Bitcoin paved the way for hundreds of alt-currencies that appeared in the cryptocurrency ecosystem in recent years. Some of the new coins had a purely technical use to power their blockchains and circulate within the platform, and some cryptocurrencies show a potential to become true means of exchange of value.
At first glance, Bitcoin and Litecoin have a lot in common. Both bitcoin and Litecoin are some of the oldest and most valued cryptocurrencies. Both are computer programs used to enable transactions on their separate blockchains. But, like Ether, Litecoin has fundamental differences and certain advantages when compared to the first ever cryptocurrency.
Bitcoin is considered as the original, tested and valued digital currency of our days. We would call it the “father” of digital cash that has been ranking on the top in the cryptocurrencies list due to its innovative nature and a long history of circulation. At the time of writing Bitcoin’s market capitalization exceeded $170 billion. The reliability and security of this digital coin are the main features attracting its miners. Regarding those two features, Bitcoin remains one of the best cryptocurrencies, if not the best, to invest in. However, the daily transaction volumes of Bitcoin have highly increased its demand, which is causing drastic fluctuations in its price. The rapid growth in the network hash rate resulted in high electricity consumption volumes – more than 215 kW/hour is required to complete one transaction – and the long average block time (approximately 8 minutes) have made Bitcoin the most expensive cryptocurrency to mine. However, if you are targeting bigger investment volumes and have a minimum $10,000 to ensure reasonable mining profitability, this coin remains the right option.
Litecoin has also been ranking at the top positions among all cryptocurrencies with its $1.8 million market capitalization, however, it incorporates almost the same functions as its predecessor does. This coin was created by a digital currency pioneer and ex-Google engineer Charles Lee in 2011 looking to address some of the issues in the original blockchain, in particular, the very slow transaction speed and its dependence on the mining equipment. Litecoin and almost all Scrypt-based cryptocurrencies were initially more accessible for average miners because Scrypt-based currencies do not rely on expensive ASIC machines and can be mined on GPU-based rigs.
Difference #1 The algorithm
Bitcoin employs the SHA-256 cryptographic algorithm in the mining process, while Litecoin makes use of a relatively new algorithm called Scrypt. SHA-256 is a more complicated and resource-consuming algorithm compared to Scrypt, which led miners to abandon GPU- and CPU-based miners in favour of more sophisticated devices called ASICs which are customized to mining Bitcoin. Speaking of the difference in the hashing power, the total hashing rate of the Bitcoin network exceeds 20,000 Terra Hashes per second, while Litecoin generates little over 90,000 Mega Hashes per second.
Difference #2. The Amount and Price
One of the differences between these two cryptocurrencies is the number of coins that can be produced over the entire period of their lifecycles. For Bitcoin, the number of all available coins to be mined is 21 million and for Litecoin it’s 86 million. The lower price of one Litecoin and the ease of its mining are primary drivers of its popularity. There’s a growing body of evidence that users prefer to pay in whole currency units rather than tiny portions of a coin with amounts consisting mostly of zeros. To accommodate the growing price of BTC and to make life easier for wallet holders, popular wallets such as Electrum are offering the option to show the amount in the wallet in fiat currency such as dollars, and not in 0.0000x amounts of Bitcoin. Lower price and a high transaction rate of Litecoin could make this digital currency more popular than Bitcoin.
Difference #3. Transaction Time
Quicker transaction time is by far the most appreciated attribute that gave Litecoin a particular advantage. While Bitcoin transaction becomes verified in 8 minutes on average, the Litecoin transaction is verified in blockchain in 2.5 minutes or less. Litecoin can handle a higher volume of transactions without the use of significant amounts of computing power. This could lead to a more favorable attitude from merchants who can accept cryptocurrency payments more efficiently. The use of different algorithms by two coins explain the difference in speed.
Some experts said that these two coins are the dollar and euro of the cryptocurrency system, we still have to see if some of the most familiar digital currencies retain value over time and stay attractive in the rapidly changing investing climate.