Dogecoin has spiked by more than 40 percent in the last three weeks, rallying from $0.060 on July 26 to $0.087 on August 17. Most of this upward movement can be attributed to the launch of a supposed scaling solution for Dogecoin, called Dogechain.

What is Dogechain?

On its website, Dogechain touts itself as a "Layer 2 for Dogecoin." It promises to bring DeFi, NFT, DApp and gaming use cases for holders of $DOGE. This will provide the meme coin something it has been missing since its inception: utility.

However, Dogechain is not a real layer-2 solution for Dogecoin. It is not even built on the meme coin network. Instead, it is based on a custom blockchain solution from Polygon, known as Polygon Edge.

Therefore, the Dogecoin Foundation quickly distanced itself from the project once it began picking up steam and media mentions. "Claims in paid media that Dogecoin launched a 'Dogechain' test network are false. Neither @Dogecoin/@dogecoin_devs, nor @BillyM2k, @ummjackson, or others associated with @DogecoinFdn are in any way affiliated with the token," said Jens Wiechers, a member of the Dogecoin Foundation, in a tweet.

How does Dogechain work?

Dogechain is a proof-of-stake (PoS) blockchain that runs on the Polygon network. Polygon is Ethereum's largest sidechain and is compatible with the Ethereum Virtual Machine. This means that Dogechain will also support apps and games developed for Ethereum.

The project's official token is $DC and will be airdropped to users soon. Once these tokens are released, users can stake their $DC tokens and build a passive income stream. However, until then, users can bridge their DOGE and receive Wrapped Dogecoin (wDOGE) in return.

They can then use their wDOGE to interact with DeFi apps, NFT marketplaces, DApps, and games on the Dogechain network. DOGE can also be used to pay transaction fees on Dogechain. Therefore, Dogecoin's latest price movements could be a product of the increased demand for DOGE tokens, which are being bridged over to Dogechain.

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Dogechain is also gaining momentum, with close to $25 million in trading volume flowing through the network in the last 24 hours.

How will Dogechain benefit DOGE?

Dogecoin works perfectly as a mode of payment. However, it does not offer any other utility besides that. Since it does not support smart contracts, all other use cases such as DeFi, NFTs, GameFi, etc., go out the window.

Further, like Bitcoin, Dogecoin also uses the proof-of-work consensus mechanism. The only difference is that Dogecoin uses the Scrypt mining algorithm, whereas Bitcoin uses the Secure Hash Algorithm 256-bit. While this allows Doge to be a bit faster, it could still suffer from scalability issues in the future, not to mention the environmental concerns of PoW.

However, after bridging $DOGE on Dogechain, users can use their wDOGE to access an ecosystem of DeFi products, NFTs and GameFi. Users will be able to trade NFTs, partake in staking and play to earn more tokens. They can also use their wDOGE to participate in DeFi activities such as lending, borrowing, and liquidity mining.

Conclusion

While Dogechain is not an official layer-2 solution, it might still work well to create an NFT, DeFi and GameFi ecosystem for Dogecoin holders. The added utility of $DOGE could also help improve its price valuation in the future.

However, at the time of writing, Dogecoin was trading at $0.08055, down 7 percent over the last 24 hours.

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