Bitcoin and Litecoin: What is the Difference?dredin
Money is one of the earliest and most significant inventions of mankind. In all its various forms, it has come a long way throughout human history, and the money we see now may change dramatically in the future. The process of money development has always been linked to technological advances in the economy. Today’s high-tech economy aspires to a digital ecosystem, which requires new, convenient means of payment to better meet the needs of different economic institutions. Thus, innovations that have swept the modern economy over the past few decades have led to the emergence of new types of currencies — digital or cryptocurrencies. Over the past few years, the growth of cryptocurrencies has increased significantly, as well as public attention, particularly to the most popular cryptocurrency — Bitcoin.
Despite the fact that Bitcoin remains the most popular cryptocurrency, even with its unpredictable behavior and high volatility, more and more people are getting interested in investing in so-called “altcoins.” One of the brightest and most ambitious members among them is Litecoin. This coin was created just three years later than Bitcoin, and since then, it has been consistently ranked among the ten coins with the largest capitalization for a long time, indicating that this crypto project has high development potential. In fact, BTC and LTC are the most “ancient” cryptocurrencies, which have common features and significant differences.
This article will tell you about Bitcoin and Litecoin, how they were created, and what their differences, advantages, and disadvantages are. You will also learn about which of these projects is the best for investment and what prospects they have for future development.
The history of Bitcoin and Litecoin
The emergence of Bitcoin and cryptocurrencies, in general, was preceded by a series of extensive studies in the field of encrypted transactions. In 1983, David Chaum of the Department of Computer Science at the University of California, Santa Barbara, thought about combining the anonymity of payments and their transparency for all market participants. The scientist proposed using the so-called “blind signature” algorithm, which allowed a secret transaction between two anonymous participants.
The prototype of the mechanism for the creation of the cryptocurrency itself was invented in 1997 by Briton Adam Back. He suggested using the Hashcash spam protection system, in which the sender makes many time-consuming transactions, and the recipient very quickly verifies their authenticity. A year later, researcher Nick Szabo began working on Bit Gold’s decentralized money system. According to him, electronic money would save users from many threats, including theft, counterfeiting, and even inflation. Szabo worked on his project until 2005 but was never able to ensure its launch.
All of the above developments were used by an unknown individual or group of individuals under the pseudonym Satoshi Nakamoto, who is considered the “father” of Bitcoin, to create an electronic currency with completely anonymous transactions.
The Litecoin project was introduced by Charles Lee in 2011. Initially, the creator of the cryptocurrency did not plan to release new coins. His main goal was to modernize Bitcoin. Bitcoin’s improvement was required amidst the emergence of negative feedback from its holders. It was necessary to reduce the time it took to process currency transactions. In addition, the coin was poorly protected from cyberattacks and was characterized by a small volume of blocks. That is why the creator of the new cryptocurrency decided to eliminate the obvious problems and began actively working on the way to modernize Bitcoin.
From the beginning, Litecoin was positioned more as an alternative to Bitcoin than as its direct competitor. Bitcoin was supposed to be a means to buy expensive things like cars, real estate, etc., while Litecoin was supposed to be a means to pay for everyday things – current bills, food, fuel, and other small but constant expenses. In fact, LTC was a “light version” of Bitcoin that used its modified source code.
How are they different from each other?
Today Litecoin is one of the most in-demand and rapidly developing cryptocurrencies on the market. This digital coin is attractive because of its name and similar properties to Bitcoin, and its unique features make it a more promising blockchain project in the long term. But what exactly is the difference between Bitcoin and Litecoin? Let’s look at the main points:
- Hashing algorithm
For Proof-of-work, the Bitcoin network uses the highly parallelized SHA256 hash function. Litecoin, instead of SHA256, uses scrypt for mining, the performance of which depends on access to large amounts of memory, so running several scrypt processes on current video cards is extremely challenging. This also implies that it is much more difficult and expensive to create ASIC devices for scrypt than for SHA256. Due to the fact that processors have a small amount of memory, mining LTC on them is not profitable.
- Speed and cost of transactions
Unlike the Bitcoin payment gateway, the block mining time in the Litecoin network is 2.5 minutes (versus 10 minutes for Bitcoin). This means complete verification of the transaction’s validity occurs after 15 minutes. When paying for goods or services, it is enough to pass through two blocks, which allows you to reduce the time of the operation to 5 minutes. After the advent of SegWit technology, the block size and network bandwidth increased, leading to an increase in the speed of the Litecoin transaction. It is also worth noting that this aspect significantly impacts the speed of processing both Bitcoin payments within Bitcoin payment gateways and Litetcoin payments involving Litecoin payment gateways.
One of Litecoin’s most significant advantages over Bitcoin is a high degree of protection against hacking. Since new blocks in Litecoin are generated 4 times faster than in Bitcoin, cyber scammers have 4 times less time to conduct a hacker attack, respectively. Therefore, the high speed of information processing within the LTC network plays against scammers. The popularity of cryptocurrency also plays a huge role. LTC today costs 90 times less than BTC, so the main blow of cyberattacks falls on Bitcoin.
As everyone knows, the issuance of Bitcoin coins is severely limited. A total of 21 million coins will be issued, while the total emission of LTC is 84 million. This limited issue of assets, in turn, dramatically affects the value of this cryptocurrency. Here, the rate of each coin can reach vast amounts of money, as its supply in the market is very limited. And this can greatly affect the future scaling and popularization of the Bitcoin network. In the Litecoin blockchain, the developers specifically increased the issue of coins by precisely 4 times so that more users could freely use LTC for financial transfers, making it accessible and cheaper.
What are their unique benefits and drawbacks?
Now that you know what the main difference between Bitcoin and Litecoin is, let’s look in more detail at the advantages and disadvantages that are inherent in each of them.
Advantages of Bitcoin
- High liquidity. Buying or selling Bitcoin today is not difficult: all over the world, Bitcoin ATMs are opening, and the number of Bitcoin exchanges is increasing yearly.
- Anonymity. The complete anonymity of the transactions allows transfers to any country without knowing the sender and the recipient. Depending on how you look at it, this aspect can be considered both pluses and minuses.
- No regulation. It can also be seen as a disadvantage, as Bitcoin is deprived of several advantages of such regulation. However, it makes the currency a free means of payment and gives it complete freedom of market regulation.
- No single issuer. Bitcoin is a surprisingly mobile currency, and this is confirmed, among other things, by the absence of any single organization to issue the cryptocurrency.
- Equal rights of participants. All Bitcoin owners are equal and participate in the system with the same rights set.
Disadvantages of Bitcoin
- Volatility. Because of the unpredictability, people are often wary of investing in Bitcoins. The volatility is caused by the fact that there is a limited number of Bitcoins in the world (21 million coins, 80% of which have already been mined) and the demand for them is constantly growing.
- Cybercrime. Cryptocurrencies are very relevant and widely discussed on the Internet. And the more relevant this topic is on the Internet, the more attackers are attracted to this topic.
- Lack of rules and legislation. Bitcoin also lacks well-defined rules and legislation in most countries around the world, making any legal dispute a little-understood novelty for legislators as there are no previous cases on which to base it.
- Dependence on technology. Unlike traditional investments, where there are claims and physical documents confirming their existence, Bitcoin exists only in the digital world and is completely dependent on technology.
Advantages of Litecoin
- With the activation of SegWit on the network, Litecoin’s bandwidth has increased significantly.
- Better scalability allows the cryptocurrency to replace fiat money used to pay for goods and services. This trend is noticeable in Europe and the U.S., where Litecoin is a popular coin.
- The generation of a single block is faster – within 2.5 minutes – simplifies the mining process. In addition, the virtual currency mining algorithm is more straightforward, and it does not require excessive spending on purchasing equipment.
- Litecoin works on all the hardware stores that are popular today.
- The simplified algorithm makes Litecoin easier to start mining with a GPU. As a result, less power is consumed, and mining costs are lower.
- Litecoin is considered more flexible and easier to change than Bitcoin. With the advent of the lightning network protocol and its implementation in the structure of Litecoin, the scalability of the transaction will increase even more.
Disadvantages of Litecoin
- Doubtfulness of “silver” status. People who have been in the crypto industry for a long time are not ready to compare Litecoin to silver and Bitcoin to gold. Both the first and the second cryptocurrency are in no way “tied” to precious metals and are capable of outperforming them in value.
- The risk of double costs. The high speed of block mining has a downside – the risk of spending the same money twice. Although, with the emergence of new algorithms and increased security, such problems are excluded.
- Vulnerability. Litecoin cryptocurrency can be attacked by an attacker capable of accelerating the rate beyond the network’s hashing activity. As the complexity of the cryptocurrency network increases and the number of participants grows, it becomes increasingly difficult to launch and deter such attacks.
- Low demand. The popularity of Litecoin in the world is at a low level, which many associate with dependence on Bitcoin and some other shortcomings.
- Low price. From its inception until 2017, the rate of Litecoin varied within minor limits, and the value of the cryptocurrency went up only in late 2017. Despite this, the value of Litecoin remains low. On the other hand, this is a positive signal for investors who plan to increase capital by further increasing the value of the virtual currency.
Which one should you invest in, and why?
Both coins are very attractive to investors, demonstrating strong price growth. Experts recommend investing in Bitcoin to earn money in 5-10 years, whereas Litecoin is a better investment for people who want to earn money in the short or medium term. Other obvious advantages of Litecoin are the efficiency of operations in the system, low cost, and ease of mining. On the other hand, Bitcoin is more actively accepted by companies when paying for goods and services.
Low fees, as well as the fast transfer of funds on the Litecoin network, contribute to its popularity as a means of purchasing other currencies on exchanges such as Coinbase. The fast finding of blocks in the network (2.5 minutes versus 10 for Bitcoin) is one of the main factors in choosing this cryptocurrency.
At the same time, Litecoin is strongly supported by its creator Charlie Lee, who is often invited to TV shows for comments and interviews. He does not forget about social networks, actively participating in discussions on forums and Twitter. This increases the number of LTC holders and the overall loyalty of the audience.
Users can easily manage capital in Bitcoin or Litecoin using special wallets and services for buying and selling coins. A reliable BTC exchanger will make it possible to conduct instant transactions with a guarantee of anonymity and without extra commissions, which is especially important for those who are aimed at short-term investments or will make a significant contribution to promising crypto.
Future of Bitcoin and Litecoin
Charlie Lee initially positioned his creation as an organic addition to Bitcoin. In his opinion, BTC is the best way to store savings, but when you want to spend your funds, it is better to use Litecoin. And for sure, it is more convenient and profitable when making purchases or paying for services.
Litecoin can work in tandem with Bitcoin but will never surpass its price and market position. Moreover, if “crypto gold” does sink into oblivion, Litecoin will likely follow it.
Analysts’ forecasts about the future of the crypto market for the coming years vary. Many say that first-generation coins not designed to solve specific problems will leave the market. Litecoin is also at risk of being in this number. This does not mean that it will disappear from the market within 1-2 years or will never again update its historical highs. However, a more distant prospect is vague.
In an alternative scenario, Bitcoin will strengthen in the status of digital gold, and the distribution of cryptocurrency as a means of payment will continue. Then Litecoin will have a good chance of rising in price. It will happen through the conclusion of partnership agreements with companies, retailers, online services, etc. The wider the circle of organizations that accept Litecoins, the higher its price will be.
To summarize all of the above, it is safe to say that investing in both Bitcoin and Litecoin is ultimately a good tool for generating profits in the future. Constantly improving algorithms for mining new blocks in the blockchain, lower commissions, and faster transaction speeds will further increase the value of both coins, attracting even more investors and, as a result, expanding the already great investment opportunities for using these crypto assets in various areas of our lives.