At a time when no financial news is complete without cryptocurrencies, it’s no surprise if you’d like to give it a try. But in order for your foray into cryptocurrencies to have a reasonable chance of success, you have to choose them based on your risk-reward tradeoff.
If you think that all cryptocurrencies have the same types of applications, you are wrong. Rather, each has its own unique applications, advantages, and disadvantages, and the right coin for you depends on your specific situation. To better understand these applications, let’s understand how two popular currencies, Dogecoin ( DOGE ) and Ethereum ( ETH ), work.
What is Dogecoin?
As a parody of Bitcoin ( BTC ) and the doge meme, Dogecoin was created in late 2013 by software engineers Billy Marcus and Jackson Palmer. The word “doge,” which describes the Shiba Inu, was intentionally misspelled when naming the cryptocurrency.
The rise in Dogecoin's value is often attributed to the sentiment of its fan club and Elon Musk's tweets. Unlike other frontline coins, Dogecoin lacks any real use case advantages and is accepted at a handful of merchant outlets.
Dogecoin is mined via the Proof-of-Work (PoW) consensus algorithm, although it has plans to transition to a Proof-of-Stake (PoS) consensus mechanism. Miners are rewarded with DOGE for their contributions; i.e., creating blocks. Unlike Bitcoin, there is no limit on the number of coins that can be mined per day, making it an inflationary cryptocurrency rather than a deflationary cryptocurrency like BTC.
Although Dogecoin uses a PoW mining mechanism, it works slightly differently than the mining mechanism in BTC. Dogecoin uses Scrypt, a simpler hashing algorithm than SHA-256 used in BTC mining. A hash algorithm is a random code generator that uses a specific technique to generate a fixed-length code. Additionally, Dogecoin and Litecoin (LTC) share a common algorithm that supports “merged mining,” allowing miners to mine both coins simultaneously without affecting operational efficiency.
What is Ethereum?
Technically, Ethereum is the blockchain, while Ethereum is the native cryptocurrency. ETH is the second most popular currency after BTC. The Ethereum blockchain has been instrumental in revolutionizing many new areas of decentralized finance (DeFi) such as DApps. It provides support for dynamic DeFi and non-fungible token (NFT)-based applications.
When Ethereum started, it was a PoW blockchain, but it is moving to a more efficient PoS mechanism called the consensus layer upgrade. Ethereum's consensus layer will use the PoS consensus method to verify transactions through staking.
The consensus layer is a multi-phase upgrade used to enhance network scalability and security. The upgrade is scheduled to be completed in 2023. It will significantly increase the transaction speed of the network while reducing transaction costs.
Recently, Ethereum’s rapidly rising gas costs have become a cause for concern following a surge in DeFi and NFT-related activity. In March 2022, the average transaction fee was approximately $15, which is far too high for anyone wanting to execute transactions, especially small transactions.
As the second largest decentralized blockchain, Ethereum facilitates the frictionless operation of smart contracts and applications that reside on it. It is known that Ethereum-based applications can run without fraud, any third-party interference or centralized control.
Is Dogecoin a good investment?
In any cryptocurrency investment, you need to consider various key factors, such as the project’s use case, the support of the community, and the team behind the project. While Dogecoin lacks suitable use cases, it does have strong community support.
In the world of digital currencies, the Dogecoin community stands out for its uniqueness. When it comes to organized action, such as supporting individual athletes and sports teams, the Dogecoin community always works together. The community plays an important role in garnering support and encouraging investors.
As with all cryptocurrency investments, the final decision comes down to personal preference and trading strategy. When making any decision, you need to understand DOGE's volatility, just like you would with any other digital coin. That said, due diligence before investing is important.
How to buy Dogecoin?
The process of purchasing Dogecoin is similar to purchasing other cryptocurrencies. You need to find an exchange that can use DOGE and then find a wallet that can store the currency. Dogecoin can be purchased with your fiat currency or exchanged for any other cryptocurrencies you may have.
If you are already trading cryptocurrencies, you probably have a wallet that supports Dogecoin. However, if you are new to cryptocurrency investing, or your existing wallet does not support DOGE, you will need to find the right crypto wallet before purchasing Dogecoin.
You can choose a software program for your crypto wallet or hardware. To protect your Dogecoin, you may even decide to create a paper wallet for storage. Depending on your convenience, you can choose any of them, although most people opt for software programs.
Is Ethereum a good investment?
ETH is one of the most well-known digital currencies; however, if you are new to the field, you may be wondering whether Ethereum is enough to invest in. The $143.5 billion cryptocurrency may be an option worth exploring.
You may want to invest in ETH as its consensus layer upgrades. A successful transformation will solidify its position as the cornerstone of DeFi operations and may also push up the price of Ethereum.
Real-world use of blockchain technology is steadily increasing, and Ethereum is the major first-generation blockchain. While Bitcoin is the first and most famous blockchain, Ethereum follows closely behind. It is the basis for a large number of DeFi applications and the Metaverse. As these applications slowly become mainstream, Ethereum will become an integral part.
Facilitating applications such as online payments, loan distribution, insurance, unlimited transactions, and more, Ethereum has everything you need to become part of the new-age economy. Ethereum already enables the tokenization of art, staking, patents, person-to-person (P2P) transactions, voting, and a host of other everyday tasks.
Ethereum is a blockchain that introduces smart contracts, which are self-propelled computer programs. This takes the concept of digital ownership to a different footing. It is also decentralized due to the large number of validators.
How to buy Ethereum?
To buy Ethereum, the first step is to create an account at an exchange that lists Ethereum. This won't be a problem as ETH is one of the most well-known digital currencies, although you may need to consider factors such as fees and operational time.
You will also need a wallet into which you can transfer your Ether. This should also be hassle-free, as you can reasonably expect every wallet around to support Ether.
Dogecoin vs. Ethereum: Pros and Cons
Let’s talk about the advantages and disadvantages of investing in Dogecoin first and then investing in Ethereum:
Dogecoin
advantage
Transaction costs are lower than Ethereum, Litecoin, Stellar (XLM) and many other cryptocurrencies.
Dogecoin has strong community support. If the community has already done this, it might as well be a step ahead!
Dogecoin is a great choice for anyone looking for a fun crypto experiment.
shortcoming
Dogecoin lacks real-life use cases and will struggle to thrive in the long run.
Dogecoin relies on emotions rather than material things.
The cryptocurrency lacks acceptance outside of its fan club.
Dogecoin’s transaction volume is only 33 transactions per second, which is too low compared to blockchains such as Solana ( SOL ) that process 50,000 transactions per second.
Ethereum
advantage
Ethereum is easier to mine than PoW cryptocurrencies like Dogecoin.
Ethereum has a huge support base thanks to the large number of validators on its network.
Thousands of validators around the world mean that Ethereum is effectively decentralized.
Ethereum will never go out of business, thanks to its support base around the world.
Ethereum is the underlying blockchain for thousands of DApps. As of May 2020, there are more than 2,800 decentralized applications on the blockchain.
shortcoming
Ethereum has no cap on the number of tokens minted. Over time, as the number of tokens in circulation grows rapidly, it is bound to cause inflation.
Gas fees often become a pain and turn off DApp users and traders.
Currently, Ethereum performs around 30 transactions per second, which is too low; however, Ethereum 2.0 is expected to increase this to 100,000 transactions per second.
Dogecoin vs. Ethereum: The road ahead
Whether you are buying Dogecoin or Ethereum, one thing you can be sure of is that you will need to comply with more exchange regulations. In almost all countries, exchanges are required to follow know-your-customer (KYC) or anti-money laundering (AML) practices. Account holders will need to share documents to verify their identity and address.
The crypto market is something that no one can accurately predict. The best way to move forward is to consider the fundamentals of cryptocurrencies and investments when investing and make the best decision possible. If you're willing to invest in the market for the long term and diversify your portfolio, you can expect to do well.
