Bitcoin versus. Dogecoin Vs. Ethereum: The Best Cryptocurrencies Compared
Cryptocurrency has been on a tear recently as government spending and Federal Reserve liquidity floods the financial system. This helped spark a surge in popular digital currencies including Bitcoin, Ethereum, and (perhaps surprisingly) Dogecoin. But the move is also fueled by growing speculation that cryptocurrency is the ‘must see’ wave of the future.
While cryptocurrencies generally have a few things in common, what are the differences between these three popular cryptos? A lot, in fact, and here are some of the biggest accolades.
What cryptocurrencies have in common
Cryptocurrencies are built using what’s called blockchain technology, which uses a distributed ledger to produce, track, and manage digital currency. Think of it as an ongoing digital receipt of all transactions in the currency, including a list of who owns what currency and how much.
This “receipt” is constantly checked by a decentralized network of computers, which helps prevent fraud and ensure the proper functioning and accounting of the currency.
Cryptocurrency is “mined” by powerful computers called miners who perform complex mathematical calculations to create coins. They also earn coins by processing currency transactions.
Thousands of cryptocurrencies exist and any number could be created using similar blockchain technology. Cryptocurrencies allow the user to transfer money semi-anonymously, although the FBI and IRS are improving in tracking transactions and freezing accounts.
Main differences between three popular cryptocurrencies
Cryptocurrencies can be created for many different purposes, and each can occupy different parts of the crypto universe. The table below summarizes some key differences between Bitcoin, Ethereum, and Dogecoin, each with a separate purpose and maximum number of coins.
|Initial objective||Created to be used as currency or store of value||Created to sell the processing power of the decentralized network||Created as a parody joke of Bitcoin and the doge meme|
|Approximate market capitalization *||$ 1.02 trillion||$ 314 billion||$ 41.4 billion|
|Number of pieces *||18.69 million||115.66 million||129.24 billion|
|Maximum number of pieces||21 million||Unlimited, but the emission is fixed||Unlimited|
* Estimated value at the end of April 2021
Objective of cryptocurrency
Each of these three cryptocurrencies was created for a different purpose. Notably Dogecoin was a satire on the growing popularity of Bitcoin and the same doge featuring a charismatic Shiba Inu. Meanwhile, Bitcoin and Ethereum were created for more serious purposes, including to facilitate transactions or act as a store of value.
The market cap of each is made up of the total of the existing coins multiplied by the current trading price, and there is a big divergence. Bitcoin is the largest, with Ethereum behind a second and Dogecoin among the top 10, according to CoinMarketCap. Traders are clustering around the most popular cryptocurrencies and the volume drops significantly below the top 20.
While these currencies may be some of the most popular for traders, Bitcoin is the one that has emerged among the general public. It becomes easier to access Bitcoin, with several ways to buy or store currency that overlays existing apps like PayPal or Robinhood.
Issue of coins
It is also useful to note how many coins can be issued in each cryptocurrency. Many traders have flocked to Bitcoin due to its strict issue limit of just 21 million. If the money continues to flow into Bitcoin and demand increases, this fixed limit virtually guarantees that the price will increase over time. While this can be good for traders, it makes Bitcoin more difficult to use as a currency.
In contrast, Ethereum’s issuance is unlimited, but its issuance schedule is fixed, which can slow the production of new coins. Meanwhile, the production of Dogecoin is unlimited, which is part of the joke. This unlimited issuance did not appear to stop the currency from skyrocketing in 2021, from around half a penny a coin on January 1 to around $ 0.32 at the end of April.
At the end of the line
If you are planning to trade cryptocurrencies, it is important to understand that not all are created equal. Some features like the limited issuance of Bitcoin can make a currency more attractive than others, at least over a longer period of time. But in the short term, cryptocurrency is driven by sentiment, so even something created as a joke and with unlimited issuance can rally strong if a wave of interest arises.