After a rough 2023 and much of 2023, cryptocurrencies are on the rise again. Some of the most popular digital currencies are Bitcoin, Ethereum, and (perhaps surprisingly) Dogecoin.
While cryptocurrencies generally have a number of things in common, what are the differences between these three popular cryptos? Quite a lot actually, and here are some of the biggest differences.
What cryptocurrencies have in common
Cryptocurrencies are built using so-called blockchain technology, which uses a distributed ledger to produce, track and manage a digital currency. Think of it as a continuous digital receipt of all transactions in the currency, including a list of who owns what and how much.
This ‘receipt’ is constantly verified by a decentralized network of computers, preventing fraud and guaranteeing the proper functioning and accounting of the currency.
The idea is to eliminate the role of a traditional central bank in the creation, distribution and transfer of currency.
Cryptocurrency is “mined” by powerful computers called miners, which perform complex mathematical calculations to create coins. They also earn coins by processing transactions of the currency.
Thousands of cryptocurrencies exist, and literally any number could be created using similar blockchain technology. Cryptocurrencies allow the user to transfer money semi-anonymously, although the FBI and IRS are getting better at tracking transactions and freezing accounts.
Key differences between Bitcoin, Ethereum and Dogecoin
When you first start learning about crypto, three names constantly come up: Bitcoin, Ethereum, and Dogecoin. People invest in each coin for different reasons, and it is a mistake to lump the three most popular cryptocurrencies into one homogeneous group.
The table below summarizes some key differences between Bitcoin, Ethereum and Dogecoin.
| Bitcoin | Ethereum | Dogecoin | |
|---|---|---|---|
| *Estimated value as of April 15, 2024, according to CoinMarketCap data. | |||
| Symbol | BTC | ETH | DOGE |
| Year developed | 2009 | 2015 | 2013 |
| Initial goal | Created to be used as currency or a store of value | Created to sell the processing power of the decentralized network | Created as a parody of Bitcoin and the doge meme |
| Estimated 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 the issuance is fixed | Unlimited, but annual issuance limited to 5 billion coins |
Purpose of the cryptocurrency
Each of these three cryptocurrencies was created for a different purpose. Dogecoin was specifically a satire on the rising popularity of Bitcoin and the Doge meme featuring a charismatic Shiba Inu. Meanwhile, Bitcoin and Ethereum were created for more quixotic and serious purposes, including laying the foundation and framework for the entire cryptocurrency ecosystem and facilitating transactions.
Market capitalization
The market capitalization of each consists of the total number of coins in existence multiplied by the current trading price, and there is a big difference. According to CoinMarketCap, Bitcoin is the largest, with Ethereum a distant second and Dogecoin in the top 10. Traders cluster around the most popular cryptocurrencies and volume drops significantly below the top 20.
While these currencies may be the most popular among traders, Bitcoin is the one that has emerged among the mainstream. It is becoming increasingly easier to access Bitcoin, with multiple ways to purchase or store the currency, including the recent approval of a Bitcoin ETF, which allows investors to gain exposure to the cryptocurrency through a traditional investment account. Of course, traders can also turn to popular apps to buy plenty of cryptocurrencies as well.
Issuing coins
It is also useful to know how many coins can be spent in each cryptocurrency. Many traders have flocked to Bitcoin because of its hard issuance limit, just 21 million. If money continues to flow into Bitcoin and demand rises, this fixed limit virtually ensures that the price will rise over time. While that may be good for traders, the volatility makes it more difficult to use Bitcoin as a currency.
Ethereum’s issuance, on the other hand, is unlimited but has a fixed issuance schedule, which can slow down the production of new coins. Meanwhile, Dogecoin production is unlimited, which is part of the joke. That unlimited issuance didn’t seem to stop the coin from skyrocketing in 2023, from about half a cent per coin on Jan. 1 to more than $0.60 in May. However, the currency trended downward throughout 2023 and well into 2023.
In short
If you are considering trading cryptocurrencies, it is valuable to understand that they are not all created equal. Some features, such as Bitcoin’s limited issuance, can make one 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 with unlimited issuance can rise sharply as a wave of interest rolls in. “Lots of wow,” as a famous Doge meme might say.
— Bank interest Rachel Christian contributed to an update to this story.
