As the world’s oldest and largest cryptocurrency, bitcoin (BTC) needs no introduction. While not as well-known as its bigger brother, Litecoin (LTC) has also long been one of the world’s largest digital currencies by market cap and has a loyal following in the crypto community.
So, what’s the difference between bitcoin and Litecoin and how do they compare to one another? To find out, let’s take a look at the history, features and the role of each coin.
Disclaimer: This information is not financial advice or an endorsement of cryptocurrency or any specific provider, service or offering. Cryptocurrencies are highly volatile and high risk. Do your own research and seek financial advice before buying. Please check with providers if their services are available in your state.
Bitcoin’s origins can be traced back to 2008 when Satoshi Nakamoto, whose true identity remains unknown, released a now-legendary paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. In it, Nakamoto outlined a vision for peer-to-peer electronic cash that would decentralize the world’s financial systems.
In January 2009, bitcoin was launched. Using a public ledger known as a blockchain to record and validate transactions, bitcoin is designed to function independently of any central authority such as a government or bank.
You wouldn’t have known it at the time, but bitcoin was to inspire a whole generation of cryptocurrencies. One of these was Litecoin, which Google employee Charlie Lee created by modifying bitcoin’s open-source code. Launched in October 2011, Litecoin was designed to offer faster, more affordable transactions than bitcoin, making it a much more practical digital currency for everyday use.
As Lee would famously state, “Litecoin is the silver to bitcoin’s gold.”
Prices: Bitcoin vs Litecoin
How similar are bitcoin and Litecoin?
On the surface at least, there are plenty of similarities between bitcoin and Litecoin. Both of them are cryptocurrencies designed to remove the need for centralized control, both can be used as digital cash, and both rely on a proof-of-work algorithm to achieve network consensus.
But there are far more differences than there are similarities.
How bitcoin works vs how Litecoin works: 5 key differences
1. Total coin supply
This is one of the most obvious differences between the two coins. While bitcoin’s maximum supply of coins will never exceed 21 million, Litecoin’s upper limit is four times higher at 84 million. As of June 2018, there are approximately 17.1 million BTC and 57 million LTC in circulation, representing approximately 81% and 68% of their respective total supply.
In terms of their practicality for everyday use, this difference in the supply limits doesn’t really have any effect. This is due to the fact that both currencies can be divided into tiny amounts – the minimum amount of BTC you can transfer is 0.00000001 BTC (one hundred-millionth of a BTC), which is known colloquially as a Satoshi – so they can still be used to purchase low-cost goods and services.
2. Transaction processing speed
Although bitcoin and Litecoin transactions are technically processed instantly, it takes time for those transactions to be confirmed by other network participants.
Litecoin is significantly faster than bitcoin at confirming transactions. While bitcoin’s average confirmation time is around 10 minutes per transaction, Litecoin’s network typically takes around 2.5 minutes to confirm a transaction. In times of heavy network congestion, bitcoin confirmation times have even stretched beyond a day. This theoretically makes Litecoin a more attractive proposition for merchants and others who need to frequently conduct transactions.
However, bitcoin advocates have pointed out that many merchants would happily allow zero-confirmation transactions on most purchases.
3. Mining algorithms
Both bitcoin and Litecoin can be generated by mining, with new bitcoin blocks generated every 10 minutes and new Litecoin blocks every 2.5 minutes. However, the algorithms these two currencies use to determine the mining process that generates new coins are different – bitcoin uses the SHA-256 algorithm and Litecoin’s algorithm is called Scrypt.
The SHA-256 algorithm is widely considered to allow a greater degree of parallel processing. This has seen the development of increasingly sophisticated mining methods, with the vast majority of bitcoin mining now carried out by Application-Specific Integrated Circuits (ASICs). Built for the sole purpose of mining bitcoin, these expensive hardware systems have taken bitcoin mining far out of reach for the everyday user.
Meanwhile, Litecoin’s Scrypt algorithm was designed to offer more resistance to custom hardware solutions. This makes it more accessible to new miners and those who can no longer mine bitcoin. However, the introduction of Scrypt ASICs to the market in recent years means Litecoin is nowhere near as easy to mine as it once was.
4. Volume of transactions
Transaction throughput is another key yardstick used to measure the performance of cryptocurrencies. While bitcoin’s network is capable of handling around 7 transactions per second, Litecoin’s maximum capacity is 56 transactions per second.
While Litecoin is a clear winner in this category, it still falls well short of other popular currencies, such as Ripple’s 1,500 transactions per second.
5. Market capitalization and popularity
In terms of market capitalization and widespread recognition, bitcoin stands head and shoulders above all other cryptocurrencies. As of June 2018, bitcoin has the largest market capitalization of any cryptocurrency, at almost $116 billion. Litecoin is a long way back in sixth position, with a market cap of $5.59 billion.
The bottom line: Bitcoin vs Litecoin
Now that we know how bitcoin and Litecoin compare, which advantages does each currency hold over the other?
Why might you buy bitcoin?
Bitcoin undoubtedly has its shortcomings, particularly in confirmation times and problems with scalability, but as a store of value, it’s currently unparalleled in the crypto world. As the oldest and most widely accepted digital currency, it has a level of widespread recognition that makes other cryptos turn green with envy.
Why might you buy Litecoin?
Where Litecoin outperforms bitcoin is as a medium for a transaction. Given that this was the coin’s original purpose, that should come as no great surprise. Litecoin transactions are confirmed faster and attract significantly lower fees than the bitcoin network, making it more suitable for everyday use.
As a store of value over time, Litecoin is a decent performer but simply can’t compete with bitcoin’s reputation as a pioneer in cryptocurrency.
It’s a better option than bitcoin for regular transactions, but in the grand scheme of things, there are other digital currencies that offer faster and cheaper payments. Ripple, Stellar Lumens and Nano are three well-known alternatives, while other projects like Monero specialize in private and anonymous transactions.
A lack of widespread adoption of Litecoin as an accepted method of payment could also hold this digital currency back. The much-anticipated Litepay payment system was meant to help bridge the gap between Litecoin and fiat currency, but it never even got off the runway.
While accurately predicting crypto markets is close to impossible, it certainly appears unlikely that Litecoin will ever grow big enough to become a legitimate challenger to its older brother. Though it does outperform bitcoin in some key areas, Litecoin simply can’t compete with bitcoin’s status as the original and best-known cryptocurrency.
When you consider that there are other cryptocurrencies offering faster and cheaper payments than Litecoin, the fact that it outperforms bitcoin for use in day-to-day transactions starts to seem irrelevant.
That said, who knows what the future will hold? From tech upgrades and increased merchant adoption to a wide range of other variants, there are plenty of factors that could potentially have a positive impact on the price of Litecoin in coming times.
As for whether or not it will ever outgrow its position as the silver to bitcoin’s gold, we’ll just have to wait and see.
Disclosure: At the time of this writing, the author holds ADA, ICX, IOTA and XLM.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
Tim Falk is a freelance writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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