Bitcoin remains the world’s most popular cryptocurrency. Its introduction in 2009 only served to spawn other digital tokens like Ethereum. Many will point to one single token as the silver to Bitcoin’s gold. That token is Litecoin. The stated intention of the developers of Litecoin is that their token will function as a complement to Bitcoin.
While the two cryptocurrencies have much in common, there are some important differences between Bitcoin and Litecoin. Let’s take a look at how these tokens are similar and how they are different.
What Bitcoin and Litecoin Have in Common
At first glance there are some commonalities between Bitcoin and Litecoin. For starters both are forms of cryptocurrency. This type of digital money has no physical existence. It is also true that neither Bitcoin or Litecoin has a determined value that is set by a government. For example, the USD is printed in various denominations. A $1 bill will always be worth $1. The value of that bill does not change, only the value of the goods you can buy with it.
Bitcoin and Litecoin have their own value, one that is expressed in the value of a fiat currency or another digital token. So, a single Bitcoin may be worth $500 or $5,000 depending on the market on any given day. When this article was written, one Litecoin was equal to $49. Bitcoin and Litecoin are regularly traded on almost all crypto exchanges.
Both of these digital tokens use a blockchain to record transactions. Both of them function as a peer-to-peer method of exchange. All of the similarities that we have mentioned could be applied to almost any cryptocurrency.
Differences in Bitcoin and Litecoin
For all that they share, the differences between the two coins are very distinct. Some of the differences can purely be attributed to the time that Bitcoin has been around compared to Litecoin. Other differences are heralded by the developers of Litecoin as an improvement over the Bitcoin architecture.
Market capitalization is one area where Bitcoin and Litecoin are divided. The market cap represents the value of coins that exist in the market at a given point in time. Bitcoin’s market cap was over $300 billion in December of 2017 during the bull market. It has grown considerably since it was introduced, In 2010 it was only about $50,000.
At the time of this writing the market capitalization for Litecoin has topped $2 billion. It is a cryptocurrency that is growing at a rapid rate. Some would say it is even progressing faster than Bitcoin, and that may be a promising sign for investors. But this is what reinforces the concept of Litecoin as a silver to Bitcoin’s gold. You can almost think of it as a quarter compared to a dollar.
Another area of difference is in the number of coins that each platform can produce. One of the ongoing debates about Bitcoin is is ability, or lack thereof, to scale. No more than 21 million Bitcoin can even be created. Litecoin, in contrast, can support up to 84 million coins. This difference may be overblown because digital tokens can be split. They can be divided almost to infinity. So, it is possible that some individuals who own either of the currencies might not own a full token. They might have 0.0001 Bitcoin or 0.025 Litecoin. But, what makes this difference important is that some individuals who spend their tokens might prefer exchanging whole instead of fractional units.
That gives Litecoin some advantage because the price of a single Litecoin is much lower than the price of a Bitcoin. It is also true that the lower price point might be more attractive to investors who want to get their feet wet in digital currencies without making a huge investment.
The time it takes to process transactions on the respective networks is also different. This is somewhat misleading because transactions on both blockchains occur instantly. What actually happens, though, is that the transactions have to be verified by others on the network. The standard for Bitcoin is about 10 minutes per transaction on average. This can vary, of course, depending on how much traffic is on the network at a given moment. For Litecoin the standard is around 2.5 minutes, a significant improvement. Almost all altcoins work to improve upon the speed at which Bitcoin transactions are processed.
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Both Bitcoin and Litecoin also use different algorithms to accomplish their cryptography. Bitcoin uses the SHA-256 algorithm whereas Litecoin uses one known as Scrypt. Each algorithm has a different impact on the way coins are mined, or created. Those who are fans of Scrypt will contend that it is a more secure method of cryptography. Here again is another area where altcoins attempt to improve upon the Bitcoin concept.
Summing it All Up
While there are differences and similarities between Bitcoin and Litecoin, one should never forget that they are two separate entities. You cannot pay for something with Bitcoin and receive Litecoin in change like you can pay with a $1 bill and get US coins back. The two tokens have different blockchains, different security protocols, and different wallets are needed to keep them.