The bull market is approaching its mid-term ascension – at least based on historical charts – and many cryptocurrencies have experienced new all-time highs. Two coins, in particular, have not only seen rapid price pumps and, thus, rapid gains but have also captivated audiences and traders alike. These two cryptocurrencies are Bitcoin and Dogecoin. Yes, you read that right, folks. Dogecoin, that lovable crypto meme intended to make everyone see the funny side of the crypto industry, is still making headlines as it continues on its upward ascend, retaining its position in the top 20 at the time of writing this article.
With that in mind, a question does begin to pop up; how does Dogecoin compare to Bitcoin? Is it even worth comparing a crypto meme to the legendary cryptocurrency? Well, why not? After all, both are peer-to-peer, value of exchange cryptocurrencies, are they not? That is what this article is going to try and answer. We will outline the comparison details between the two and explain how they differ and what makes them similar.
Dogecoin vs Bitcoin Comparison Table
|Crypto Token: BTC||Crypto Token: DOGE|
|Token Market Capitalization: More than $1,000 billion||Token Market Capitalization: Less than $10 billion|
|Total Supply: 21,000,000||Total Supply: Unlimited|
|Volatility: High||Volatility: High|
|Price Prediction: Will cross $100,000 per token||Price Prediction: Will never cross $10 per token |
One of the most striking differences between them is that Bitcoin has its own blockchain and mining algorithm, while Dogecoin is merge mining with Litecoin. This means that Litecoin miners can verify transactions and mine two cryptocurrencies at the same time without sacrificing overall mining performance. This no doubt increases Dogecoin’s hashrate, thereby making it more secure and decentralized, it nevertheless makes it completely dependent on the success of Litecoin’s mining algorithm.
The reason why Dogecoin merge mining with Litecoin brings us to the second main difference. While Bitcoin has a maximum supply of just 21 million, Dogecoin does not technically have a max supply. In fact, it was originally supposed to have a max supply of 100 billion, but due to an improper encoding on Dogecoin’s mining algorithm by its creator, Jackson Palmer, 10,000 Dogecoins are being minted per block, giving it an inflation rate of 5 billion DOGE tokens minted per year! Because of the huge inflationary rate, this makes securing and mining Doge tokens unprofitable, and as a result, the token was at risk of suffering the infamous 51% attack.
Luckily Litecoin came to the rescue when its founder, Charlie Lee, approached Palmer and suggested Dogecoin should merge mine with Litecoin. It was basically a no-brainer, especially when you consider that both coins have the same type of mining algorithm, which brings us to the third main difference.
While Bitcoin uses the SHA-256 mining algorithm, Dogecoin uses the Scrypt mining algorithm. This makes the altcoin not only computationally more efficient, but in fact, it is what allowed it to merge mining with Litecoin, thereby saving the adorable crypto meme.
The fourth difference between the two has to do with utility. While Bitcoin was originally created to be a peer-to-peer exchange of value, given its rarity, it is now coming more as a store of value. Dogecoin, on the other hand, was created, in the words of its creator, “Dogecoin is the spare change you throw in the jar when you get home.”
Moreover, Bitcoin has been rapidly gaining popularity in terms of a source of alternative payment. While many businesses have already begun accepting Bitcoin as a form of payment for certain goods and services, Dogecoin has been lagging behind. While there are certain businesses that do accept Dogecoin as payment, it has not met the same success as its parental crypto coin. Not yet anyway.
But perhaps the most prominent difference comes from their inception. Bitcoin was the very first cryptocurrency to come in existence, thereby taking the credit for leading the revolution for a fourth Industrial Revolution. Dogecoin was created 4 years after Bitcoin, and it was only intended to be as a joke against the negative stereotype surrounding cryptocurrency as a ‘dark' market for criminals and money launderers.
All of this explains why the price of Dogecoin is still in the cents, and considering how many of it there are in the market, it doesn’t seem Dogecoin will ever make it to one dollar denomination.
What is Bitcoin?
Bitcoin is a peer-to-peer cryptocurrency that was created by the now-famous but still unknown Satoshi Nakamoto. In his famous Whitepaper, he wrote the outlines of Bitcoin’s intention to be a direct form transfer of value directly between two parties, without the need of a third party across a network that is communally and consistently secured by thousands of individuals called Nodes.
Nakamoto published his Whitepaper on October 31, 2009, and after only two months, on January 3, 2009, he mined the first Bitcoin block, known as the genesis block, thus launching the world’s first cryptocurrency and entering the history books.
However, while Satoshi Nakamoto is credited to being its inventor and main contributor, others have made their own significant contribution in improving the crypto coin. Bitcoin GitHub lists over 750 contributors, but its main ones are Wladimir J. van der Laan, Marco Falke, Pieter Wuille, Gavin Andresen, Jonas Schnelli.
As mentioned previously, Bitcoin was created to have a max supply of only 21 million. To mine BTC, it uses a Proof-of-Work (PoW) consensus algorithm, in which nodes compete with each other by attempting to solve a complex mathematical puzzle that has been continually increasing in difficulty. Whoever manages to solve it first gets to verify a transaction and, thus, earn BTC.
The specific algorithm that is used is the SHA-256 algorithm, which belongs to the SHA-2 family of hashing algorithms.
Apart from its limited supply, Bitcoin also experiences a halving every few years, which further constrains the supply. What this is is that the rewards Nodes receive are cut in half. This happens every 210,000 blocks mined, or roughly every four years. The first Bitcoin halving in 2012 slashed the reward for mining a block from 50 BTC to 25 BTC. In 2016, the halving event cut rewards again to 12.5 BTC per block mined, and as of May 11, 2020, just 6.25 new BTC are created with each new block mined.
Whenever Bitcoin is being transferred anywhere, it needs to be verified by the nodes in the network. To incentive them, the user would pay a small fee to the nodes for every transaction, regardless of where he sends it. Depending on the price of Bitcoin, these fees were initially next to nothing during its early days.
However, now that Bitcoin is worth around $58,626.45 at the time of writing this article, these fees are becoming a bit pricey when transferring a small amount of BTCs. Although the upgrade of Segregated Witness and Native Segregated Witness have reduced these fees by more than half, as the price of Bitcoin continue to rise, transferring Bitcoin can inevitably become almost as expensive when participating in the Ethereum network.
The Bitcoin network is secured by the thousands of nodes participating in verifying transactions. The entirety of the network depends on how many people participate. The more there are, the more decentralized the network becomes, and thereby, the more secure it is since this makes it almost impossible to pull off a 51% attack (essentially when a node gains more than 50% control of the network’s computing power).
Other decentralized cryptocurrencies have already suffered a 51% attack, compromising the security of the network. Bitcoin Cash and Ethereum Classic are two primary examples.
In addition to decentralization, Bitcoin also has a multi-signature feature. This means that in order for a transaction to be accepted by the network, it needs the approval and signature of multiple nodes. The more nodes sign off on it, the more secure it is.
Finally, Bitcoin is an open-sourced, transparent cryptocurrency. This means that anyone can ‘pop the hood' and look into its code and verify any discrepancies or issues. Furthermore, all transactions are transparent and can be seen on a Bitcoin explorer. This includes all wallets that hold BTCs. However, because it is not required to provide personal information or ID in order to handle Bitcoin (unless you buy it from a centralized exchange), this allows users to be anonymous.
Bitcoin takes the credit for being the first cryptocurrency. Yet, with all of this technological innovation and improvements, it is not without defects.
One of the reasons why its utility was changed from a transfer of value to a store of value has to do with how long it takes to send some BTC across the network. The approximate time is 10 minutes, but it can take longer if the network becomes congested. This is because its blockchain was designed to be linear in nature. This means that transactions can only be verified one at a time. This is in stark contrast to other 2nd or even 3rd generation blockchains such as Polkadot that can verify multiple transactions in parallel.
Another issue has to do with how expensive it is becoming to participate in the network as a node. In the beginning, it was perfectly sufficient to use your own laptop to run its algorithm. However, currently, it requires using high-tech and very expensive equipment to do this. This has resulted in some people either being forced out of the network and prevents small-time nodes from participating. This has led to the formation of huge mining pools, where nodes, instead of competing against each other, joined their computing power in order to mine more Bitcoin.
While there have been some concerns that this trend may lead to some form of centralization, this is a very unlikely scenario since any attack on the Bitcoin network will no doubt cause severe panic in the market and may lead to its price dropping like a rock. For the Bitcoin nodes which receive payment in BTC, this is eating the hand that is feeding them.
Pros & Cons
What is Dogecoin?
Dogecoin is a peer-to-peer, decentralized, and open-source cryptocurrency. Unlike other altcoins, it was created purely as a tongue-in-cheek digital coin. It was based on the famous 2013 Doge meme Kabosu, a Japanese Shiba Inu. Its token is the DOGE token.
The first DOGE token was released on December 16, 2013, but the first block mined was on December 6.
Like most other peer-to-peer cryptocurrencies, Dogecoin can be used as a medium of exchange. Although primarily used for tipping (yes, the creator literally meant you could use the token to tip users on Reddit and Twitter, you can also use the token to spend on various items and services.
Dogecoin is based on the proof-of-work algorithm from both Lluckycoin, now a dead crypto, and Litecoin. In being similar to Bitcoin, Dogecoin experiences a halving every 100,000 blocks. However, it uses Scrypt technology. Dogecoin's proof-of-work differs from Bitcoin's in other ways as well.
As previously mentioned, Dogecoin does not have a max supply, and it has a big inflationary rate. Yet, despite its drawbacks, it has managed to stand the test of time and even garner its own followers and community.
Dogecoin was created by Australian software engineer Jackson Palmer and American Billy Markus. After reading a Wired news article about the best memes of 2013, Palmer got the idea of creating a funny, cute, lovable digital coin that went against the stigma surrounding cryptocurrencies. As an active purchaser of website domains, Palmer bought the dogecoin.com domain with the now-famous doge logo and Comic Sans text.
Billy Markus approached Palmer and convinced him to make an actual Dogecoin cryptocurrency. He designed its protocol, basing it on other cryptocurrencies such as Litecoin. He soon left the project in early 2014 and gave all control over to Palmer.
As mentioned earlier, its primary feature is that it has merge mining with Litecoin, making it completely dependent on the digital silver to secure its own network and verify transactions. The reason it was able to do this is due to the crypto meme having the same algorithm as Litecoin. Because of these two factors, transactions are processed faster than on the Bitcoin network.
In addition, mining Doge is not only faster but cheaper and more efficient, at least when compared to Bitcoin. This makes mining Doge and Litecoin possibly more lucrative than Bitcoin, assuming their prices do not plummet. As a result, 10,000 Doge tokens are mined per block.
Another feature is the token’s devoted and active community. Millions of people not only use Doge but actively ensure its continued popularity. Some prominent celebrities, most notably Elon Musk, have advertised the lovable crypto meme. What made it particularly appealing was not the token itself but the community that began to surround it. Many who came on board shared the same philosophy ideas of sharing, encouragement, charity, and overall friendliness.
Fees on the next network is 1 Doge per 1 kb transaction. Currently, 1 Doge is $0.05 at the same of writing this article. This is dirt cheap when compared to other transaction fees from Bitcoin and especially Ethereum.
As mentioned, Dogecoin is entirely dependent on Litecoin’s own network, which, thus far, has proven to be very much secured and decentralized and with almost no downtime since its inception. Hence, Dogecoin admirers can breathe out a sigh of relief in knowing that their lovable crypto meme is in the hands of a reputable cryptocurrency.
Despite all of the hype surrounding it, it needs to be explicitly stated that given its huge inflationary rate, and other than its cute meme, there really isn’t much of a use case of Dogecoin other than to be used as pocket change and charity donations.
Despite that, though, that does not mean the crypto meme doesn’t have its own whales that are able to manipulate its price. Nor does it mean that traders didn’t profit from the price pump. However, readers need to be reminded that unlike other crypto coins such as Bitcoin, Litecoin, Dash, and others, the recent price increase has been more about the hype surrounding it rather than from any profound fundamental. Dogecoin is first and foremost the crypto space’s lovable crypto meme, and users are expected to respect it as such.
Pros & Cons
Dogecoin vs Bitcoin: Conclusion
Based on everything that was discussed above, it is true that while both cryptocurrencies have similarities, they also have fundamental differences. The most prominent ones are their use cases.
Bitcoin is becoming the new digital store of value, more so than gold, while Dogecoin is used for providing charity donations and as a form of ‘pocket change’ payment for certain services. While Dogecoin can technically be used as a medium of exchange, its huge inflationary rate makes it impossible to be used in such a way for extended periods of time, let alone as a store of value.
At the same time, though, Bitcoin is generally slow and cumbersome, while Dogecoins’s network is less congested and faster. This makes it more likely for Dogecoin to be more used to buy that cup of coffee or make other small transactions than Bitcoin. And despite Bitcoin being the most recognized cryptocurrency, Dogecoin has been making strides in that department.
And most importantly, while Bitcoin is considered to be a huge technological breakthrough that will usher in another revolution, it is being taken far too seriously for many regular users. Dogecoin can help alleviate that by bringing an array of fun and cuteness to this new space, thereby making it more accessible worldwide. After all, who wouldn’t want to own a bit of the cute crypto meme?