Cryptocurrency is a digital currency similar to dollars, euros, and yen. Instead than relying on government backing or central bank, it uses an online ledger with robust cryptography to safeguard online transactions.
You can buy cryptocurrency via cryptocurrency exchanges. It can also be “mined.” Mining cryptocurrency requires powerful computers with high-end GPU graphics cards to perform complex math calculations to create coins.
Since cryptocurrency is not printed like dollars, each cryptocurrency has a limited supply, making them popular with investors. However, cryptocurrency is also prone to volatility, making it a risky investment. For example, Bitcoin has a limited supply of 21 million coins. However, as more coins are found and certain supply levels are reached, the value of the coins is reduced by half.
Cryptocurrency is built using blockchain technology. Developed by a mysterious figure named Satoshi Nakamoto, blockchain is a secure, distributed ledger that produces, tracks and manages digital currency. It was developed by a mysterious figure named Satoshi Nakamoto. No one knows Nakamoto’s real identity or if it is one person or many.
Blockchain is a running digital receipt of all the transactions in the currency, including who owns what currency and how much. The receipt is never trimmed; rather, it is always added to for a complete history. To prevent fraud, the receipt is constantly validated by a decentralised network of computers. This guarantees that the currency functions properly and securely.
There are numerous cryptocurrencies available on the market, but the three most popular are Bitcoin, Ethereum, and Dogecoin.
Key differences among three popular cryptocurrencies
Cryptocurrencies can be created for a variety of reasons, and each one may occupy a different part of the crypto universe. We have summarized below the fundamental distinctions between Bitcoin, Ethereum, and Dogecoin.
Bitcoin
Bitcoin is the first and most popular cryptocurrency. Bitcoin was introduced in January 2009 following the publication of Nakamoto’s white paper describing a blockchain-based currency. It is currently an internationally traded financial asset with daily activity in the tens of billions of dollars.
The Bitcoin network is decentralised, which means that no one controls or owns it. Instead, the Bitcoin network is made up of volunteers (reportedly 80,000) who run open source software on their computers known as nodes. All Bitcoin transactions are recorded on the blockchain, a public ledger.
The scarcity of Bitcoin, combined with rising demand from institutional and retail investors, is one of the main factors driving its value. Bitcoin has a fixed supply of 21 million coins, much less when compared to billions for other cryptocurrencies. So the 19 million bitcoins already created and circulating in the market account for roughly 90% of the total supply. Bitcoin’s value may continue to rise as the number of bitcoins created approaches its limit.
Ethereum
In 2012, 17-year-old Vitalik Buterin began writing for Bitcoin Magazine, proposing improvements to the Bitcoin platform. When his suggestions went unanswered, he created Ethereum, his own digital money.
Ethereum, also known as “Blockchain 2.0,” is similar to Bitcoin but adds some features, such as:
- Conditional transactions: Transactions can only occur if certain conditions are met. These rules are referred to as “smart contracts.” The contract cannot be changed once it has been written. That is why they are known as “trustless transactions.” The currency exchange will not happen if the contract terms are not met.
- Decentralised applications: These apps enable and enforce smart contracts that run on the Ethereum blockchain network instead of relying on a centralised server. They are written in Solidity, a JavaScript-like language designed specifically for developing dApps.
Ethereum, like Bitcoin, is a distributed network of nodes that verifies transactions and pays miners in coins. At the time of writing, each Ethereum coin is worth about $2,800. Unlike Bitcoin, there is no limit to the number of coins that can be mined.
The cryptocurrency market is eagerly awaiting the release of Ethereum 2.0, a more energy-efficient and cost-effective model that employs the proof-of-stake, or PoS, protocol rather than the proof-of-work, or PoW, protocol. The switch to PoS will enable the network to support more transactions per second, making it more scalable.
“The blockchain behind the second-largest cryptocurrency, Ether, will soon undergo a highly anticipated upgrade that may lead to more institutional investors putting money in the network and help lift Ether’s price,” says Eloisa Marchesoni, a crypto entrepreneur and public speaker.
While Bitcoin is currently the largest crypto by market value, Marchesoni believes Ether will overtake Bitcoin after its infrastructure upgrade, also known as the “Merge,” which marks the end of Ethereum’s proof-of-work.
The amount of energy consumed during operations is one of the top concerns about Ethereum’s current network. Ethereum 2.0 appears to be a more sustainable option. The Ethereum Foundation estimates that Ethereum’s PoS upgrade will reduce energy consumption by 99.95%. Ethereum 2.0 is expected to be released sometime in 2022 in separate phases.
Dogecoin
Dogecoin exemplifies how an internet meme can permeate popular culture. “Doge” is a photo of Kabosu, a shiba inu dog with a peculiar expression on its face. The picture was usually accompanied by text in broken English, reflecting some kind of internal dialogue. This meme was so popular that it was sold as a nonfungible token in June 2021 for 1,696.9 Ethereum – roughly $4 million at the time of purchase.
When the creators of Dogecoin chose Kabosu as their logo in 2013, they were being comical. That is what distinguishes Dogecoin from the competition. The community behind it doesn’t take itself too seriously. A Twitter poll voted Elon Musk CEO after he expressed support for Dogecoin and referred to himself as “The Dogefather.”
Dogecoin was created with the intention of being more approachable than other cryptocurrencies. Theoretically, it has an infinite supply. Dogecoin ensures that miners always get enough rewards as an incentive to keep mining. Cons? Dogecoins were worth about 24 cents each in September 2021. The coins are far more common than Bitcoin or Ethereum. The real draw, however, is the goofy community.
Dogecoin-Ethereum bridge
The idea for the Dogecoin-Ethereum bridge came when Ethereum developer Buterin said on Twitter that a bridge to Dogecoin would be great, and Musk agreed with him.
The bridge allows users to send Dogecoin from its native blockchain to the Ethereum blockchain, where it is converted into Ethereum tokens. The converted Dogecoin will be accepted by any token that accepts Ethereum. The bridge also works in both directions, so converted Dogecoins can be converted back.
The primary benefit is far more widely used and accepted than Dogecoin, making for much faster transactions.
However, building the bridge is easier said than done. It is a work in progress and there is no set release date at this time.
Bitcoin and Ethereum are both well-established and popular cryptocurrencies, whereas Dogecoin remains a fun side project for Musk and the Doge community. However, Doge is a good way to experiment with cryptocurrency and learn about it without putting too much money at risk.
Bottom line
If you’re thinking about trading cryptocurrencies, you should know that they’re not all created equal. Bitcoin is used as a medium of exchange for goods and services in some parts of the world. Bitcoin, for example, has become legal tender in El Salvador. This has drawn criticism because Bitcoin’s volatility can be difficult for the local population who uses it for transactions.
Ethereum transactions are not monetary in nature; rather, the network hosts a collection of codes known as smart contracts. These smart contracts serve as the foundation for Ethereum applications.
However, cryptocurrency is driven by sentiment in the short term, so even something created as a joke and with unlimited issuance may rally strongly if a wave of interest sweeps in. Much wow,” as a famous doge meme might say.