After a rough 2022 and much of 2023, cryptocurrencies are booming again.  Some of the most popular digital currencies include Bitcoin, Ethereum and (perhaps surprisingly) Dogecoin.

While cryptocurrencies typically have a few things in common, what are the differences between these three popular cryptos? Quite a lot actually, and here are some of the biggest distinctions.

What cryptocurrencies have in common

Cryptocurrencies are built using what’s called blockchain technology, which uses a distributed ledger to produce, track and manage a digital currency. Think of it like a running digital receipt of all the transactions in the currency, including a list of who owns what and how much.

This “receipt” is being constantly verified by a decentralized network of computers, helping to prevent fraud and ensuring 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 that perform complex math 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 move money semi-anonymously, though the FBI and IRS are getting better at tracking transactions and freezing accounts.

Key differences among Bitcoin, Ethereum and Dogecoin

When you first start learning about crypto, three names come up constantly: Bitcoin, Ethereum and Dogecoin. People invest in each coin for different reasons, and it’s a mistake to lump the three most popular cryptocurrencies together into a single homogenous group.

The table below sums up some key differences among Bitcoin, Ethereum and Dogecoin.

Purpose of the cryptocurrency

Each of these three cryptocurrencies was created for a different purpose. Notably, Dogecoin was 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 extant coins multiplied by the current trading price, and there’s a wide divergence. Bitcoin is the largest, with Ethereum trailing a distant second and Dogecoin among the top 10, according to CoinMarketCap. Traders cluster around the most popular cryptocurrencies and volume drops significantly below the top 20.

While these currencies may be among the most popular for traders, Bitcoin is the one that’s emerged among the mainstream. It’s becoming easier to access Bitcoin, with multiple ways to purchase or store the currency including the recent approval of a Bitcoin ETF, which lets investors get exposure to the cryptocurrency inside a traditional brokerage account. Of course, traders can also turn to popular apps to buy many cryptocurrencies, too.

Coin issuance

It’s also useful to note how many coins can be issued in each cryptocurrency. Many traders have flocked to Bitcoin because of its hard limit on issuance, 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 Bitcoin harder to use as a currency.

In contrast, Ethereum’s issuance is unlimited, but it has a fixed issuance schedule, which may slow the production of new coins. Meanwhile, the production of Dogecoin is unlimited, which is part of the joke. That unlimited issuance didn’t seem to stifle the currency from skyrocketing in 2021, rising from about a half-penny a coin on Jan. 1 to more than $0.60 in May. However, the coin trended downward through the course of 2021 and well into 2022.

Bottom line

If you’re considering trading cryptocurrencies, it’s valuable to understand that they’re not all created equal. Some features such as Bitcoin’s limited issuance may make a 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 and with unlimited issuance may rally hard if a swell of interest sweeps in. “Much wow,” as a famous doge meme might say.

— Bankrate’s Rachel Christian contributed to an update of this story.