Bitcoin vs. Ethereum vs. Dogecoin: Everything You Need to Know About Cryptocurrency
While cryptocurrency first emerged in 2009 with the release of Bitcoin, it continues to be a popular topic—and intriguing opportunity for individuals with extra cash to spare. But it’s also a confusing and ever-evolving industry. What is cryptocurrency and how does it work? How much money can you really make by investing in cryptocurrency—and how much do you risk to lose? Below, we break down what the “digital currency” is and the most popular types available today.
Put simply, cryptocurrency is a digital currency (or means of exchange) that uses blockchain technology. The blockchain technology tracks the movement of Bitcoin and other cryptocurrencies from person to person. This means that transactions can be decentralized and held in a digital wallet instead of a traditional bank or financial institution. People can exchange and invest in cryptocurrency through a variety of means. For example, there are platforms that allow people to purchase portions of Bitcoin, which can then be used to make transactions or held as an investment.
As cryptocurrencies continue to increase in popularity and successful investment stories appear in the media, it’s natural to be curious about how to get in on the action. Before you should take any steps toward investing in cryptocurrency, however, it pays to know how different types of cryptocurrencies compare.
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Common Types of Cryptocurrency
A variety of cryptocurrencies have emerged in recent years. If you’re really interested in pursuing this type of investment, you’ll want to know the nuances between them all, from Litecoin and Stellar Lumen to Zcash. But for the purposes of this article, we’ll examine three of the most popular types.
Of the cryptocurrencies mentioned in this article, Bitcoin typically holds the most value. It’s considered “digital gold” due to its restricted supply and high market cap. While Bitcoin is considered to be one of the more stable cryptocurrencies, it’s still riskier to invest in than traditional stock options.
Ethereum, the second-most valuable cryptocurrency listed in this article, is considered “digital silver.” It’s similar to Bitcoin in that it is also a digital currency—but unlike Bitcoin, Ethereum isn’t intended to be an alternative monetary system. Rather, it’s a programmable blockchain that can be used for things such as smart contracts and NFTs.
Dogecoin was initially created as a joke, to poke fun at Bitcoin. But after gaining popularity on social media, investments in Dogecoin began to surge. The hype has died down, and since new Dogecoin is made every day—unlike Bitcoin—it doesn’t maintain a high value for long periods of time.
A Tip for Investing in Cryptocurrency
Investing in cryptocurrency is risky, as it’s generally considered to be more volatile than traditional methods such as opening a high yield savings account or investing in the stocks of a company.
If you do want to invest in cryptocurrency, remember to keep your portfolio diverse. In other words: don’t put all your eggs in one basket. Investing a portion of your savings in cryptocurrency could yield great results, but you could also cost you a significant amount of money. By being willing to only risk a certain amount (choose a number you’re comfortable with after assessing your finances), you can take part in an exciting and diverse field and ensure that the rest of your funds are safe.
At Citadel Credit Union, we want to ensure that you invest safely. Connect with one of our experts to discover your options.