Ever since we launched our chain of memes and dreams, our team’s goal has been to onboard as many users as possible into the wonderful world of blockchain tech.
As an EVM, Dogechain provides utility for Dogecoin, which has become instrumental as a gateway into the industry. However, this cryptocurrency is most often held by mainstream investors without advanced DeFi knowledge.
For this reason, we’ve always tried to educate our user base with pertinent information about the new use cases for Dogecoin in the smart contract world. In this blog post, we collected our previously published “Dogechain Explains” in an omnibus of knowledge covering many critical topics in the blockchain industry.
Dogechain Explains – What is DeFi?
🧩 DeFi stands for decentralized finance.
It is geared toward building a new, internet-native financial system, using blockchain tech to replace traditional intermediaries and trust mechanisms.
🌎 DeFi allows anyone, anywhere in the world to access advanced financial services and experience more control over their money.
It enables borderless, peer-to-peer financial interactions such as:
🔹 Cryptocurrency trading
🔹 Lending
🔹 Borrowing
🔹 Liquidity farming, etc.
DeFi uses blockchain-powered components like stablecoins, tokens, DEXes, and lending protocols to provide these services.
🧩 Because of how all of these pieces fit together, many refer to DeFi components as “Financial Legos”
This new archetype sets the foundation for the Web3 revolution!
Dogechain Explains – Liquidity Pools 💧
🔄 Liquidity is a fundamental part of crypto. Liquid assets are easily converted back and forth, without huge price variations or slippage.
Liquidity Pools play a crucial part in the creation of a liquid DeFi system.
🔒 Liquidity pools are piles of digital assets that are locked in a smart contract.
🤝 They are used to facilitate trading by providing liquidity to DEXes or lending protocols. Automated market makers (AMMs) use them to allow digital assets to be traded automatically.
💲 The price of the tokens in the pool is determined by a mathematical formula of the AMM and depends on:
🔹 The size of the trade
🔹 The size of the pool
This means that larger pools can accommodate bigger trades without significantly moving the price.
🐶 / 🐶 In its basic form, a liquidity pool holds 2 tokens, e.g. $wDOGE and $DC, creating a market for that pair of tokens.
Once the market is created, users can start trading these tokens and the AMM will accommodate their trades.
👥 Any user can become a liquidity provider (LP) by providing a 50/50 split of these tokens to the pool.
🏆 The pools provide incentives to LPs by rewarding them with a fraction of the trading fees or other rewards, proportional to the amount of liquidity they supplied.
All in all, liquidity pools are essential to the DeFi ecosystem:
🔹 They enable decentralized trading
🔹 They allow users to make yields through their holdings.
And thanks to Dogechain’s smart contract capability, you can now provide liquidity with your $DOGE to reap the benefits. 🤑
Dogechain Explains – Cross-chain bridges ⛓ ↔️ ⛓
✅ Cross-chain bridges allow tokens designed for one blockchain to be used on another one.
🧩 This makes them a crucial component of blockchain interoperability and one of the pillars of the Web3 era.
📈 With the increasing number of standalone blockchains, users are continuously getting new options for accessing #DeFi and other advanced functionalities.
However, each network has a representative coin which is usually incompatible with other chains. 🤨
🔒 Bridges allow us to lock these tokens in a smart contract and mint their exact representation on the destination chain.
We can then use these tokens and access the functionalities and dApps of the destination chain, allowing interconnectivity.
➕ An added advantage to the interoperability is that bridges allow us to use isolated blockchain coins like #Dogecoin on other protocols, like #Dogechain.
The representation of the native coin can gain smart contract capability, increasing its utility.
💪🐶 In our case, the bridge allows $DOGE to be used as gas on Dogechain and plugged into #DeFi protocols, #NFTs, and gaming.
Dogechain explains – Coin burns 🔥
🗑 Coin burning in crypto is a deflationary process that permanently removes tokens from the total supply.
These tokens can be either in circulation or unreleased, but in both cases, a predefined amount of tokens is irrevocably destroyed. 💥
💰 → 🔥 Burns can be either automatic or manual, and the process involves sending tokens to a “burn” address, from where they cannot be retrieved by anyone.
💀 This proof of burn address for Dogechain is:
0x000000000000000000000000000000000000dEaD
Burning can have multiple benefits for the projects.
🔹 Reduce supply and make tokens more scarce.
🔹 Increase long-term value and provide more upside potential for the project.
Dogechain explains – Self Custody 🛡️
🧱 One of the pillars of blockchain technology is digital asset ownership.
Thanks to cryptography, every #Web3 participant owns their tokens as long as they remain in possession of their private key.
👛 Your crypto wallet allows you to remain in control of your funds, at all times, without the need for a third-party custodian.
😎 However, out of convenience, or sheer misunderstanding of the concept, many users choose to store their crypto assets on centralized exchanges.
🔪 🐔 By doing this, they are sacrificing their self-custody and handing over their crypto to the #CEX. Just recently, we witnessed how risky this practice can be.
When a CEX like #FTX goes bankrupt or gets hacked, users’ assets aren’t insured and are lost forever.
💸 While it can be handy to keep some assets on a CEX for trading, the bulk of your holdings should always be in your personal wallet.
🔒 Bonus points if you are using a hardware wallet, which is the most secure option out there.
To sum up, the concept of self-custody and digital ownership is essential to understand cryptocurrencies as a whole.
Keeping your assets in your decentralized wallet instead of a CEX should be compulsory for every #crypto user.
Dogechain Explains – DAOs 🗳️
⛓ Decentralized Autonomous Organizations (#DAOs) are a new kind of organizational structure, built with blockchain technology.
These can be easily described as crypto co-ops that form for a common purpose. 🤝
👥 DAOs have no central leadership. Instead, they are governed by their communities following a specific set of rules enforced by blockchain technology.
💼 A DAO’s goals can range from supporting different blockchain startups, or investing in NFTs, among many other things.
Members participate in a DAO through their token ownership. They can use their tokens for various purposes, such as managing a common treasury or voting on certain decisions.
These decisions are usually made via smart contract proposals, which the group votes on.
Some benefits of DAOs vs traditional organizations include:
🔹 Transparent – all decisions are made on-chain, and their treasuries and transactions are visible to everyone.
🔹 Democratic – every token holder can vote on group decisions, not just boards or executives.
🔹 They move faster because they’re often project-specific, with significantly less red tape than traditional start-ups.
🔹 They provide an opportunity to support projects and consider innovative ideas as a community, instead of just a select few.
Dogechain has its own DAO, where $DC holders can participate in the governance of the chain and distribute Ecosystem funds to builders on the chain and benefit from it.
Dogechain Explains – What is Staking?
🔐 Since the 14th of November, users can stake their $DC tokens on #Dogechain and get access to passive yields for actively participating in the ecosystem.
But what does staking mean and how does it work behind the curtains?
🤝 Blockchains use various consensus mechanisms to validate transactions and secure their networks.
The most popular ones are Proof of Work (Bitcoin, Dogecoin) and Proof of Stake (Ethereum, Dogechain).
🌿 PoS is considered more scalable and eco-friendly than PoW
💰 Staking offers crypto holders a way of putting their digital assets to work and earning passive income without needing to sell them.
On a technical level, staking is used to select honest participants and verify new blocks of data being added to the network.
🛡 Moreover, locking tokens ensures that the blockchain remains secure, as it becomes increasingly expensive to attack it.
Two distinct actors interact in this mechanism:
1️⃣ Validators
🔹 Lock a large number of tokens to get the right to confirm transactions and create blocks through consensus.
🔹 Receive token rewards for their service and distribute a portion of these rewards to delegators.
🔪 To ensure honest participation, validators can be penalized by the protocol if they show malicious or dishonest behavior on the chain.
2️⃣ Delegators
🔹 Delegate their tokens to a validator of their choice to increase the safety of the network.
🔹 Receive a portion of the token rewards for entrusting their tokens with the chain.
🥜 In a nutshell, users lock their tokens to participate in running the blockchain and maintaining its security.
In exchange, they earn rewards proportional to the amount of their stake. 🤑
Have you staked your $DC yet?
Get started here:
🌐 https://bridge.dogechain.dog/pos/locker
Dogechain Explains – Decentralized Exchanges 🔄
DEXes are a crucial part of #DeFi, allowing users to trade cryptocurrencies without intermediaries. 🤝
🧠 To achieve this, they rely on self-executing smart contracts which facilitate peer-to-peer trading.
👛 This means that users can conserve control of their assets at all times and don’t relinquish their custody to a centralized entity.
This is in contrast to Centralized Exchanges that require that you deposit assets in a custodial wallet.
☝️ 🐶 To be able to provide instantaneous swaps, DEXes rely on liquidity providers from the community.
Users can lock tokens into smart contracts (liquidity pools) that will provide the essential funds needed for executing trades. 🔒
Benefits of DEXes include:
🔹 Trustless and permissionless – due to their decentralized nature, anyone with a compatible wallet can DEX services.
🔹 Token availability – DEXes can list any token without having to go through a lengthy whitelisting process.
🔹 Anonymous – DEXes don’t require KYC or registration to be used.
🔹 Reduced counterparty risk – DEXes operate with no intermediaries and users don’t have to deposit assets, eliminating 3rd party custodianship risk.
Have you tried one of the DEXes on #Dogechain yet?
These platforms represent a core component of #DogeFi and allow you to access advanced financial tools with your $DOGE. 💰🔗
Dogechain Explains – NFT Floor Price
🔎 When navigating through the rich #Dogechain NFT ecosystem, you will inevitably come across the term “NFT floor price”.
This term refers to the lowest price a seller wants for an NFT in any given collection. ⬇️
📈 The floor price is also a good starting point for understanding the popularity of an NFT collection and the token’s value over time.
For example, a project whose floor price starts decreasing shows that interest in that project is falling. 🤯
💸 Usually, NFTs with rare traits will sell for prices much higher than the floor price.
Knowing the floor price allows users to hunt for gems and find rare pieces that are selling for cheap. 💎
🧹 Finally, it’s worth noting that one can “sweep the floor” and purchase multiple NFTs in a collection at its floor price.
This can allow the buyer to set a new floor, by listing the swiped NFTs at a higher price.
Dogechain Explains – Slippage 😵💫
When trading on decentralized exchanges, you will often encounter the term “Slippage”. But what does this mean and how does slippage impact your trades? 👇
🔂 Well, when you place a buy or sell order for a token, you naturally expect this order to be filled at the price you’ve chosen.
However, this isn’t always the case and can become a costly issue due to slippage.
⚖️ Slippage is the difference between the expected price of an order and the price when the order executes.
🔣 This difference can happen due to high volatility and low liquidity and is expressed in percentages, showing how much the price for a specific asset has moved.
💱 While this phenomenon occurs in all markets, it’s very frequent on low-liquidity DEXes.
Altcoins with low volume and low liquidity often suffer from slippage.
💸 Too much slippage can become quite costly for frequent traders.
That said, this can be avoided by limiting your slippage tolerance to lower percentages.
However, there’s a caveat to this. 🙈
It also means that if your tolerance is too low, your trade might never execute. As a result, you will miss out on an opportunity to cash out your profits. 💰
🎯 For consistent results, it’s important to thoroughly understand the volatility of the cryptocurrency and the trading platform you are using.
This will help prevent you from accidentally placing an order at an undesirable price.
Dogechain Explains – Blockchain Nodes ⛓
🧊 Blockchain nodes are essential components of a blockchain network.
These devices are connected to the network and participate in the verification and validation of transactions.
🛡 Nodes help to ensure that the blockchain securely and immutably records all transactions that have taken place on the network.
Blockchain Nodes can have different roles in the network such as:
🔹 Storing a copy of the entire blockchain and validating transactions
🔹 Verifying and adding new transactions to the blockchain
🔹 Running smart contracts or serving as trusted intermediaries for certain transactions
🔒 Consequently, they ensure the integrity and security of the blockchain by communicating with each other and using the consensus of the blockchain to validate transactions.
Running a blockchain node has several advantages 👇
1️⃣ You can broadcast transactions directly from the node, securing private information
2️⃣ Removes the need to use block explorers to check transactions
3️⃣ Can be a decent source of passive income
🥜 In a nutshell, nodes are the backbone of blockchain technology, securing the network and contributing to its decentralization.
The more nodes a blockchain has, the more decentralized its consensus is. 🤝
Dogechain Explains – RPC Nodes 🧅
📄 dApps on #Dogechain require data from the network to complete user requests like sending transactions or evaluating the state of the blockchain.
RPC nodes enable #Web3 apps to interact with the chain and easily access user data.
⛓ On Dogechain, validator nodes run the consensus protocol and create blocks on the chain.
The RPC nodes, on the other hand, serve as a gateway to obtain blockchain information. 🔑
🚪 An RPC endpoint is the network location where a program sends its RPC requests to access the server’s data.
RPC endpoints can be private or public:
🤝 Public RPCs are shared, rate-limited resources, that allow anybody to send and receive data from the blockchain.
They are usually offered by the dev team itself as an all-around solution for dApps to access data.
🕵️ Private RPCs operate in order to service specific dApps and avoid request congestion created by other programs.
This allows a fast and consistent RPC service at all times.
High-volume dApps like DEXes usually use private nodes to ensure a smooth service
Dogechain Explains – Privacy Coins
💭 Many mistakenly think that cryptocurrencies like #Dogecoin are anonymous because their pseudonymous addresses enable transactions without identifying personal information.
🔏 However, since they use blockchain technology, all transactions are recorded on a public ledger.
👀 This makes transactions accessible to anyone and hence, possible for third parties to investigate on-chain data and piece together people’s identities.
This can be a serious security issue for big holders or people that don’t want anyone snooping on their financials
🕵️ Privacy coins are cryptocurrencies that preserve anonymity by obscuring the flow of money across their networks.
They make it difficult to work out who sent what to whom – which is useful for keeping your crypto financial data private.
🙈 To achieve this, these cryptocurrencies use varying cryptographic techniques to obscure details around transactions and better shield users from prying eyes.
Some of the most popular privacy coins are $XMR, $ZEC, and $DASH
☑️ Even #Doge’s big brother, $LTC, introduced an opt-in privacy upgrade in 2022.
Although there has been some regulatory clampdown on privacy coins, many crypto investors seemingly want to keep their transactions truly anonymous and increase the security of their funds.
Dogechain Explains – Arbitrage ⚖️
If you have been trading cryptocurrencies long enough, you have certainly heard of the term Arbitrage.
🤔 But what exactly is it and how can you take advantage of it?
🔄 Arbitrage refers to capitalizing on price differences across different markets to make a profit.
When navigating the markets, you will often notice that the same cryptocurrency has slightly different quotes on different exchanges. 💰!=💰
💧 There are many reasons for this price discrepancy, such as low liquidity or high slippage when large trades occur.
This price difference can sometimes become quite significant for short amounts of time, opening opportunities for arbitrage and profit. 🤑
💱 Crypto arbitrage trading is the process of buying a digital asset on one exchange and selling it (nearly) simultaneously on another, where the price is higher.
For this reason, arbitrage is considered low-risk since it doesn’t require that you understand the market.
You just spot price differences and execute a series of transactions to take advantage of the price difference.
Sounds simple enough, right? However, this is easier said than done.
⏩ Crypto markets move incredibly fast, making it quite challenging for traders to capitalize on these arbitrage opportunities manually.
This is why most arbitrage traders use automated bots and spread their capital on multiple exchanges to be able to act quickly. 🤖
👌 Finally, it’s worth noting that arbitrage is a necessary and positive side effect of any market.
Price differences inevitably occur and arbitrage traders act upon them to rebalance the market organically while making some profits in the process. 🌱
Dogechain Explains – Crypto Derivatives 📈
Once you delve into more advanced #DeFi instruments, you’ll inevitably come across Crypto Derivatives.
This thread will explain what they are, and why they have gained so much popularity in the last few years.
⤴️ Crypto Derivatives are financial instruments that derive their value from an underlying crypto asset.
They allow traders to get exposure to the price movement, without actually owning said asset.
In contrast to spot markets which allow profits only when the price goes up, derivatives allow speculating on both positive and negative price action. 📉 📈 🤑
Three major types of crypto derivatives include:
🔹 Futures – are contracts between traders that obligate them to buy or sell a particular asset at a predetermined price, on a specified date in the future.
E.g. A futures contract requires that you buy 100 DOGE at $0.8 in 1 week.
- If the price is higher at that time, you will be able to buy at a lower price and pocket the difference. 😏
- If the price is lower, you need to pay the difference. 🥶
🔹Options – are similar to futures, with the difference that they don’t obligate you to buy or sell the asset once the contract expires. Instead, you can pay the contract fee which comes at a fixed price.
🔹 Perpetuals – are unique to crypto and differ from futures in that they do not have an expiry date. Traders can keep positions as long as they keep paying their holding fee called the funding rate.
Derivatives have:
Pros:
🔸Higher leverage
🔸Managing risk and hedging
🔸Advanced trading strategies
🔸Higher liquidity
🔸Market efficiency
and Cons:
♦️ High risk
♦️ Regulatory concerns
♦️ Counterparty risks
As always, with any financial instrument, do your own research, practice before you risk real money, and never risk more than you can afford to lose. 💸
Dogechain Explains – Crypto Perpetuals ♾️
♾ Crypto perpetual contracts or “perps” are a derivative unique to the cryptocurrency market.
They are becoming increasingly prevalent trading instruments that could find their place on #Dogechain very soon. 👀
📆 Similar to futures, they are an agreement to buy/sell crypto at a fixed price. This means that traders can speculate on the price going up or down and pocket the difference if the market goes their way.
Unlike futures, however, perpetuals do not have an expiration date.
📈 📉 This allows traders to go long or short indefinitely, and close their position whenever they wish.
Some unique mechanisms come into play that affect how perps work 👇
🔹 Maintenance margins – each perp depends on a maintenance margin rate, which is the lowest amount of collateral traders need to hold to keep their position open.
If the collateral value falls beyond the threshold, the position is liquidated. 💸
🔹 Funding rate mechanism – To avoid too many long or short positions simultaneously, perpetuals use a funding mechanism.
The goal is to adjust the perp’s value relative to the underlying asset’s price.
💰 E.g. if the asset’s price goes below a perp’s price, the mechanism will require shorters to pay the funding rate to those with long positions.
This gives incentive to purchase contracts, causing the perp price to rise and realign with the price of the asset.
☯️ On the other hand, if the asset’s price goes above a perp’s price, the longs will pay rebates to shorts.
These fees incentivize buying or selling to keep the perp contract in balance with the real-time price of the asset.
There are many advantages to perps:
🔹 No need for custody – users don’t own the underlying asset
🔹Potential to profit from bullish or bearish positions
🔹Easy access to leverage
🔹Funding fees increase profits in sideways markets
Dogechain Explains – AMMs ⚖️
Wondering how you are able to trade #DOGE on DEXes?
Automated Market Makers or AMMs are protocols critical to #DeFi. They allow permissionless trading using liquidity pools instead of a traditional market of buyers and sellers. 🔁
📜 AMMs use self-executing smart contracts to allow users to trade against a pool of tokens — a liquidity pool. This LP can be considered a “shared pot” of tokens.
The AMM usually incentivizes users to supply LPs with tokens through transaction fees or LP tokens. 💰
The price of the tokens in the pool is determined by a mathematical formula.
By tweaking the formula, liquidity pools can be optimized for different purposes.
The most common formula was popularized by Uniswap as:
🧑🏫 x * y = k
Here, x and y are the prices of 2 assets, and k, a constant.
This constant means there is a constant balance of assets that determines the price of tokens in a liquidity pool.
Consider a $DOGE/$DC pool
🔸 Every time $DC is bought, the price of $DC goes up as there is less $DC in the pool than before.
🔸 Conversely, the price of $DOGE goes down as there is more $DOGE in the pool.
The pool stays in constant balance, where the total value of $DC = the total value of $DOGE.
While popular, these first-generation AMMs are limited by impermanent loss and low capital efficiency.
For this reason, we are seeing an emergence of various protocols in the industry aimed at optimizing AMMs such as @QuickswapDEX V3 with its concentrated liquidity.
Dogechain Explains – Layer-2 Blockchains 🥮
Base layer networks like Bitcoin, #Dogecoin, or Ethereum were created with security and decentralization in mind. That said, their scalability or usability can be somewhat lacking.
🍾 Layer-2 blockchains are off-chain solutions created to reduce scalability or utility bottlenecks of the underlying leading chains.
The purpose of these chains is to assist in validating transactions or providing smart contract computational capacity for the main chain.
This allows for minimizing the tasks handled by the base layer, allowing the network to process transactions faster. 🏃 💨
🎚 Consequently, they are essential to scaling blockchain technology for mass demand and setting the industry up for seamless growth in the future.
🥜 In a nutshell, they offer:
🔸 Lower fees: layer-2s bundle multiple off-chain transactions into a single layer-1 transaction, which helps reduce the data load and costs. 💸
🔸 More utility: Through the combined advantages of higher throughput and lower fees, layer-2 projects can focus on improving user experience and expanding the scope of applications. 🔭
☝️🐶 Did you know that Dogechain acts as a smart contract layer-2 for Dogecoin?
It allows $DOGE holders to use #DOGE as gas and access a new world of DeFi, NFTs, and blockchain games.
Dogechain Explains – v2 vs v3 AMMs 🤖
With major DEX @QuickswapDEX offering both v2 and v3 versions of their AMM on #Dogechain, many wonder about the differences between these protocols. 🤔
This post should help you understand both AMM versions’ workings and learn their differences.
💧 A v2 DEX’s primary function is to allow users to build up trading pools between any token and a wide range of assets. This liquidity allows them to trade said tokens for each other
When LPs provide liquidity to v2, it is distributed evenly along the price curve. ☯️
0️⃣ ->♾️ However, while this allows handling price ranges between 0 and infinity, it makes the capital inefficient for LPs.
Assets are usually traded within a certain price range, not taking advantage of 99% of the capital, and never generating fees.
🧃 v3 introduces concentrated liquidity, where LPs can choose the price range where they wish to provide liquidity.
The protocol creates a price curve for every LP, allowing them to generate fee rewards when assets trade in that particular range. 💰
🪙 v3 equally allows users to provide a single token as liquidity in a custom price range above or below the current market price.
This is in contrast to v2s which will require a pair of tokens to be added to the LP.
That said, even though v3 shows clear advantages, it hasn’t been fully adopted because it requires more active liquidity management. 😓
As such, v2 remains a major player for users trading exotic pairs 🍸, while v3 has become the go-to solution for blue chip projects. 🫐
Dogechain Explains – Making a meme token on Dogechain 🐶🚀
Do you have what it takes to create your own #memecoin? If you feel lost and don’t know where to start, we got you covered!
🔗 https://bit.ly/3LUlqwz
Instead of the usual Twitter explainer, follow the link above to our Medium to read about:
🔸 Meme tokens and their potential in the industry
🔸 How to create a meme token using Build-A-Doge
🔸 Creating liquidity pools on Quickswap
🔸 The required tools to manage and engage your community
🔸 Meme token marketing fundamentals
And join the memeconomy on Dogechain!
#DogeFi starts with you 🫵🐶
Dogechain Explains – Bitcoin Ordinals 🪙
Bitcoin is the original cryptocurrency, and until recently, it was mainly used for storing and transferring value. Bitcoin ordinals are changing this. 😇
🔢 The Ordinals protocol is a system for numbering satoshis, the smallest denomination of Bitcoin. It gives each satoshi a serial number and tracks them across transactions.
⛏ Satoshis are numbered based on the order in which they were mined and transferred, hence the name “ordinals”.
🧊 Ordinal inscriptions are similar to smart contract NFTs in some ways, in that they can hold additional data. However, they are also inscribed directly onto individual satoshis, which are then included in blocks on the Bitcoin blockchain.
Unlike NFTs, ordinals reside fully on the blockchain and do not require a separate token. In this sense, ordinal inscriptions respect the BTC ethos and inherit its simplicity, immutability, security, and durability. 🧘
💯 Ordinals have a major advantage – they provide added utility to the Bitcoin blockchain beyond simply transferring value.
🧭 However, inscribed satoshis are now competing for block space with regular BTC transactions, which increases network fees significantly.
💢 This has caused some major controversy within the Bitcoin crowd, where some see them as an attack on the network’s integrity.
What do you think? Will Ordinals continue to grow, or will they be phased out as a novelty?
Wrap-up
This concludes this first Dogechain Knowledge Omnibus! Make sure to follow our socials and blog for more educational content that will prepare you to face head-on this seemingly daunting industry.