Litecoin and Bitcoin are two of the largest cryptocurrencies in the world. Indeed, Bitcoin (BTC) is the largest in terms of market valuation. Litecoin is also a popular digital asset that expanded in the last years. This is why we need to understand which are the differences between Litecoin and Bitcoin.
Litecoin (LTC) was an early hard fork of bitcoin (BTC). It was launched by former Google engineer Charlie Lee in 2011. Litecoin was never meant to be a competitor to bitcoin. It has been developed with an aim to complement bitcoin. The digital currency has a market capitalization that oscillates between $2 and $8 billion. However, its price can change according to market trends.
You can currently buy both Litecoin and Bitcoin using Binance.
Litecoin and Bitcoin
Bitcoin was launched by Satoshi Nakamoto in 2009. More cryptocurrencies were launched in the later years to compete with bitcoin. Litecoin was developed with the purpose of being silver to bitcoin’s gold. The cryptocurrency would complement bitcoin rather than to compete with it.
Bitcoin has a limit supply of 21 million coins. On the other hand, Litecoin has a total supply of 84 million digital coins. Bitcoin is subdivided into smaller units called as satoshi to let users complete transactions of smaller amounts. The same happens to Litecoin with the difference that smaller units are not called satoshis.
Bitcoin price has increased significantly over the last years. Transaction fee increases if there are more number of transactions pending in bitcoin mempool. At that point, it becomes economically unviable to use bitcoin for sending smaller payments of less than $10. The larger the congestion, the larger the fees.
This is something that does not happen to the Litecoin network. Why? Simply because it is able to support a larger number of transfers per second. Its blockchain design makes it better for LTC to be used as a means of payment. However, think of Litecoin and Bitcoin as virtual currencies that complement each other.
The price of a single bitcoin is simply the ratio of its market capitalization divided by total coins in supply. Price of the digital currency would decrease if its supply was increased. It is pretty similar to how fiat currencies devalue when a government decides to print more paper money. This is where having four times the supply of coins becomes an advantage for Litecoin. It can be used for sending micropayments.
The scalability debate
Bitcoin has a block interval of 10 minutes. Miners verify transactions in the network and then validate them. Several transactions are added in a block. Any block is validated by miners only after the maximum size of the block has been reached. Critics have argued that bitcoin block interval has become a big problem. If the time between two consecutive blocks reduces then the network can handle more transactions.
Litecoin has a block interval time of only 2 minutes 30 seconds. It can process more transactions than bitcoin. Transaction fee will be low if the network is equipped to handle more transactions.
Litecoin and Bitcoin Fees
There are other issues that are affecting Litecoin and Bitcoin. This is related to transaction fees, and a topic we mentioned before. Bitcoin transaction fees are larger than those on the Litecoin network. This is why it is definitely important to understand when to use one network or the other.
Bitcoin is the most secure network in the world. It can be used for a wide range of things. Nowadays, large companies are investing in Bitcoin because it can be considered a store of value. In a recent report released by the Asset Management firm Ruffler, they ifnormed they have placed 2.5% of their portfolio in BTC. The decision behind this investment is related to the lack of trust they have for fiat currencies.
Their report reads as follows:
“The exposure to bitcoin is currently equivalent to around 2.5% of the portfolio. We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies. Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.”
Thus, Bitcoin is seen by large companies and investors as a store of value rather than as a tool to send and receive payments. Even when BTC can be used to send and receive transactions, only the largest and most valuable are going to be sent using this network. Here is where Litecoin comes into place.
Litecoin transactions are faster and cheaper than on the Bitcoin network. As you can see in this image, Litecoin and Bitcoin transaction fees have been very different over time.
Litecoin transaction fees have been close to $0.01 while BTC transaction fees experienced large spikes over the last years. This is something that allows Litecoin and Bitcoin to work together. Bitcoin can be seen as the digital asset to store value and Litecoin the cryptocurrency to process transfers.
Litecoin and Bitcoin Differences and Similarities
- Litecoin and Bitcoin have a different founder. Litecoin was created by Charlie Lee and Bitcoin by Satoshi Nakamoto.
- The release date is also different. Bitcoin is the first and oldest cryptocurrency launched in January 2008 and Litecoin was released in 2011.
- Their total supply of coins is different, Litecoin has 84 million LTC and Bitcoin 21 million BTC.
- The block processing time is 2.5 minutes for the Litecoin network and 10 minutes for Bitcoin.
- Transaction fees are higher on the Bitcoin network than on the Litecoin network
- Bitcoin uses an algorithm known as SHA-256 while Litecoin was developed using Scrypt
- Both of the digital currencies can be tracked but Litecoin is developing privacy solutions
- Bitcoin is usually used for large transfers or as a store of value, Litecoin is used for transfers
- Litecoin and Bitcoin use the Proof-of-Work consensus algorithm
- Their coin ticker is different (BTC vs LTC)
There are many other differences and similarities between Litecoin and Bitcoin. However, those shown above are the most important.
Final Words About Litecoin and Bitcoin
Both Litecoin and Bitcoin are among the largest virtual currencies you can find. They have a lot of similarities but also many differences. Investors and traders would find it very useful to use both virtual currencies in order to diversify their portfolios. Litecoin can be also used to process transactions and Bitcoin to store value.
Image Provided by Seeking Alpha and Flickr