uses the Script algorithm. In comparison, SHA-256 is more complex, so it takes longer to hash. Whereas the Script algorithm is much simpler (just remember this information for now, I will tell you what it is for later)
Reward: The key to mining coins is the size of the reward. Bitcoin has a reward of 12.5 BTC, while Dogecoin has 10000 DOGE. The difference is 800 times. But since the prices of these cryptocurrencies are very different, it doesn't seem like such a big difference. In terms of investment, Dogecoin is definitely the leader in this regard.
Time to create a block: It takes 10 minutes to create a new Bitcoin block, while Dogecoin takes only 1 minute.
What do I need to mine Dogecoin?
To start making money by mining Dogecoin, you need to do a few things:
Buy mining equipment
Choose a wallet to store Dogecoin
Download and install software
Dogecoin mining equipment
The first thing to do is to purchase the mining hardware. There are three different types of hardware available for DOGE mining:
GPU: The graphics processing unit (GPU) is more powerful than the central processing unit (CPU) and is responsible for the digital rendering of the computer system. It is efficient for mining cryptocurrencies because of its fast speed. However, the resource consumption of this method is very high.
CPU: The central processing unit, or CPU, is used to solve complex algorithms. Anyone with a powerful enough CPU can start mining cryptocurrency. Following the resolution of complex blockchain algorithms, it checks coin transactions. Compared to a GPU, it is not as efficient, but has a low entry threshold for mining.
ASIC: ASIC is an acronym for Application-Specific Integrated Circuit, an electronic gadget mainly used for mining cryptocurrency. Dogecoin users should look for Scrypt-based mining equipment. Basically, ASICs are an off-the-shelf solution for mining cryptocurrencies and are the most efficient as that is their main function. On the other hand this solution is the most expensive. Remember I mentioned that there are different algorithms for hashing. So, when choosing an ASIC miner for DOGE you must choose one which is designed for the Script algorithm.
Choosing a wallet for Dogecoin
There aren't many options when it comes to choosing a Dogecoin wallet. Hardware wallets (which are considered the safest) are also available for DOGE coins: they are supported by Ledger Nano X and Trezor Model T. These wallets are currently considered the safest on the market. There are, of course, also free wallet options, but we don't recommend using them for long-term storage of your assets.
Dogecoin mining software
Below are the Dogecoin mining software:
CPU Miner: As the name suggests, this software works with processor hardware. This software is mainly used for mining pools.
EasyMiner: This is a piece of software that runs on GPU-based hardware and is a great tool for beginners. Another program, Cuda-Miner, is considered the best for Nvidia GPUs.
MultiMiner: ASIC hardware specifically uses Multi-Miner software. However, ASIC hardware can also be used with CPU Miner and Easy-Miner.
Choosing how to mine
Once you have purchased the hardware and installed the software, you need to choose a strategy for mining. To begin with, you should know that there are several options for mining cryptocurrency: solo mining or mining pools. In solo mining, your computer is the only one mining the cryptocurrency and, as a consequence, you are the only one receiving the reward. However, in today's reality this method is not very efficient, because mining has become dozens of times more complicated and there is very little chance to get any reward, even if you have some really expensive equipment. Nowadays it is mining in a mining pool that is most common. Mining pools allow you to combine the efforts of your miners, making the task of mining easier. The power requirements are much lower, making it easier to get into mining. As a result of mining, the rewards are shared among all the members of the mining pool in the ratio in which they have contributed to the mining. Choose your pool responsibly as they all have individual mining terms and conditions.
How much can I earn by mining Dogecoin in 2023?
Calculating the entire profit from Dogecoin mining requires four factors to be considered. These costs include the hash power offered, the price of Dogecoin at the moment, the cost of electricity and the reward per block. After Ethereum switched from Proof-of-Work to Proof-of-State, 30% of all miners switched to other coins, including Dogecoin. Because of this, the network hash rate of all coins that can be mined has doubled, and some coins even more. Consequently, more powerful hardware is needed for mining, which incurs higher costs. The earnings will depend directly on how powerful the hardware you use is.
To calculate the profit and payback, we recommend using special calculators that are publicly available on the Internet. Let's take for example an ASIC called Antminer L7, which is designed for Script hashing, costing about $8500, giving a hash rate of 9500 Mh/s with a power consumption of 3425 W/h. Let's take the average electricity price in Moscow of $0.09 per kl/h. As a result, we obtain that the net profit of such a miner for the year, assuming 1% mining pool commission, will be $ 3470. That is, the payback period will be 2.5 years. And if to take into account that fact, that complexity of mining only grows, it is possible to consider, that all 3 years.
The risks of Dogecoin mining
Before you dive into Dogecoin mining, you need to know what the pitfalls are here. The first factor you should consider is that the cryptocurrency is extremely volatile. And even if you will get 1000 DOGE, with the current value of $90, in a week's time the rate can fall dramatically, and you will be left with only $50 of your $90. In addition, you should consider the following risks that you may encounter on the way:
Declining profitability: The increasing competition among miners and the increasing complexity of mining can lead to declining profitability over time.
The need for specialized hardware: There comes a time when it becomes unprofitable to mine on regular GPUs. Therefore, to mine Dogecoin, it is recommended to buy specialized equipment such as ASIC miners, which can be expensive to buy and maintain.
Rumors about Dogecoin switching from PoW to PoS: Recently, there have been more and more rumors floating around the web that Dogecoin may switch to Proof-of-State consensus mechanism for the sake of sustainability. This will mean that it will no longer be possible to mine DOGE and you will need to switch to mining another coin, where the competition will already be higher.
Conclusion
In this article we have tried to break down all aspects of Dogecoin mining. Mining is a very expensive activity right now. It has its risks, but it is also realistic to make money. However, this topic requires in-depth knowledge of how it works. This knowledge will help you not to lose the money you have invested. Like any other cryptocurrency income, you have to remember that the cryptocurrency market is the most volatile of all, and therefore the riskiest. Always be sober about your strengths and don't invest all your money in one asset.