Crypto seemed to pop up overnight. It feels like just a few years ago that nobody had heard of these digital assets, which now dominate headlines around the world and look increasingly like the future of fintech.
There are now thousands of different cryptocurrencies available. From buying up Dogecoin to checking the Dash Price, there are various ways to get involved in this booming and exciting financial sector. However, understanding the history and core principles of technology is vital. Let’s take a look at two of the most popular cryptocurrencies, Bitcoin and Litecoin, and discuss the differences between them.
What is Bitcoin?
Bitcoin is the most famous and most valuable cryptocurrency currently available, and many people regard it as synonymous with the wider crypto industry.
Launched in 2009, Bitcoin is designed as an alternative payment method that offers a number of advantages over traditional payment systems. Bitcoin transactions are made through a peer-to-peer network of interlinked computers. They do not require an intermediary like a bank or financial institution, an attribute referred to as decentralization.
The Bitcoin network can handle around seven transactions per second, with payments generally taking around 10 minutes to process. However, these waiting times can increase, depending on factors including congestion of the network and transaction fees associated with Bitcoin payments.
Bitcoin has a hard cap of 21 million, at which point no new coins will be produced. At its peak, Bitcoin reached a value of over $67,000. Currently, the price is around $27,000. Bitcoin’s current market cap is over $540 billion, making it the most valuable cryptocurrency on the market.
Bitcoin transactions are recorded and stored on a digital ledger called the blockchain. Each transaction is represented by a block, which generates a unique hash code. Users, known as nodes, on the network, solve complex equations to create equal hash codes, after which the block is verified and added to the chain, and the users are rewarded with Bitcoin. This process is known as proof of work.
Bitcoin uses an algorithm called SHA-26 to generate these hash codes. Solving the resultant equations requires enormous amounts of computational power and energy. So much so that Bitcoin is often criticized for its contributions to the climate crisis.
What is Litecoin?
Marketed as a Bitcoin alternative, Litecoin was launched in 2011. It was designed to replicate the positives of Bitcoin while also improving on some of its shortcomings.
Litecoin has a limit of 81 million, significantly higher than Bitcoin. Litecoin’s value reached an all-time high of around $255 in April 2021 and currently sits at a price of $90. Litecoin’s market cap is $6.29 billion, far less than Bitcoin’s.
Much like Bitcoin, Litecoin transactions are conducted through a peer-to-peer network and stored on a blockchain. Litecoin also uses a proof of work system, with nodes on the network solving equations to validate blocks and earn rewards.
However, a key difference between Bitcoin and Litecoin is the algorithm used to generate hash codes. While Bitcoin uses SHA-26, Litecoin uses an algorithm called Scrypt. Scrypt is an off-shoot of SHA-26, which requires far less computational power for block validation.
As a result, Litecoin can process transactions significantly faster than Bitcoin, capable of handling around 54 transactions per second with wait times of approximately two minutes.
Which is Best?
Bitcoin and Litecoin are largely similar cryptocurrencies that use the same blockchain and proof of work consensus mechanisms. However, there are key differences between the two assets that have created a debate about which coin is the best.
Bitcoin is undoubtedly the most popular and valuable cryptocurrency, with a market cap and price far exceeding that of Litecoin. For someone looking to hold valuable assets, Bitcoin is the best, while those looking to snap up lots of coins for a cut price will be better off with Litecoin.
The key difference between Bitcoin and Litecoin is in the algorithm used to generate hash codes. Litecoin’s use of the Scrypt system means transaction speeds are much faster, making the process of using Litecoin as a payment method far more streamlined and efficient.
However, the Scrypt algorithm is less secure than Bitcoin’s SHA-26. The higher level of computational power required to solve Bitcoin equations means that transactions on the network have a greater degree of protection against attacks from scammers and hackers.
On the other hand, Scrypt’s less energy-intensive attributes mean that Litecoin is more environmentally friendly than Bitcoin. In a time when the climate crisis is one of the most pressing issues facing humanity, this could give Litecoin the edge over Bitcoin and see it achieve a greater deal of mainstream integration.
Conclusion
At a glance, Bitcoin and Litecoin might seem like much of the same thing. They both use similar structures and protocols and operate using a similar philosophy.
However, there are differences between the two cryptocurrencies that are important to note. Bitcoin is significantly more valuable as a result of the coin’s lower limit and higher demand. The different hash algorithms also mean that Litecoin can process transactions faster than Bitcoin, which makes it a more climate-friendly option but does come at the expense of security.
