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Litecoin vs Bitcoin

By Francis Jay

While Bitcoin is the household name, younger contenders are creeping up to take its crown. Who will win the battle between Litecoin and Bitcoin?

When it launched in 2011, Litecoin’s developers believed they were creating a “silver to Bitcoin’s gold”. This new cryptocurrency would solve some of the problems Bitcoin was experiencing. But comparing the two today, which comes out on top: Bitcoin or Litecoin?

Difference between Bitcoin and Litecoin

Bitcoin (BTC), launched in 2009, was the brainchild of Satoshi Nakamoto, a mysterious person or persons whose identity is still unknown. The cryptocurrency is a decentralised digital currency without a bank or single administrator and can be sent from user to user on the global Bitcoin network without intermediaries. With no exchange rates or bank fees, payments are fast and very cheap.

All transactions are recorded on a public blockchain ledger and must be verified, making them traceable and very secure.

Google developer Charlie Lee took a close interest in Bitcoin and believed he could overcome some of its drawbacks. By agreement, a hard fork was created on the Bitcoin blockchain on November 7 2011, splitting the currency into two: Bitcoin and a new currency: Litecoin (LTC).

One of the main drawbacks Lee hoped Litecoin would solve was how long it took to verify a transaction. While Litecoin uses the same blockchain technology as Bitcoin, Lee proposed using a different, simpler algorithm called scrypt. Unlike the SHA-256 algorithm used by Bitcoin, the scrypt “proof of work” splits each transaction into two segments, removing the signature from the original data and making transaction processing much faster. So how do they compare?

Litecoin vs Bitcoin: Transaction speed

Winner: Litecoin, at the moment

Bitcoin can carry out 4-7 transactions per second, with confirmation taking 10 minutes.

Litecoin, however, can carry out 56 transactions per second, with a 2.5-minute confirmation time.

However, credit card companies such as Visa can handle up to 4,000 transactions per second. Imagine having to wait for ten minutes in a store for your Bitcoin transaction to be confirmed. Even Litecoin’s 2.5 minutes would seem a lifetime and you’ll incur transaction fees, too. As crypto coins become more readily accepted in the real world, companies must consider how practical their use will be.

Zero confirmation transactions are one idea for overcoming this. Transactions can be accepted without confirmation by the miners, making the process very fast. However, there are fears that “double spend” could occur, with coins spent twice.

Another solution is the Lightning network. This is a secondary blockchain layer that sits on top of the main blockchain, allowing payment channels to be created between users and retailers.

By storing some of our crypto coins on a “multi-signature address” we can agree to pay a retailer a set amount of that currency, in a similar way to buying a gift card from a certain shop.

When we agree to pay for an item, the transaction is secured and recorded on a balance sheet but importantly, not the main blockchain. This makes it very fast. More transactions can be carried out in the same way.

When the payment channel is closed by either party, spent coins are transferred to the retailer, the balance sheet is verified by miners and a single transaction is recorded on the blockchain.

By creating a network of such payment channels, fast transactions are possible between users and retailers. With fewer transactions to verify, the load on the main blockchain will be eased and fees can be kept to a minimum.

Litecoin vs Bitcoin: Market Capitalisation

Winner: Bitcoin

With a market cap of $131.30bn, Bitcoin holds the number one ranking in the market capitalisation table. Litecoin is sixth, with a market cap of $3bn.

LTC vs BTC: Mining rewards

Winner: Bitcoin

Bitcoin rewards miners for completing a block and while this was set at 50 BTC when Bitcoin was first mined, it halves roughly every four years. Currently, a miner will earn 12.5 BTC for completing a block – roughly $93,622 (£72,407). This is expected to halve again in 2020.

Litecoin also rewarded miners with 50 coins for completing a block in the early days, but halves the reward every 840,000 blocks. A miner can currently earn 12.5 Litecoin per block, about $590.63 (£456.79).

However, the cost of the equipment and electricity required to mine Bitcoin, or even Litecoin, nowadays can far outweigh any profit made.

Litecoin vs Bitcoin: Coin Acceptance

Winner: Bitcoin, for the moment

Bitcoin is becoming widely accepted as a currency in its own right, with a growing number of retailers allowing users to spend coins directly. Microsoft, Expedia, PayPal, KFC and Subway, Virgin Galactic, AT&T, Amazon and Starbucks are some of the big names who will accept payment in Bitcoin. But be warned, this is often via an intermediary such as Spedn or Purse.io.

Litecoin’s smaller value coin, faster transaction speed and cheaper fees makes it potentially more attractive for smaller purchases. Its list of accepted retailers is growing fast, partly helped by its being named recently as the official cryptocurrency of the American football team, the Miami Dolphins. It has some way to go to catch up with Bitcoin, however.

Litecoin or Bitcoin what to buy?

Winner: Both

Both Bitcoin and Litecoin can be easily bought through sites such as currency.com. Investing in digital coins is, however, a risky business. While we observed impressive highs for both Bitcoin and Litecoin in December 2017, their prices have plummeted equally dramatically.

Many analysts remain bullish about the prospects for cryptocurrencies. Bitcoin has a long history, plenty of users and has seen highs that it could reach again. With 18m coins already mined it is fast approaching its 21m coin maximum. What’s more, an estimated 5m coins have already been lost, improving the value of the ones left.

Litecoin, too, has a long history, but with faster transaction times and cheaper fees. Both currencies have high trading volumes, making them popular with investors. However, cryptocurrencies are notoriously volatile. Provided we only invest what we can afford to lose, either coin could be worth adding to our portfolios.

So, Bitcoin appears to have won the battle of the crypto coins. Yet this doesn’t mean we should rule out Litecoin. In many ways there is little difference between cryptocurrencies that use the same blockchain technology.

As Charlie Lee said: “Litecoin and Bitcoin will work together to solve the world’s transaction needs in the future.” Bitcoin is always going to be better known but Litecoin has strengths too, particularly with smaller, faster and cheaper transactions. In a world that is beginning to embrace digital currencies, there is room for both.

FURTHER READING: What is Litecoin?

FURTHER READING: A simple guide to buying or mining Litecoin

FURTHER READING: What is blockchain technology and how does blockchain technology work?

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