We compare bitcoin and Litecoin side by side in this in-depth guide.
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 purpose of each coin.
Head to head: Bitcoin vs Litecoin
Where to buy bitcoin and Litecoin
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Bitcoin and Litecoin: A brief history
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 decentralise 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 centralised 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, but 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, while Litecoin’s maximum capacity is 56 transactions per second.
But 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 capitalisation and popularity
In terms of market capitalisation and widespread recognition, bitcoin stands head and shoulders above all other cryptocurrencies. As of June 2018, bitcoin has the largest market capitalisation of any cryptocurrency, at almost US$116 billion. Litecoin is a long way back in sixth position, with a market cap of US$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 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.
Disclosure: At the time of writing, the author holds ADA, ICX, IOTA and XLM.