Bitcoin vs. Litecoin:In recent years, public interest in crypts has fluctuated dramatically. While digital currencies do not currently inspire the same genuine enthusiasm they did in late 2017, more recently, investor interest in cryptocurrencies has resurfaced. The main focus of this attention has been Bitcoin, which has long been the dominant name in cryptocurrency. Since Bitcoin’s founding in 2009, hundreds of other cryptocurrencies have entered the picture. While it is increasingly difficult for digital currencies to stand out due to crowding in the field, Litecoin (LTC) is not a Bitcoin crypto that managed to face the competition. LTC is behind Bitcoin as the 7th largest digital currency by market cap as of May 2020.
Table of Contents
- Since 2009, Bitcoin has dominated the cryptocurrency world, but Litecoin and thousands of other coins have entered the ring.
- As of May 2020, Bitcoin’s market capitalization was just under $128 billion, while Litecoin’s was under $3 billion.
- Litecoin can produce more significant coins than Bitcoin, and its transaction speed is faster. Still, these factors are mainly psychological benefits to the investor and do not affect the value or usability of the coin.
- Bitcoin and Litecoin use cryptographic algorithms that are fundamentally different from one another. While Litecoin uses the more recent Scrypt algorithm, Bitcoin uses the more established SHA-256 method.
Bitcoin and Litecoin Similarities
Bitcoin and Litecoin appear to have a lot in common at first glance. Both are decentralized coins at their core. For value, circulation control, and legitimacy, central banks support fiat currencies like the US dollar or the Japanese yen, but cryptocurrencies rely only on the network’s cryptographic integrity.
Litecoin was launched in 2011 by founder Charlie Lee, who announced the debut of the “lite version of Bitcoin” through a message posted on a popular Bitcoin forum. Since its founding, Litecoin has will see as created in reaction to Bitcoin. Litecoin developers have long claimed that they intend to make the “silver” for the “gold” of Bitcoin. For this reason, Litecoin adopts many of the features of Bitcoin that Lee and other developers thought worked well for the previous cryptocurrency and changes some other aspects that the development team felt could be improved upon.
Proof Of Work
One fundamental similarity between these two cryptocurrencies is that they are both proof of working ecosystems, meaning that the underlying process by which bitcoin and LTC will mine is fundamentally similar (although not quite the same, as we will see below).
Storage And Transactions
Many of the essential elements of bitcoin and LTC transactions are also very similar for investors. Both cryptocurrencies can be purchased through an exchange or mined using a mining platform. Both require a numerical or cold storage “wallet” to securely store between transactions. Additionally, over time, both cryptocurrencies have proven to be subject to dramatic volatility, depending on factors related to investor interest, government regulation, and more.
Differences Between Bitcoin And Litecoin
One area where Bitcoin and Litecoin differ significantly is in market capitalization. As of May 2020, the total value of all bitcoins in circulation was just under $128 billion, making its market capitalization more than 45 times that of Litecoin, which has a total value of less than $3 billion. . Whether Bitcoin’s market capitalization looks high or low to you depends mainly on a historical perspective. When we reflect that Bitcoin’s market capitalization was just $42,000 in July 2010, its current number seems surprising, though not nearly as much as its high market capitalization of $326 billion on December 17, 2017. However, while the total number of bitcoins is worth substantially less now than two years ago, Bitcoin as a network still trumps all other digital currencies. The closest competitor is Ethereum, the second largest cryptocurrency with a market cap of around $19.4 billion. So the fact that Bitcoin is significantly higher in value than Litecoin is not a surprise, as Bitcoin is much bigger than all other digital currencies out there at the moment.
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Another of the main changes between Bitcoin and Litecoin concerns the total number of coins each cryptocurrency can produce. This is where Litecoin excels. The Bitcoin net can never exceed 21 million coins, while Litecoin can accommodate up to 84 million coins. In theory, this seems like a significant advantage in favor of Litecoin, but its real-world effects could be negligible. It is because Bitcoin and Litecoin are divisible into almost infinitesimal amounts. The minimum amount of mobile Bitcoin is one hundred millionth of Bitcoin (0.00000001 Bitcoins), known colloquially as a “satoshi.” Users of either coin should therefore have no difficulty purchasing low-priced goods or services, regardless of how high the price of a single undivided Bitcoin or Litecoin might become.
Litecoin’s higher number of maximum coins can offer a psychological advantage over Bitcoin due to its even lower price for a single unit.
While technically, transactions take place instantly on the Bitcoin and Litecoin networks, time is required for these transactions to be confirmed by other network participants. Litecoin will prioritize the speed of transactions, which has proven to be an advantage that grows in popularity. According to information from Blockchain.info, the Bitcoin network’s average transaction confirmation time is currently just under 9 minutes per transaction (the time it takes for a block to be verified and added to the blockchain), although this can vary widely.
By far, the most fundamental technical change between Bitcoin and Litecoin is the different cryptographic algorithms they employ. Bitcoin uses the long-standing SHA-256 algorithm, while Litecoin uses a comparatively new algorithm known as Scrypt.
The primary practical significance of these different algorithms is their impact on the process of “mining” new coins. In both Bitcoin and Litecoin, the transaction confirmation process requires substantial computing power. Some memberships of the currency network, known as miners, allocate their computing resources to confirm other users’ transactions. In exchange for this, these miners will reward earning units of their mined currency.
SHA-256 will generally consider a more complex algorithm than Scrypt while at the same time allowing for a greater degree of parallel processing. Consequently, Bitcoin miners in recent years have been using increasingly sophisticated methods to mine Bitcoins as efficiently as possible. The most common way to mine Bitcoins is to use Application-Specific Integrated Circuits (ASICs). Unlike the simple GPUs and CPUs that came beforehand, these are hardware systems that can be tailor-made for Bitcoin mining. The practical consequence is that mining Bitcoins is increasingly beyond the reach of the average user unless that individual joins a mining pool.
While Bitcoin and Litecoin may currently be the two most valuable cryptocurrencies, history suggests that the situation in this dynamic and developing industry could change within a few months. Whether the cryptocurrencies we have grown accustomed to will retain their prominence in the upcoming months and years is yet to be determined.
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