After a difficult 2022 and most of 2023, cryptocurrencies are booming again. The most popular digital currencies include Bitcoin, Ethereum, and (perhaps surprisingly) Dogecoin.
Though most cryptocurrencies have specific features, how do these three well-known cryptocurrencies vary from one another? Actually, quite a few, with these being some of the more notable distinctions.
What Cryptocurrencies Have in Common
Blockchain technology, which creates, tracks, and manages digital currency via a distributed ledger, is the foundation of cryptocurrencies. Consider it as a continuously updated digital receipt of all money transactions, complete with a list of who owns what and how much.
This “receipt” is constantly verified by a decentralized computer network to prevent fraud and ensure proper functioning and settlement of the currency.
The idea is to eliminate the role of traditional central banks in creating, circulating, and transferring money.
Cryptocurrency is “mined” by powerful computers called miners, which perform complex mathematical calculations to create coins. You can also earn coins by completing currency transactions.
There are thousands of virtual currencies and literally any number can be created using similar blockchain technology. Cryptocurrencies allow users to move money semi-anonymously, but the FBI and IRS are getting better at tracking transactions and freezing accounts.
Key Differences Between Bitcoin, Ethereum, and Dogecoin
When you first learn about cryptocurrencies, three names always come to mind: Bitcoin, Ethereum, and Dogecoin. People invest in each coin for different reasons, and it would be a mistake to lump the three most popular cryptocurrencies into a single homogeneous group.
The following table summarizes some important differences between Bitcoin, Ethereum, and Dogecoin.
| Bitcoin | Ethereum | Dogecoin | |
|---|---|---|---|
| Symbol | BTC | ETH | DOGE |
| Year developed | 2009 | 2015 | 2013 |
| Initial purpose | Created to be used as a currency or store of value | Created to sell processing power of the decentralized network | Created as a joke spoof of Bitcoin and the doge meme |
| Approximate market capitalization* | $1.3 trillion | $388.8 billion | $23.5 billion |
| Number of coins* | 19.68 million | 120 million | 143.9 billion |
| Maximum number of coins | 21 million | Unlimited, but issuance is fixed | Unlimited, but yearly issuance limited to 5 billion coins |
Purpose of Cryptocurrencies
Each of these three cryptocurrencies was created for a different purpose. In particular, Dogecoin satirized the growing popularity of Bitcoin and the Doge meme, featuring a charismatic Shiba Inu. Bitcoin and Ethereum, on the other hand, were created for more exotic and serious purposes, such as providing the foundation and framework for the entire cryptocurrency ecosystem and facilitating transactions.
Market Capitalization
Each market capitalization is the total number of coins in existence multiplied by the current trading price, and there is a large discrepancy. According to CoinMarketCap, Bitcoin is the largest, followed by Ethereum and Dogecoin in the top 10. Traders are concentrated around the most popular cryptocurrencies, with trading volumes well below the top 20 currencies.
These currencies may be among the most popular for traders, but it is Bitcoin that has established itself as the mainstream. Bitcoin is becoming increasingly accessible as there are multiple ways to buy or store the currency, including the recent approval of Bitcoin ETFs that allow investors to access crypto through traditional brokerage accounts. . Of course, traders can also purchase many cryptocurrencies using the popular app.
Coin Issuance
It is also helpful to note the number of coins that can be issued with each cryptocurrency. Many traders are flocking to Bitcoin because it has a strict spending limit of just 21 million. As funds continue to flow into Bitcoin and demand increases, this hard limit essentially ensures that the price will rise over time. While this may be good for traders, the volatility makes it more difficult to use Bitcoin as a currency.
In contrast, Ethereum’s issuance is unlimited, but its issuance schedule is fixed, which can delay the production of new coins. On the other hand, Dogecoin production is unlimited and this is part of the joke. This unlimited issuance didn’t seem to be able to stop the currency from rising in 2021, rising from around 0.5 penny per coin on January 1st to over $0.60 per coin in May. However, throughout 2021 and well into 2022, the coin has been on a downward trend.
Conclusion
When considering trading cryptocurrencies, it is important to understand that not all currencies are created equal. Some features, such as Bitcoin’s limited issuance, may make the currency more attractive than others, at least over the long term. However, in the short term, cryptocurrencies are driven by emotion, so even something that was created as a joke and can be used indefinitely can skyrocket as interest grows. As the famous Doge meme says, “It’s amazing.”
- Mac Miller’s Long-Awaited Album ‘Balloonerism’ Drops Soon - November 22, 2024
- WhatsApp Announces Upcoming Voice Message Transcription Feature - November 22, 2024
- Google doodle celebrates the Lebanon’s Independence Day - November 22, 2024
