Litecoin Vs Bitcoin: A Comparison of Two Leading Cryptocurrencies

Discover the differences between Litecoin and Bitcoin, from their hashing algorithms to market capitalization. Find out which cryptocurrency suits your needs.

The general public’s interest in cryptocurrencies has dramatically changed over the last few years. Investors have taken notice of it as their interest in cryptocurrencies has risen over time. This interest has centered primarily on Bitcoin, which has come to be associated with making cryptocurrency millionaires and boosting user wealth.

Since the creation of Bitcoin, hundreds of additional cryptocurrencies have either been created or forked from it. These “altcoins,” as they are known as cryptocurrencies that are not Bitcoin, include the Bitcoin fork Litecoin (LTC). While Litecoin and Bitcoin both use the same blockchain and verification process as the foundation, there are a few key differences that can help you determine which is best for your needs.

Key Takeaways

• Bitcoin uses the SHA-256 encryption algorithm, whereas Litecoin uses the Scrypt algorithm. These two cryptocurrencies operate using different cryptographic algorithms.
• The proof-of-work consensus algorithm is used by both Bitcoin and Litecoin, two cryptocurrencies.
• In comparison to Bitcoin, Litecoin can produce more coins.
• Litecoin’s market cap continues to be much lower than that of Bitcoin.

Bitcoin

The first cryptocurrency to be introduced was Bitcoin in 2009. In the intervening years, it has changed from being a novelty to a contentious commodity, investment, and exchangeable currency. To uphold the reliability and security of a centralized database known as a blockchain, it depends on decentralized and community computing power.

Some notable Bitcoin properties that make it unique are:

• Proof-of-work: the blockchain’s consensus mechanism and validation process, which verifies transactions and blocks using computational power from GPUs and, to a lesser extent, CPUs.
• It uses SHA-256: the blockchain’s encryption is provided by the cryptographic hash function. The hash function encrypts input by converting it to an output of fixed length.

Litecoin

Litecoin was launched in 2011 by former Google engineer Charlie Lee, who announced the debut of the “lite version of Bitcoin” via a posted message on a popular Bitcoin forum.1 Since its inception, Litecoin has been perceived as a response to Bitcoin’s propensity for centralization.

As a result, Litecoin adopts many of the characteristics Lee and other Bitcoin developers thought were beneficial to Bitcoin in its early stages. The development team felt that Litecoin could be improved in other areas. Some of Litecoin’s notable properties are:

• Proof-of-work: While proof-of-work is used by Litecoin, it does not solely rely on CPU or GPU computing power, but also on access to large amounts of memory.
• Uses Scrypt: Litcoin uses Scrypt to perform hashing. Scrypt uses SHA-256 but has much higher memory needs for proof-of-work. This is said to lessen its reliance on GPU arithmetic logic units (ALUs) and consequently ASIC mining equipment. However, Scrypt ASIC mining devices were developed in 2021; as a result, Litecoin might need to find an alternative.

Key Differences  Between Bitcoin & Litecoin

Litecoin and Bitcoin differ most noticeably in their hashing algorithms. As was already mentioned, SHA-256, which is processed quickly by the ALUs of graphics processing units, is the algorithm used by Bitcoin.

Market Capitalization

The market capitalization, or aggregate dollar value of all the issued coins, is another key distinction between Bitcoin and Litecoin. Because it can be mined by big farms and mining pools and because there is such high demand for it, the exchange rate of bitcoin to dollars is much higher, bitcoin is more widely used. Due to Bitcoin’s smaller supply and higher demand, it has a much smaller market cap than Litecoin.

Distribution

The total number of coins that each cryptocurrency can produce is one of the key differences between Bitcoin and Litecoin. Here Litecoin stands out from the competition. The maximum number of coins on the Bitcoin network is 21, while the maximum number of coins on the Litecoin network is 84,050,000.

Theoretically, this should be Litecoin’s biggest advantage, but in practice, prices for commodities and investments are generally determined by supply and demand, as well as investor and consumer sentiment. Bitcoin’s price reflects the apparent belief shared by both parties that it is a good fit for their objectives in terms of money, values, and interests.

Algorithms

Litecoin and Bitcoin also have different algorithms. Litecoin uses Scrypt, whereas Bitcoin uses SHA-256.

The two algorithms have different effects on how mining new coins unfolds. A lot of computing power is necessary in order to confirm transactions on both Litecoin and Bitcoin. Usually, SHA-256 is a more complex algorithm compared to Scrypt.

The miners also tried using some of the most sophisticated methods to be able to efficiently mine bitcoins. To do so, miners decided to use ASICs like Antminer L7, which are hardware systems made to mine Bitcoins.

Meanwhile, Scrypt was made in such a way that it is not as susceptible to the ASIC-based mining custom hardware solutions, which is what made more people look towards Litecoin. Thus, Litecoin seems more accessible for people who want to become miners.

Transaction Speed

Although technically transactions on the Bitcoin and Litecoin networks happen instantly, it takes some time for those transactions to be confirmed by other network users. Transaction speed was prioritized when Litecoin was created.

The time it takes for a block to be verified and added to the blockchain is referred to as the transaction confirmation time, and it is typically nine minutes per transaction on the Bitcoin network. The amount of network traffic, though, can greatly alter this. For Litecoin, the corresponding time is about 2.5 minutes.

Is Litecoin More Volatile Than Bitcoin?

Since its launch, the market has been dominated by Bitcoin, which is widely regarded as the leading cryptocurrency. It is also well known to be extremely volatile, with sharp and sudden price changes.

The price of bitcoin has fluctuated significantly in the past, according to historical price movements. As an illustration, in 2017 the price of Bitcoin increased from about $1,000 in January to almost $20,000 in December before plummeting back to about $3,000 by the end of that year.

Litecoin, which ranks second in terms of market capitalization, is frequently referred to as the silver to Bitcoin’s gold. Litecoin is viewed as a more reliable alternative to Bitcoin, despite the fact that it has also seen price volatility.

Litecoin’s historical price movements indicate that its price swings have been less extreme than those of Bitcoin. As a matter of fact, the price of Litecoin moves more gradually and predictably.

Because it processes transactions more quickly than Bitcoin, Litecoin is thought to be more stable than Bitcoin. In comparison to Bitcoin’s 10 minutes, Litecoin’s transaction confirmation time takes about 2.5 minutes. Its adoption and stability have increased as a result of its faster speed, which has made it a more appealing choice for businesses and consumers.

Making Litecoin more ASIC-resistant was a choice made by its creator, which also contributes to its stability. As a result, mining for Litecoin can now be done by a larger number of users rather than just a few powerful mining pools. As a result, the network became more decentralized and safe, which aided in Litecoin’s stability.

Historically, Bitcoin has experienced more extreme price fluctuations than Litecoin. Both have experienced price volatility, but Bitcoin’s price has been subject to jarring changes. The variables that affect Litecoin less severely than those that affect Bitcoin include its predictability and lack of regulation.

On the other hand, Litecoin is less volatile than Bitcoin because of its increased stability and ASIC resistance due to its faster transaction speed. It’s important to remember that changes in the value of one cryptocurrency, like Bitcoin, frequently have an impact on other ones, like Litecoin. This means that despite its own stability, Litecoin’s price can be impacted by Bitcoin’s volatility.

The duration and particular market circumstances determine whether Bitcoin or Litecoin is more volatile. The more volatile of the two cryptocurrencies, though, is generally acknowledged to be Bitcoin. Litecoin may be preferred over Bitcoin by investors and traders looking for a more reliable investment option. However, Bitcoin may offer greater potential for returns for those who are willing to accept the risks associated with volatility.

Conclusion

While each cryptocurrency has advantages of its own, Bitcoin and Litecoin do have some features in common. They can both be excellent investment opportunities, and you can convert between them if you want to. Before deciding between them, be sure to consider what they have to offer and select the option that best meets your requirements.

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