The world of Cryptocurrency is growing and blockchain technology is making the processes secure and seamless other types of cryptocurrencies have emerged.
With all the new cryptocurrencies entering the market, the top two cryptocurrencies used are bitcoin and litecoin. We break down the definitions, similarities, and differences between the two if one is better than the other, and if so, how.
What is Bitcoin?
Before bitcoin was developed, there had been a double-spend shortcoming with previous versions of digital currencies. The double spend problem was that if you sent out one digital currency, two would be sent out simultaneously to two different parties.
This caused a huge delay that could not be stopped until Satoshi Nakamoto figured it out in 2008. Satoshi alleviated this problem by embedding a proof-of-work timestamp algorithm in each block. This made it impossible for two digital currencies to be sent out simultaneously without raising an alarm of the discrepancy. After Satoshi fixed this technical issue, bitcoin was released into the market in 2009, becoming one of the first and still most popular digital currencies of all time.
What is Litecoin?
This is the second Cryptocurrency to be developed and borrows some of its protocols from Bitcoin. Litecoin has been described as the silver version of Bitcoin’s gold and was developed by Charlie Lee in 2011.
A former Google employee, Lee was encouraged to develop ways to fix the issues that marred existing digital currencies. His approach was not to create a Cryptocurrency that would compete with Bitcoin but rather work as an alternative in the market. In one way or the other, he created a quality product with better features than the original in that it was more affordable and is currently among the top three best cryptocurrencies to get into.
What are the Similarities between Litecoin and Bitcoin?
Litecoin and Bitcoin are some of the best digital currencies in the market, and they do share some things in common such as;
Proof of Work
The proof of work concept is used in both cryptocurrencies. This means that both Litecoin and Bitcoin are mined in similar ways. This concept also allows the two cryptocurrency mining rewards to be halved every four years.
The core updates in both are similar in that they use Segregated Witness. This technology allows transactions to be split into two segments. This enabled the unlocking signature removal from the original portion and added later at the end of the transaction as a separate structure.
Due to their similarities, it is common to find that platforms that offer Bitcoin support also have Litecoin support. This is also because both these digital currencies are viewed as similar by investors, so offering them at the same time is a win-win situation.
What are the Differences between Bitcoin and Litecoin?
That Litecoin is conceptually similar to Bitcoin does not negate the fact that there are significant differences between the two cryptocurrencies. The main differences are;
When using Bitcoin, the miners solve the mathematical equation posed at the time, and the successful ones get the transaction reward added to their blockchain. Bitcoin uses the Secure Hashing Algorithm (SHA), in this case, SHA-256. When Bitcoin was launched, the mining reward was fifty BTC which is set to half every four years.
Litecoin uses a slightly less complicated hashing function when compared to the SHA-256, referred to as Scrypt. This hashing function is less exposed to ASICs; methods miners use to enhance how they mine bitcoins.
The difference in the algorithms used affects the speed at which transactions are processed, and this causes a chain reaction in other sectors. The first aspect being affected is electricity consumption. When working with Bitcoin, you need to solve the mathematical equation as fast as possible, and the low processing time warrants more computers increasing energy consumption. In addition to this, you will also need fans to cool these supercomputers. The faster processing speed availed by Litecoin reduces the number of computers needed for each transaction, thus reducing energy consumption.
In this way, Litecoin is more environmentally friendly, which could be a huge factor for some people looking to get into digital currencies.
One of the factors that developers were keen on enhancing when working on Litecoin is the transaction time. They did this by ensuring that the transaction times were significantly lowered. The response time on a transaction when using Bitcoin is a maximum of nine minutes, depending on traffic. Litecoin’s response to a transaction is less than two minutes and thirty seconds. With up to four times faster than Bitcoin, it is clear why Litecoin is attractive to many users.
The coin supply for both these digital currencies affects them negatively and positively. The maximum supply for Litecoin is eighty-four million coins, and the more coins in the market, the higher the liquidity rate.
Bitcoin’s maximum supply is twenty-one million coins. This is beneficial because fewer coins in circulation make them rare, which significantly increases their value.
The dollar market value for these two digital currencies is not the same. This can be attributed to a few factors like the distribution of the currency and its popularity among users. Bitcoin’s market capitalization is far higher than Litecoin because of its high demand and large mining pools. There is also the fact that Bitcoin has the highest dollar exchange rate compared to other cryptocurrencies.
People want better cash outs when using any digital currencies and would rather have a small share of a highly valued Cryptocurrency like Bitcoin than many shares of a lesser value. As of 13th January 2022, close to nineteen million bitcoins were mined at forty-four thousand dollars per coin, totaling a market capitalization of eight hundred and thirty-four billion dollars. Meanwhile, during the same period, sixty-nine million litecoins were mined, with each coin valued at one hundred and forty dollars, totaling close to ten billion dollars.
These statistics show why people gravitate more to Bitcoin because it has a stronger market presence.
Which is a Better Buy Between Litecoin and Bitcoin?
The two digital currencies have their advantages and disadvantages, and it is up to the buyer to evaluate each and choose accordingly. The benefit of getting Bitcoin is that it has the originality factor, which makes it a high-value digital currency. On the other hand, Litecoin offers similar high-quality coins that are more easily accessible and affordable.
Your choice will be determined by your goals and the available resources such as funds and necessary equipment. There is also a great way to look at it, and in the larger scope of things, it would be a great idea to get both coins and enjoy each offer’s benefits.
The one tip that cuts across both currencies is being vigilant when transacting this because it is nearly impossible to reverse a digital currency transaction. Even where there is a small chance that you can reverse the transaction, it will cause you a significant financial loss.
On a positive note, you can convert Bitcoin to Litecoin with the right trading app or even on an exchange platform that allows it. Before delving into either digital currency, you should appreciate that both are very volatile transactions that render them speculative investments.
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