Bitcoin vs Litecoin: In depth Comparison
While Bitcoin remains the undisputed king of cryptocurrency, the past few years have seen several alternative coins (or altcoins) also gain relevance in the crypto space. Among these is Litecoin, an altcoin created in 2011 with the goal of being the “silver” to Bitcoin’s “gold”. At the time of writing, Litecoin is the 5th biggest cryptocurrency by market cap after Bitcoin, Ethereum, Ripple, and Bitcoin Cash.
What happens if we compare these two “early days” cryptocurrencies? Are they simply different or is one superior to the other?
This article will provide an overview and comparison between the two platforms by covering the following topics:
- What are Bitcoin and Litecoin?
- Who’s Behind Bitcoin and Litecoin?
- What are Bitcoin and Litecoin’s Future Plans?
- Bitcoin and Litecoin Side-by-Side
Litecoin is the younger, faster, cheaper, smarter, and not-as-rich-but-getting-there brother of Bitcoin. Bitcoin, on the other hand, is the original — the one that had to go through all the hurdles and tough experiences to eventually get to the top where it sits today. Still, they are brothers, and as such, they look a lot alike.
Released in January 2009 and widely recognized as the world’s first cryptocurrency, Bitcoin allows users to make financial transactions without the need for trusted intermediaries. These transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain.
Litecoin is a few years younger than Bitcoin, first appearing on Github in October 2011 as a fork of the Bitcoin Core client. According to the Litecoin website, “Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world.”
One might think that Litecoin’s similarity to Bitcoin suggests an underlying intention to replace it; however, Litecoin’s team has explicitly stated that they want to work together with Bitcoin in order to help solve the world’s future transaction needs.
The identity of Bitcoin’s creator — or creators, according to some — is uncertain even to this day. Known only as Satoshi Nakamoto, this mysterious figure published the Bitcoin whitepaper and disappeared soon after.
As for Litecoin, things are a bit simpler: its creator is Charlie Lee, former software engineer at Google and ex-Director of Engineering at Coinbase. While Lee is more committed and involved than ever to take Litecoin to its next phase, the same cannot be said for Satoshi Nakamoto. In 2011, the maker of Bitcoin stopped his involvement in the project, handing over control of the source code repository and network alert key to Gavin Andresen and transferring related domains to various members of the Bitcoin community.
Today, both Bitcoin and Litecoin are supported by their respective foundations and communities. The Bitcoin Foundation coordinates the efforts of the Bitcoin community with the long-term goal of making Bitcoin a globally accepted method of exchanging and storing value. Similarly, Litecoin is supported by Charlie Lee and the Litecoin Foundation, where he is member of the board of directors together with Xinxi Wang and Franklyn Richards.
In 2017 both Bitcoin and Litecoin integrated support for Segregated Witness (SegWit) with the goal of preparing the two currencies for their first transactions on the Lightning Network. In both cases, the adoption of the update was pretty slow, with only some wallets and services taking advantage of the increased block space.
2018, however, comes with exciting plans for both currencies to change this trend.
First up for Bitcoin are changes to the Bitcoin Core wallet interface. Thanks to a new address format known as “bech32”, whose introduction is planned for May with Bitcoin Core 0.16, additional users will soon be able to send and accept SegWit transactions.
The rollout of the Lightning Network on Bitcoin’s Mainnet is another thing we can look forward to in 2018. The network is meant to provide a second-layer solution built on top of Bitcoin’s blockchain and is aimed at providing near-free transactions and instant confirmations.
As for Litecoin, 2018 should bring private transaction options, the potential to layer smart contracts on the network, and LoafWallet — a simple payment verification (SPV) designed for mobile users.
|Release date||January 3, 2009||October 13, 2011|
|Creator||Satoshi Nakamoto||Charlie Lee|
|Supporting organisations||Bitcoin Foundation||Litecoin Foundation|
|Circulating supply||16,890,875 BTC||55,412,208 LTC|
|Total supply||21,000,000 BTC||84,000,000 LTC|
|Block times (Feb, 2018)||9 minutes||2.5 minutes|
Besides the difference in availability of coins shown in the table above, transaction speed and mining algorithms are the fundamental technical aspects that distinguish Bitcoin from Litecoin. Keep reading for a more detailed explanation of these features.
Even though transactions happen instantaneously for both Bitcoin and Litecoin, it does take a certain amount of time for transactions to be confirmed.
Bitcoin’s block confirmation time is currently around 9 minutes, whereas Litecoin’s is just below 2.5 minutes. What does this mean for the users? Because Litecoin transactions are confirmed faster, Litecoin’s transaction backlog is lighter and results in lower transaction fees.
At the time of writing, Bitcoin’s average transaction fee is $2.43 while Litecoin’s is $0.36. Even at its all-time high, Litecoin’s average transaction fee never went above $1.50, while Bitcoin’s highest peak was over $50 per transaction. Addressing Bitcoin’s high block time is possibly the main reason why Charlie Lee created Litecoin.
Additional consequences of Litecoin’s faster transaction speeds are Litecoin’s ability to handle a higher volume of transactions and reduced risk of double spending attacks — both of which would require major codebase updates for Bitcoin to match.
From a purely technical standpoint, the most fundamental difference between Bitcoin and Litecoin is the cryptographic algorithms they utilize, which have major implications for the process of mining new coins.
In order to avoid doubts about what “mining” means, here is a simple definition: “mining” refers to the process of collecting, verifying, and adding transactions onto the blockchain. Special participants in the network — known as “miners” — share their computing power to perform this essential service in exchange for a reward paid in the currency they have mined.
Bitcoin utilizes a mining algorithm called SHA-256, while Litecoin uses an algorithm known as Scrypt. In practical terms, the difference between the two algorithms is in the type of computing resources they require miners to provide. Bitcoin’s SHA-256 is a more complex and processing-intensive algorithm than Litecoin’s Scrypt, which on the other hand is more memory-intensive.
In the early days of Bitcoin, new coins could be successfully mined using regular computer processors (CPUs) and subsequently more powerful machines like gaming computers (GPUs). In recent years, due to the increase in mining difficulty created by competition on the network, Bitcoin miners have adopted more sophisticated mining devices in order to keep mining operations profitable. Today, Application-Specific Integrated Circuits (ASICs) mining machines are the prevailing method for Bitcoin mining. These devices are expensive and built for the specific purpose of mining, making them out-of-reach for everyday users.
In order to keep mining open to everyone, Litecoin opted for a a more memory-intensive mining algorithm — Scrypt — which was designed to make mining Litecoin less efficient specifically for ASICs and more accessible to everyone. It’s worth mentioning, however, that companies such as Zeus and Flower Technology have recently developed Scrypt ASICs, suggesting that Litecoin’s ideal of inclusive mining may soon become obsolete.
With their numerous similarities but important differences, it’s easy to see why Bitcoin and Litecoin are considered the “gold” and “silver” of the cryptocurrency space. Both have been around for a long time, are supported by a wide array of exchanges, and are generally recognized as good stores of value. Expectations for both coins are also very positive, with some crypto insiders predicting both currencies will reach 6-figure values in 2018.
Recent history, however, has shown how new cryptocurrencies and platforms — Cardano, for example — can quickly emerge and gain relevance within only a few months. In such a dynamic environment, cryptocurrencies that feel familiar to us like Bitcoin and Litecoin might just end up losing some of their stature to up-and-coming 3rd generation blockchains.
But perhaps not. Maybe Bitcoin and Litecoin will be able maintain their spots at the top of the market cap chart. They certainly don’t show any immediate signs of weakness, but only time will tell.