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Dogecoin vs Bitcoin: Key Differences to Know

By Brian Nibley · September 27, 2021 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Dogecoin vs Bitcoin: Key Differences to Know

When it launched in 2014, Dogecoin (DOGE) was literally a joke currency. Based on the famous meme of a Shiba Inu dog with grammatically incorrect phrases surrounding it like “so wow,” “very style,” or “much like,” DOGE had very little value for a number of years.

Then, in 2021, the meme crypto rose from obscurity after being promoted by a number of rich and famous people. The price of DOGE skyrocketed from a fraction of a penny to about $0.70 at its peak before crashing down to $0.15. At the time of writing, one DOGE traded for $0.24.

By contrast, Bitcoin (BTC) launched in 2009 with a white paper by the pseudonymous person or people known as Satoshi Nakamoto who described it in a white paper as “peer-to-peer digital cash.”

Here is a guide to some of the key differences between Dogecoin vs Bitcoin.

5 Key Differences Between Dogecoin and Bitcoin

Difference #1: Purpose of the Coin

Bitcoin’s creators developed it to function somewhat like digital gold. While Bitcoin can only handle about seven transactions per second (TPS), the total value transacted on the network far exceeds that of any other coin. In other words, people choose BTC for payments involving large sums of money.

Some individuals also consider Bitcoin an investment, a view that has paid off as Bitcoin has compounded at an average annual rate of 100% – 200%. From March 2020 to July 2021, Bitcoin had risen by about 800%, generating incredible returns for those who were able to HODL through the volatility.

Meme-inspired Dogecoin, on the other hand, began as a fun way for people to learn about cryptocurrency. A meme coin that traded at a price of a tiny fraction of a penny, people could send it to each other for educational purposes or as a niche hobby. Several online merchants now accept DOGE, although it’s not as widely accepted as BTC.

Recommended: What is Dogecoin? A Guide to the Original Meme Crypto

Difference #2: Market Cap

There is no contest in terms of market cap when comparing the two coins. At the time of writing, Bitcoin’s market cap was about $867 billion, while the market cap of Dogecoin was just over $31 billion. Bitcoin is currently the largest crypto by market cap, while Doge coin ranks ninth.

For much of its history, DOGE ranked somewhere between the 30th and the 50th largest cryptocurrencies by market cap, if not much lower. During the altcoin frenzy of 2017 and 2018, the meme coin reached a market cap of $1 billion for the first time, and its price breached the $0.01 mark.

Bitcoin has always been the largest cryptocurrency by market cap. With the longest history, the most secure network, and the most robust community of users and volunteer developers, other coins can’t compete for the top spot in the same way. When it comes to big-time investors looking to gain exposure to crypto with a lot of working capital, they tend to allocate most of that capital to Bitcoin, often seeing the other options as too risky.

It seems likely that Bitcoin will remain the largest coin by market cap, although the speed with which some altcoins like Dogecoin have climbed the ranks has been remarkable.

Difference #3: Supply

The supply and demand dynamics of Dogecoin and Bitcoin are extremely different.

One of Bitcoin’s properties that makes it valuable is a deflationary monetary policy. Over time, the supply of Bitcoin decreases rather than increases. Every four years or so, the block reward for miners gets reduced by 50% in a process known as “the halving.” There will only be 21 million Bitcoin ever mined.

Recommended: How Many Bitcoins Are Left?

Dogecoin, on the other hand, has an inflationary monetary policy. There is no limit to the amount of DOGE that miners can create, although there’s an annual cap of 5 billion coins issued. The DOGE blockchain stopped halving a long time ago, so the mining reward remains static at 10,000 DOGE per block.

This means that people can keep mining DOGE and dumping it on the market ad infinitum. Rather than sending the price “to the moon,” the supply and demand dynamics of DOGE imply that it’s much more likely to crater toward the center of the Earth as time goes on.

Difference #4: Security, Tech Development

Until the recent flurry of activity surrounding Dogecoin, its Blockchain had a long period of stagnant development. Between the years 2015 and 2020, there wasn’t a single developer update to DOGE. In 2021, developers have proposed several upgrades that could take effect before the year is over.

Dogecoin began as an almost exact clone of Bitcoin with a few minor changes, and it remains a close replica, but there’s a large difference in security between the cryptocurrencies.

The Bitcoin network is more secure than the Dogecoin network by many orders of magnitude. The hash rate of DOGE is less than 416 TeraHash per second (TH/s) while the hash rate of BTC is more than 120 ExaHash per second (EX/s). One TeraHash equals one trillion hashes while one ExaHash equals one quintillion hashes.

Why is this important? It means that conducting a 51% attack against Dogecoin would be relatively simple compared to conducting the same attack against Bitcoin. A 51% attack is when someone takes control of a network by owning the majority of hashing power.

This difference is because the DOGE Blockchain uses a different mining algorithm than Bitcoin’s. This is part of why DOGE is faster and easier to mine. While Bitcoin uses the SHA-256 algorithm, DOGE uses the Scrypt algorithm.

Difference #5: Block Time and Transaction Speed

This is the one area where Dogecoin has an advantage over Bitcoin, since the DOGE blockchain processes transactions more quickly and inexpensively than BTC transactions.

The DOGE blockchain processes a new block of transactions every minute. The BTC Blockchain processes a block every 10 minutes. While this might make DOGE more desirable as a means of exchange, it is less desirable as a store of value.

Because DOGE miners receive 10x the block rewards compared to Bitcoin miners, a higher supply of new Dogecoins entering the market tends to drive down the price.

Is Dogecoin the Next Bitcoin?

It would be difficult for Dogecoin to overtake Bitcoin as the mainstream cryptocurrency of choice. Bitcoin has 98% of the hashing power of all proof of work coins, and there’s little to indicate that Dogecoin or any of the other altcoins could meaningfully chip away at that advantage.

Recommended: What Are Altcoins? Guide to Bitcoin Alternatives

The Takeaway

Despite having risen to be among the top 10 cryptocurrencies by market cap, Dogecoin is still a meme coin. It launched as a joke seven years ago, and little has changed since then, other than some celebrity endorsements.

Cryptocurrency traders who want to make a lot of small, frequent transactions may prefer DOGE to Bitcoin because of its faster confirmation times and lower fees, but Bitcoin Lightning also works for this purpose.

By opening an account on the SoFi Invest brokerage platform, you can trade Bitcoin, Dogecoin, and other altcoins such as Ethereum, Cardano, or Litecoin. You can use the app to manage your holdings in not only crypto but also stocks and exchange-traded funds.

Photo credit: iStock/Ksenia Raykova

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