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What’s the Difference Between Bitcoin and Litecoin?

A Comparison between Bitcoin and Litecoin

The public’s interest in cryptocurrencies has shifted considerably during the last several years. Investor interest in cryptos has risen dramatically since the turn of the century. The main focus of this interest has been Bitcoin, which has long been the most well-known name in cryptocurrency, which is unsurprising given that it was the first digital currency to gain widespread acceptance.

Hundreds of new cryptocurrencies have entered the market since the launch of Bitcoin in 2009.

Despite the fact that it has become increasingly difficult for digital coins to stand out in such a crowded environment, Litecoin (LTC) is one non-Bitcoin cryptocurrency that has managed to hold its own. LTC is now the sixth-largest digital currency by market capitalization, trailing only Bitcoin.

Similarities Between Bitcoin and Litecoin, there’s a lot to choose from.
On the surface, Bitcoin and Litecoin appear to be very similar. They are both decentralized coins at their most fundamental level. Unlike fiat currencies like the US dollar or the Japanese yen, which rely on central banks for value, circulation control, and validity, cryptocurrencies are decentralized and rely only on the network’s cryptographic integrity for value, circulation control, and legitimacy.

Litecoin was created in 2011 by Charlie Lee, a former Google employee who revealed the “lite version of Bitcoin” via a comment on a prominent Bitcoin forum.

Litecoin has been viewed as a reaction to Bitcoin since its inception. Indeed, Litecoin’s creators have claimed for some time that their goal is to build the “silver” to Bitcoin’s “gold.”

As a result, Litecoin integrates many of the characteristics of Bitcoin that Lee and other developers thought were useful in the earlier cryptocurrency, while also changing some parts that the development team thought should be improved.

Work Samples

The fact that both Bitcoin and Litecoin are proof of work ecosystems is a significant commonality. That is to say, the mechanism by which both cryptocurrencies are mined—that is, generated, authenticated, and then added to a public ledger, or blockchain—is fundamentally the same (though not exactly the same, as we will see below).

Transactions and Storage

Many of the basic features of trading with Bitcoin and Litecoin are also extremely comparable for an investment. Both of these cryptocurrencies can be purchased on a cryptocurrency exchange or mined using a mining machine. To be properly stored between transactions, both require a digital or cold storage “wallet.”

Furthermore, the prices of both cryptocurrencies have shown to be very volatile over time, depending on a variety of factors such as investor interest and government laws.

Market Capitalization Differences Between Bitcoin and Litecoin
The market capitalization, or total dollar market value of all outstanding coins, is one area where Bitcoin and Litecoin differ dramatically.

The total value of all bitcoins in circulation is about $1 trillion as of March 2021, making bitcoin’s market cap more than 70 times that of Litecoin, which is worth $13.7 billion.

Whether you consider Bitcoin’s market cap to be big or low is mainly dependent on your historical perspective. When we consider that Bitcoin’s market capitalization was only $42,000 in July 2010, its current value appears to be incredible.

Bitcoin still outnumbers all other digital currencies as a network. Ethereum, the second-largest cryptocurrency, is its closest competition, with a market worth of approximately $212 billion. 2 Given that Bitcoin is so much larger than any other digital currencies in existence at this time, the fact that Bitcoin has a substantially higher value than Litecoin is not surprising.

Distribution

Another significant distinction between Bitcoin and Litecoin is the total amount of coins that each cryptocurrency is capable of producing. This is where Litecoin sets itself apart. Bitcoin’s network can never hold more than 21 million coins, whereas Litecoin can hold up to 84 million.

Although this appears to be a substantial advantage for Litecoin in principle, its real-world implications may be minor. This is due to the fact that both Bitcoin and Litecoin may be divided into almost microscopic amounts. In reality, one hundred millionth of a bitcoin (0.00000001 bitcoins), often known as one “satoshi,” is the minimal amount of transferable Bitcoin.

Regardless of how high the general price of an undivided single Bitcoin or Litecoin rises, users of either currency should have no trouble acquiring low-cost items or services.

Because of the lower price per unit, Litecoin may have a psychological edge over Bitcoin due to its larger number of maximum coins.
Richard Brown, an IBM executive, suggested in November 2013 that some users could choose to transact in full units rather than fractions of a unit, which could be a benefit for Litecoin.

Even if this is correct, the problem might be rectified with a few simple software tweaks to the digital wallets used to conduct Bitcoin transactions.

Popular Bitcoin wallets such as Coinbase and Trezor already offer the option to display the Bitcoin value in terms of official (or fiat) currencies such as the US dollar, as Tristan Winters points out in his article “The Psychology of Decimals” in Bitcoin Magazine.

This can help you overcome your resistance to working with fractions.

Quickness of Transaction

Although transactions on the Bitcoin and Litecoin networks are technically instantaneous, it takes time for those transactions to be confirmed by other network participants. Litecoin was created with the objective of prioritizing transaction speed, which has shown to be a benefit as the currency has risen in popularity.

The average transaction confirmation time (the time it takes for a block to be verified and added to the blockchain) on the Bitcoin network is currently just under nine minutes per transaction, according to data from Blockchain.com, though this can vary greatly when traffic is high.

For Litecoin, the corresponding time is about 2.5 minutes.

This difference in confirmation time might, in theory, make Litecoin more appealing to retailers. A merchant selling a product in exchange for Bitcoin, for example, would have to wait roughly four times as long to receive payment confirmation than if the identical thing was offered in exchange for Litecoin. Merchants, on the other hand, can always choose to accept transactions without waiting for any kind of confirmation. The security of zero-confirmation transactions is a hot topic of discussion.

Algorithms


The use of distinct cryptographic methods is by far the most basic technical difference between Bitcoin and Litecoin. The long-standing SHA-256 algorithm is used by Bitcoin, whereas Scrypt is a relatively recent method used by Litecoin.

The influence of these various algorithms on the process of mining new coins is their principal practical significance. Confirming transactions in both Bitcoin and Litecoin necessitates a significant amount of computational resources. Miners are members of the currency network who devote their computational resources to verifying the transactions of other users. These miners are rewarded for their efforts by receiving units of the cash they have mined.

SHA-256 is considered to be a more difficult algorithm than Scrypt, although it allows for more parallel processing. As a result, Bitcoin miners have become increasingly sophisticated in recent years in order to mine bitcoins as effectively as possible. The usage of Application-Specific Integrated Circuits (ASICs) is the most frequent approach for Bitcoin mining (ASICs).

Unlike the simple CPUs and GPUs that came before them, these are hardware systems that can be customized to mine Bitcoins. As a result, Bitcoin mining has grown increasingly out of reach for the average person unless they join a mining pool.

Scrypt, on the other hand, was created to be less vulnerable to the bespoke hardware solutions used in ASIC-based mining. Many observers believe that Scrypt-based cryptocurrencies like Litecoin are more accessible to individuals who also want to participate in the network as miners as a result of this. While several businesses have released Scrypt ASICs, Litecoin’s aim of more easily accessible mining remains a reality, as the majority of Litecoin mining is still done on miners’ CPUs or GPUs. 11

FAQs about Litecoin vs. Bitcoin

What Is the Purpose of Litecoin?

Given the hullabaloo around its prices and market capitalization, it may appear like Litecoin exists primarily to be purchased and sold, to paraphrase an old traders’ joke about soybeans. However, Litecoin, like all cryptocurrencies, is a type of digital money. Individuals and institutions can use it to make purchases and move payments across accounts.

It’s suitable for modest, everyday transactions because of its relative speed and low cost. Without the use of an intermediary like as a bank, credit card company, or payment processing provider, participants operate directly.

Is it Possible to Convert Litecoin to Bitcoin?

You may swap litecoins for bitcoins and vice versa, just as you can do with fiat currencies like dollars for pounds or yen for euros. Swapping one for the other is often not an issue because they are both leading and very liquid cryptocurrencies.

To do so, you’ll need a bitcoin trading or exchange platform or trading app account. The amount you’ll get from the conversion is, of course, determined by the current exchange rates for each currency.

Is it possible to send Litecoin to a Bitcoin wallet?

Because you can’t send Litecoin to a Bitcoin address (even if they’re in the same wallet), it’s crucial to understand cryptocurrency conversion. You will lose the money if you do so. If you have seed backups for the keys that allow you to access your account, recovery may be possible, but it’s challenging.

Is Litecoin on the verge of displacing Bitcoin?

It’s anyone’s guess whether Litecoin will ever overtake Bitcoin as the most popular cryptocurrency. Bitcoin is the first digital currency, and many people associate it with cryptocurrencies in general—almost it’s a generic term, like Kleenex is for facial tissue.

If any other cryptocurrency were to dethrone Bitcoin, Ethereum (now ranked second) or one of the other higher-ranking currencies would be the most plausible possibilities. Litecoin’s fundamentals, however, are liked by certain analysts. In a 2018 article for The Motley Fool, stock picker Sean Williams wrote, “Litecoin can process transactions faster than bitcoin, and its faster block time suggests that it can handle more capacity than bitcoin,” adding, “it most definitely has the tools to push bitcoin aside and become the go-to medium of exchange for digital currency users.”

While Bitcoin and Litecoin are currently the gold and silver of the cryptocurrency ecosystem, history has proven that the status quo in this fast-moving and still-developing industry can shift in a matter of months. It’s unclear whether the cryptocurrencies we’ve been familiar with will maintain their prominence in the months and years ahead.

What do you think?

Written by Trevanna Gordon

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