With the buzz behind bitcoin and the mainstream explosion of cryptocurrency, Smashing Boxes President and COO Walter Pinson, will break down a different piece of the cryptocurrency puzzle in each newsletter in a feature we like to call “Crypto Classified.”
Why should you care? Walter is MIT Sloan School of Management trained in blockchain and cryptoeconomics, has an MBA and an undergraduate degree in computer science. With more than 30 years of software and coding experience, Walter most recently built a mobile trading app for a leading cryptocurrency exchange as well as an exchange-arbitrage trading bot platform.
What is the Difference between Bitcoin and Dogecoin?
If you’re new to cryptocurrency you may be wondering what the difference between Bitcoin and Dogecoin is. Valid question, with a relatively simple answer. Purpose.
Bitcoin was started with a purpose. The idea that money was subject to government censorship was problematic, particularly when dealing with things such as inflation. Bitcoin was very purposeful and came with high ideals.
Dogecoin is the opposite of that. Its founder, Jackson Palmer, was following cryptocurrency and various alternatives to Bitcoin. As Bitcoin was the standard, alternative coins were popping up to ride the wave and get people to invest without any intention of returning value.
In true internet fashion, Palmer was mocking these alternative coins and created a meme of a Bitcoin with a dog’s face on it and started tweeting about it as Dogecoin. Enter Billy Markus, a coder from IBM. Markus asked Palmer for permission to turn it into a legitimate alternative and in 2013, Dogecoin became a real coin that people could buy.
Satoshi Nakamoto, the creator of Bitcoin and author of the famous Bitcoin white paper, was helped along the way by Cypherpunk, Hal Finney, who received the first bitcoin transaction from Nakamoto. As the first coin, Bitcoin is the standard and being the first has network effects that make it the gold standard. Bitcoin is less likely to go to zero and with it’s mainstream notoriety, it has the backing of major institutions giving it legitimacy.
Conversely, as I mentioned above, Dogecoin started as a joke, as a meme, and could very easily go to zero because it has much smaller network effects and little, if any, institutional support.
On one hand, they’re both digital currencies that came out of the ether and don’t have any intrinsic value. But there is orders of magnitude of difference between their values and what they’re worth. Dogecoin has an impressive $7 billion market cap, but Bitcoin’s market cap is a staggering $1.15 trillion.
As you can see, there’s a clear reason why Elon Musk used only his words (tweets) to hype Dogecoin but spent $1.5 billion on Bitcoin - we’ll discuss this more in depth in the next issue.