Bitcoin vs Litecoin

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    Bitcoin vs Litecoin

    In 2009, a whitepaper was released by Satoshi Nakamoto for a cryptocurrency that has now become a revolution, sort of. Its value increased for nothing at the time of release to $325,000 in 2021 and has hit the news headlines. Within a couple of years of its release, the digital currency, namely Bitcoin, has inspired a lot of individuals to start similar projects.

    One of the successful individuals is Charlie Lee, who created a fork from Bitcoin known as Litecoin but with a few differences. Nonetheless, it shares a few similarities with Bitcoin. At present, Litecoin flaunts a big community and a sizable chunk of the crypto market.

    If you’re a crypto investor, you must be aware of the differences between Bitcoin and Litecoin to make better decisions. Being the world’s first cryptocurrency, Bitcoin has set the bar with its blockchain platform and is dominating the market. However, Litecoin brings out a faster way of doing things with some more technical capabilities and without diminishing the actual purpose.

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    What is Bitcoin?

    It is the first cryptocurrency that was introduced with blockchain technology and is the most popular digital currency to date. Bitcoin was created to increase safety in financial transactions throughout the network.

    In simple words, Bitcoin is an online version of cash that can be used to buy products and services online. The best part is that bitcoins are not backed by any bank or government. This results in eliminating the middlemen involved in the transactions.

    Its network security is handled by miners who verify transactions with the help of high-powered computers and in exchange, they get bitcoins as a reward.

    What is Litecoin?

    Created in 2011 by Charlie Lee (a former Software Engineer at Google), Litecoin is a cryptocurrency that facilitates digital payment methods globally with the help of blockchain technology.

    It is often referred to as altcoin because it was developed from the source code of Bitcoin that was made public and was open for modification. It uses decentralized open-source software to create and transfer coins.

    The unique attribute of Litecoin is that it uses a different blockchain. This eliminates a major pain point of Bitcoin that is slower transactions and allows users to experience faster transaction or transfer speed. The 3 unique features of Litecoin are:

    1. A unique Litecoin mining hashing function.
    2. A faster block generation time.
    3. Increased maximum coin supply.

    Litecoin’s fast speed and low fees make it attractive for individuals to use it for peer-to-peer transfers and digital purchases, and as a payment system for businesses.

    “Litecoin is the Silver to Bitcoin’s Gold”- Charlie Lee

    As mentioned by Charlie Lee (Creator of Litecoin), Litecoin is the earliest altcoin that was built to complement Bitcoin. It provides increased accessibility and transaction throughput that complements Bitcoin’s natural utility as a store of value.

    In the early days of release, Charlie became interested in Bitcoin and was quick to imagine a world where this incredible new technology will be widely adopted. However, he realized that the major problem with it was the speed and noted that adding a new block to the blockchain takes approximately 10 minutes.

    Right after this, he immediately started working on finding a solution for this and complementing Bitcoin. Within a week, Litecoin was born. He further described it as the “light version of bitcoin” that could become “the silver to Bitcoin’s gold”.

    Litecoin is a more scalable medium of exchange than Bitcoin because it has faster block times and higher transaction throughput. Bitcoin has grown more into a store of value. And because of their similarity, Litecoin can be used as a testnet for the Bitcoin protocol, as evidenced by its early adoption.

    Bitcoin vs Litecoin: The Face-Off

    Both Bitcoin and Litecoin have been around for years now and are among the most popular cryptocurrencies. Even though they have lots of similarities, there are many differences in terms of transaction speed, transaction fees, scalability, mining, mining profitability, hash rate, community, merchant adoption, and price.

    Let’s understand their differences in-depth, one at a time:

    1. Market Capitalization

    As of 2021, the market capitalization of Bitcoin is $647.2 billion and $9.2 billion for Litecoin. It is one of the main areas in which Bitcoin and Litecoin differ so much. However, it is worth mentioning that Bitcoin’s capitalization is the greatest among all 4,000+ digital currencies available right now.

    The closest competitor to Bitcoin in terms of market cap is Ethereum, which is the second-largest cryptocurrency whose market cap is around $122.6 billion.

    Bitcoin enjoys a significantly higher market capitalization than Litecoin. It is, obviously, due to the fact that Bitcoin is the most popular and the first cryptocurrency in existence.

    2. Scalability

    When it comes to scalability, Litecoin leads the way. With more and more users adopting Bitcoin over time, it struggled with scalability because of lesser speed. It cannot handle many transactions at once and therefore charges higher transaction fees to get a transaction included in a new block.

    On the other hand, Litecoin’s user base is smaller and it handles fewer transactions as compared to Bitcoin. Therefore, Litecoin is better at handling lots of transactions or scale along with a lesser transaction fee.

    However, considering Litecoin a clear winner is not completely correct. This criterion would’ve made sense if both of them were making equal transactions. But since that isn’t the case, there is no clear winner between Litecoin and Bitcoin.

    3. Hash rate

    Hash rate is the measuring unit that gauges the processing power of a cryptocurrency network. You can understand it as the total mining power allocated to the network by miners. This is an important point of comparison between Litecoin vs. Bitcoin. Higher the hash rate, the more secure the network is. More number of miners means more hash rate.

    Have a look at the historical chart of the hash rate of Bitcoin and Litecoin. As depicted clearly, Bitcoin’s graph is much higher than that of Litecoin.

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    Because Litecoin is currently unprofitable to mine, not many people are involved in it. This not only results in slower but negative growth. Whereas, the graph of Bitcoin is steadily increasing as a lot of people are regularly involved in its mining.

    4. Algorithm and Mining

    Bitcoin uses a traditional algorithm known as SHA-256, whereas Litecoin uses scrypt. These algorithms have a direct impact on the speed by which they can generate coins.

    Since this was the major pain point that Charlie Lee focused on, Litecoin’s algorithm is designed to produce about 4 times as many coins as Bitcoin does. Resulting in the production of one coin every two-and-a-half minutes whereas Bitcoin takes around 10 minutes.

    Moreover, SHA-256 is extremely complex and has been altered by miners over the years. Typically they use Application-Specific Integrated Circuits (ASICs) hardware systems that are customized for mining Bitcoin. This is the main reason why Bitcoin mining requires strong processing power and can’t be done by regular users due to its complexity.

    On the other hand, Litecoin uses scrypt, which is a more efficient algorithm for mining cryptocurrency because it is designed to prevent too much customization with hardware solutions like ASICs.

    Unlike SHA-256, scrypt favors high-speed Random Access Memory and therefore makes it easier for regular users to participate in mining without too much complexity and resource-intensive computers.

    5. Store of Value

    A store of value is something that is not only valuable but also stays valuable for a longer run. The most well-known example of this is gold. Similarly, currencies can be a store of value too but their value varies from country-to-country.

    Digital currencies, such as Bitcoin and Litecoin, are also a good example of the same. As they have limited supplies (there will only be 21 million bitcoins and 84 million litecoins), they are considered a better store of value.

    In between these two, Bitcoin has a better store value because it is the oldest and most trusted cryptocurrency and will reach its supply limit first. Their three-quarters have already been mined. Compared to Bitcoin, Litecoin has a comparatively lower value.

    Bitcoin vs Litecoin: A Head-To-Head Comparison

    Baseline Bitcoin Litecoin
    Algorithm Bitcoin works on the traditional algorithm known as “SHA-256.” The algorithm on which Litecoin works is known as “scrypt.”
    Mining Time For the verification of a single block, Bitcoin takes around 10 minutes. Litecoin takes 2.5 minutes to verify and confirm a single block
    Founder Satoshi Nagamoto (The real identity is yet not revealed.) Charlie Lee, a former Software engineer at Google.
    Date of launch 3rd January 2009 7th October 2011
    Mining Type Processor-intensive Memory-intensive
    Form Bitcointalk Litecointalk
    Transaction Speed Bitcoin has comparatively slower transaction time. Litecoin provides faster transaction speed.
    Market Capitalization $647.2 (in billion) as of 2021. $9.2 (in billion) as of 2021.
    % of the Total Cryptocurrency Market 68.1% as of 2021. 1.0% as of 2021.
    Ticker Symbol and Color The ticker symbol for Bitcoin is BTC and its virtual coin is of gold color. LTC is the ticker symbol for Litecoin and its virtual coin is of silver color.
    Block Explorer blockchain.info block-explorer.com
    Block Reward Per Block 12.5 25

    Wrapping Up

    Litecoin and Bitcoin are two of the most popular cryptocurrencies that have been around for years. As the name implies, Litecoin provides faster transactions and lower transaction fees as compared to Bitcoin. This attracts more people to buy it, especially inexperienced investors and the ones who don’t want to invest more.

    However, Bitcoin has the upper hand and is leading the industry because of a lot of reasons. It is superior to other cryptos when it comes to mining centralization, mining profitability, hash rate, wider community awareness, and adoption.

    Also, the big open-source community and Bitcoin developers are working through developments for making the process faster and also to solve the scalability problem. Once Bitcoin improves its scalability, its transactions would be near-instantaneous and free, making it even faster and cheaper than Litecoin or any other altcoin.

    Considering all these factors in mind, it can be said that the clear winner of “Bitcoin v/s Litecoin” is Bitcoin. However, you can consider different aspects as per your needs and choose a suitable pick among the two immensely popular cryptos.