Introduction: The Origins of Litecoin and Reasons for Its Creation
More than a decade ago, an obscure person or group named “Satoshi Nakamoto” unleashed upon the world a digital currency that in its short lifespan, has become a global movement. Within a couple of years of its release, Bitcoin (BTC) started to inspire individuals who saw the potential in cryptocurrency and sought to start similar projects.
One such individual was Charlie Lee, a former Google engineer, who created a fork or split from Bitcoin called Litecoin (LTC), that was similar but had a few key differences. Despite its similarities with the original cryptocurrency, Litecoin became its own movement in itself, with its own community and a sizeable chunk of the crypto market.
Around the time of Litecoin’s creation, people saw Bitcoin’s value go from basically nothing to nearly $30 in June 2011, resulting in investment gains the likes of which no one had ever seen before.
However, it was hard to acquire Bitcoin in those days since there weren’t easy ways to buy it.
Moreover, the process of mining, where users help validate Bitcoin transactions and get rewarded in transaction fees and newly minted BTC for doing so, was becoming increasingly difficult thanks to the rise of expensive specialized mining devices called application-specific integrated circuits (ASICs). ASICs made mining harder and put mining out of reach for everyday individuals.
Therefore, while many realized the potential of Bitcoin both as a groundbreaking technology and investment vehicle, they felt that it was too late to get in on the ground floor of BTC as an early adopter (little did they know how wrong they were!).
Against this backdrop, Charlie Lee launched Litecoin (LTC), which sought to improve upon Bitcoin with faster transactions and a more egalitarian mining process thanks to Scrypt, a mining algorithm that would prevent ASICs from taking over.
While “another Bitcoin fork” doesn’t sound too revolutionary today, those were the early days of crypto and Litecoin quickly gained a following. It also rewarded early adopters who perhaps weren’t as early to the Bitcoin party, with 1 LTC going from $0.03 in July 2012 to $40 in November 2013 — a 1,300x or 130,000% increase.
With Bitcoin and Litecoin both being around for years now and being pillars of the crypto community, what other differences, aside from transaction speed and mining algorithm, exist? In this article we’ll compare Litecoin vs. Bitcoin in terms of transaction speed, transaction fees, scalability, mining, mining profitability, hashrate, community, merchant adoption, and price to see which is better.
Litecoin vs. Bitcoin Transaction Speed
As mentioned, one of the ways in which Litecoin creator Charlie Lee sought to improve upon the Bitcoin idea was making Litecoin transactions faster than those of Bitcoin.
Since Litecoin transactions confirm 4 times faster than Bitcoin transactions, Litecoin is the winner when it comes to transaction speed and for situations where people need transactions quickly validated.
Litecoin vs. Bitcoin Fees
The next point to consider when comparing Bitcoin vs. Litecoin is transaction fees. Staying true to its name, Litecoin again is “liter” when it comes to transaction fees:
Again, Litecoin takes the cake here, as Bitcoin’s higher transaction fees make it less suitable for everyday transactions.
Bitcoin vs. Litecoin Scalability
If you look closely at the screenshot above with Litecoin and Bitcoin’s average transaction fees over time, you can see that Bitcoin’s transaction fees were once similar to those of Litecoin’s and at times even lower (especially in Bitcoin’s early days).
However, as more and more users have started to use Bitcoin over time, Bitcoin has struggled with scalability, or the ability to handle many transactions at once, which you can see in the form of higher transaction fees in order to get a transaction included in a new block.
While this might make you think that Litecoin is better able to handle lots of transactions or scale, due to its lower transaction fees, this is an unfair comparison, since Bitcoin routinely handles many more transactions than Litecoin:
If Litecoin dealt with as many daily transactions as Bitcoin, comparing the two projects’ scalability would make sense. But since that isn’t the case, there isn’t a clear winner between Litecoin and Bitcoin when it comes to scalability.
Aside from that, Bitcoin and Litecoin are experimenting with similar scalability improvements, such as SegWit and Lightning Network. Indeed, Litecoin is sometimes referred to as a “testnet” for Bitcoin improvements.
Litecoin vs. Bitcoin Mining
Along with faster transactions, the key improvement Charlie Lee wanted to emphasize with the release of Litecoin was its resistance to ASIC mining centralization.
While Scrypt, Litecoin’s mining algorithm, did fend off the ASICs for quite some time, it, too, fell victim to ASIC mining, as manufacturers were able to figure out a way to manufacture Scrypt ASICs.
Ironically, this has led to Litecoin mining becoming more centralized than Bitcoin mining, with 5 mining pools (groups of miners that “pool” their mining power together to mine more blocks while splitting rewards) accounting for 71% of Litecoin’s hashrate (Litecoin network’s total mining power).
While Bitcoin’s hashrate distribution isn’t some decentralized utopia — in both networks, the top 3 pools make up 48% of the total hashrate, which is very close to the 51% needed for a 51% attack — it is still more decentralized than Litecoin’s. The top 5 Bitcoin mining pools “only” make up 60.4% of Bitcoin’s total hashrate:
Thus, while Bitcoin and Litecoin both have pretty centralized mining processes, Bitcoin is slightly less centralized in that respect relative to Litecoin. Of course, this is ironic since one of the main reasons for Litecoin’s creation was to prevent mining centralization.
Litecoin vs. Bitcoin Profitability
Perhaps one of the reasons for Litecoin’s heavy mining centralization is that Litecoin’s mining profitability is currently the opposite of good. With not many miners willing to operate in the red (no profits), one can assume that former Litecoin miners have backed out of mining LTC, at least until LTC mining profitability comes back.
This isn’t a good sign for Litecoin. If less miners are willing to mine a Proof of Work cryptocurrency, that means that the cryptocurrency isn’t as secure (it takes less mining power to launch a 51% attack on the network).
On the other hand, while Bitcoin’s mining difficulty is quite high, this is perhaps offset due to factors like Bitcoin’s higher price. When it comes to mining profitability, Bitcoin is the clear winner for now, and it shows in Bitcoin’s hashrate (shown below).
Litecoin vs. Bitcoin Hashrate
The next point of comparison for Litecoin vs. Bitcoin is network hashrate, or the total mining power allocated to the network by miners. The significance of network hashrate is that the higher it is, the more secure the network is. This is because if a network has a high hashrate, it’s more resistant to a 51% attack, since any malicious actor or group would need to somehow gain control of that much more mining power in order to launch an attack.
Bitcoin’s hashrate is orders of magnitude higher than Litecoin’s hashrate:
Since Litecoin is currently unprofitable to mine, we can see that not only is Litecoin’s hashrate lower than Bitcoin’s (this could also be due to the fact that Bitcoin is more popular), but also that Litecoin’s hashrate has been decreasing while Bitcoin’s has been steadily increasing.
This of course isn’t a good sign for LTC since security — against 51% attacks and otherwise — is of paramount importance when peoples’ money is on the line.
Litecoin vs. Bitcoin Community and Merchant Adoption
Aside from the more technical differences between Litecoin and Bitcoin that have been discussed thus far, another important point to consider is the difference in community between BTC and LTC.
As of writing, Bitcoin is undoubtedly more popular than Litecoin:
- Subreddit (communities for different topics on the social platform Reddit) subscribers — 1.3 million for r/Bitcoin vs. 211,000 for r/Litecoin
- Tweets per day — 25,457 for #Bitcoin vs. 744 for #Litecoin
- Merchant adoption — companies like Wikipedia, Microsoft, Expedia, Burger King, and Twitch accept Bitcoin vs. mainly lesser-known merchants for Litecoin. More crypto businesses like exchanges and wallets support Bitcoin compared to Litecoin, too
Litecoin vs. Bitcoin Price
As of March 9th, 2020, 1 LTC is $50.49, while 1 BTC is $8,007.03. However, keep in mind that the maximum limit for Litecoin’s total supply of LTC is 4 times greater than that of Bitcoin’s (84 million vs. 21 million), which can make Litecoin’s price seem relatively low despite the fact that it’s consistently one of the top 5–10 crypto assets by market cap (assets in circulation multiplied by asset price).
Though to newbie investors who don’t know what market cap is or means, the lower Litecoin price could signal more “room for growth” compared to assets like Bitcoin. From a price appreciation standpoint then, Litecoin might have a slight edge on Bitcoin, thanks to market psychology.
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In sum, Litecoin and Bitcoin are two of the most popular cryptocurrencies and have both been around for years. While Litecoin was originally created as a faster, less mining-centralized version of Bitcoin, some other differences have emerged since.
Indeed, Litecoin, as its “Lite” name would imply, has faster transactions and lower transaction fees. It also has a lower price than Bitcoin, which could entice more people to buy it, especially inexperienced investors.
However, Bitcoin has the upper hand when it comes to less mining centralization, increased mining profitability, higher hashrate, and wider community awareness and adoption.
Since Litecoin’s main technical advantages over Bitcoin — faster transactions and lower transaction fees — are being actively worked on by Bitcoin developers through developments like Lightning Network, one has to wonder what the point of Litecoin would be if Bitcoin is able to figure out its “scalability problem”.
If Bitcoin scales, transactions would be near instantaneous and free, making it even faster and cheaper than Litecoin or any other altcoin (cryptos that aren’t Bitcoin) that try to be a faster and/or cheaper version of Bitcoin. With that point in mind, we’re going to have to give this Bitcoin vs. Litecoin “fight” to BTC.
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Information provided is for informational purposes only and should not be considered financial advice. Investing in crypto assets is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Past performance is not indicative of future results.