Bitcoin is undeniably the most popular cryptocurrency in the world. For a long time, Litecoin held the second place. Journalists dubbed Litecoin as “the silver to Bitcoin’s gold”. Unsurprisingly, as the crypto market is extremely volatile, things have changed.
Nowadays, it’s either Ethereum or Ripple. Both are battling for second place and have the chance of usurping the king, namely, Bitcoin. Still, even though Litecoin fell in its market capitalization, it remains an active player in the cryptoverse. If you look at the coin from a layman perspective, you wouldn’t notice much difference between LTC and BTC.
However, there are indeed differences, aside from the obvious choice of market cap. Let’s take a look at them, and see why you might want to use one currency over another.
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The Differences: Encryption, Supply, Block Time
Funnily enough, Litecoin started out as a branch of the Bitcoin Core client, with minimal differences, such as a slightly modified GUI. It grew to include a different method of encryption, greater maximum coin numbers and decreased block generation time.
It aims to process transactions faster than Bitcoin, from BTC’s 10 minutes to two and a half minutes. Originally, the mining difficulty of Litecoin was pitifully low, which led to “instamining” the coins.
It had the SHA256 hashing algorithm, same as Bitcoin. The change was stimulated by the idea that a cryptocurrency should be able to be mined by everyone, and thus, the developers switched to Scrypt (alternatively written as s-crypt, which is short for “secure cryptographic hashing function”, pronounced “script”). It worked only in the beginning, and since the real period of launch at around block #10079, difficulties started to rise.
After a few months people started to use GPUs, later FGPAs and ASICs to mine Litecoin. Once ASIC miners entered the market, the goal of stopping mining with specialized hardware was abandoned. The focus became towards a transaction speed that is faster than that of Bitcoin, with lower payment fees.
In May 2017, Litecoin accepted Segregated Witness, and later on completed the first Lightning Network transaction, transferring LTC from San Francisco to Zurich in one second.
The aforementioned SHA256 algorithm, which BTC makes use of, requires less memory than Scrypt. This is because Scrypt uses an extra bit of randomness, as stated in the algorithm. It’s basically SHA256 with an extra layer of complexity on top. Thanks to this, it cannot be broken with a very powerful ASIC, while SHA256 can be.
But as mentioned, this happened in Litecoin regardless. Some ASIC-proof coins exist though, like Ethereum, which uses a custom Ethash algorithm that requires too much memory to be mined with an ASIC. This is something to consider when investing in coins.
Bitcoin could be seen as centralized in a way that only wealthy institutions with the money to pay for ASIC can mine it. Litecoin ultimately fell into that trap, and this doesn’t really incite trust in users. Still, you can praise LTC creators for wishing to alleviate the problem and paving the path for other altcoins.
Coin Limit Between LTC & BTC
Another difference between Bitcoin and Litecoin is the total coin limit. It amounts to 21 million for Bitcoin, 84 million for Litecoin. Technically, even though the numbers are different, this means little for users.
Both coins, and many other cryptocurrencies, can be divided into large decimal points. You might know that 0.00000001 of a Bitcoin is called a Satoshi. This is one hundred millionth of the coin.
Consequently, this means the number of coins is irrelevant when it comes to participation, as no matter how high the price, you’ll still be able to purchase low priced goods. Litecoin might have a tiny advantage in that people prefer to deal in whole numbers, but such a nuisance can be easily fixed with software, like some wallets already do, by displaying the value of BTC in dollars or another currency.
While I mentioned the 2.5 minute transaction speed, this is not the end of transaction benefits of LTC. Faster block generation means higher transaction volumes. Bitcoin would require significant changes in code to achieve this. The quicker block time also reduces the risk of double spending attacks, so you can’t go wrong with Litecoin.
Basically, you could say that BTC uses 2009 technology, and LTC is two years ahead. Scalability of the Bitcoin network remains a huge problem, especially as of now, with $20 transaction fees being in place.
Altcoins such as LTC are definitely needed in the crypto market, as they propagate new technology that could possibly be one day integrated into Bitcoin. Though, I find it highly unlikely that Bitcoin will eagerly accept all the new developments in cryptocurrency tech, as its developers are ill adapted to change, on top of being constrained by technological limits.
Look at the BTC/BCH split (aka 'hard fork') – only a fraction of miners and the community followed. It might be that Bitcoin has made itself too big to fail, after all. But I believe that if developers don’t do anything, it will topple over and another coin will take its place. Where will Litecoin be when that arrives?