Dogecoin was created by programmer Billy Markus from Portland,Oregon, who hoped to create a fun cryptocurrency that could reach a broader demographic than Bitcoin. In addition, he wanted to distance it from the controversial history of other coins. At the same time, Jackson Palmer, a member of Adobe System’ marketing department in Sydney, was encouraged on Twitter by a student at Front Range Community Collage to make the idea a reality.

After receiving several mentions on Twitter, Palmer purchased the domain dogecoin.com and added a splash screen, which featured the coin's logo and scattered COmic Sans text. Markus saw the site linked in an IRC chat room, and started efforts to create the currency after reaching out to Palmer. Markus based Dogecoin on an existing cryptocurrency, Luckycoin,which features a randomized reward that is received for mining a block, although this behavior was later changed to a static block reward in March 2014. In turn, Luckycoin is based on Litecoin, which also uses scrypt technology in its prof-of-work algorithm. The use of scrypt means that miners cannot use SHA-256, bitcoin mining equipment, and that dedicated FPGA and ASIC devices used for mining are complicated to create. Dogecoin was officially launched on December 6, 2013.The Dogecoin network was originally intended to produce 100 billion Dogecoins, but later, it was announced that the Dogecoin network would produce infinite Dogecoins.

On December 19, 2013, Dogecoin jumped nearly 300 percent in value in 72 hours, rising from US$0.00026 to $0.00095,with a volume of billions of Dogecoins per day. This growth occurred during a time when Bitcoin and many other cryptocurrencies were reeling from China's decision to forbid Chinese banks from investing into the Bitcoin economy.Three days later, Dogecoin experienced its first major crash by dropping by 80% due to this event and due to large mining pools seizing opportunity in exploiting the very little computing power required at the time to mine Dogecoin.