In this article, we are going to do the comparison of Litecoin with top rated cryptocurrencies Bitcoin and Ethereum.
Litecoin versus Bitcoin
While Bitcoin remains the unquestioned king of the cryptocurrency space just as it has since it created the market, its share of the market cap dropped below 80 percent of the total cryptocurrency market cap for the first time at the start of 2017, and there is more and more talk about the ways in which its iteration of the blockchain has already reached its limits. This is leaving room for cryptocurrencies such as Litecoin, which have natural advantages over it, to come more to the forefront, and the recent spike in its price shows that more and more users are taking notice.
Of all the alternatives to bitcoin out there, Litecoin is the one that is most often compared to it and with good reason. After all, it did start as a fork of the Bitcoin blockchain which means it is quite similar in many ways. However, the ways in which it is different stack up in Litecoin’s more often than not.
Total coins: One of the biggest differences between the two is the number of coins that will ever end up being in circulation. The Bitcoin network is set to automatically cap out at 21 million coins which means that is all that there will ever be. Litecoin, on the other hand, is set to eventually cap out at 84 million coins. Additionally, while more than 70 percent of all bitcoins have already been mined, the number of bitcoins that can still be mined is sitting at about 50 percent.
What the actual effects of this difference are going to remain to be seen as they could turn out to be negligible. This could be the case as both cryptocurrencies have the ability to be broken down into extremely small amounts, in fact, .00000001 bitcoin, the smallest amount that can be transferred at once, is known as 1 satoshi. This could theoretically mean that users will never have a hard time purchasing cheap goods, regardless of the ultimate price either coin rises to.
Even still, the simple fact that Litecoin has a larger potential number of coins could possibly lead to it having a psychological advantage over bitcoin, especially once bitcoin reaches its limit. Some experts also anticipate that users may prefer dealing in large units as opposed to smaller units, which means they would naturally be more inclined to spend a third of a bitcoin on something than a hundredth of a bitcoin on the same item. This, of course, could then be countered by a change in the way the amount of cryptocurrency a person has is displayed from being displayed in cryptocurrency terms to being displayed in terms of the local fiat currency. This would then naturally defuse the psychological aversion to dealing in smaller units of currency.
Transaction speed: While technically transactions that occur in the Bitcoin blockchain and the Litecoin blockchain happen instantaneously, the amount of time that is required for those transactions to be confirmed varies dramatically between the two. Specifically, a new block is created on the Bitcoin blockchain just once every 10 minutes while a new block is created in the Litecoin blockchain every 2.5 minutes.
What’s more, the Bitcoin blockchain is already operating at full capacity which means that even if no new transactions were made moving forward, there are enough transactions currently waiting to be verified to take nearly a week for the blockchain to be caught up. As such, this difference in confirmation time is already starting to make Litecoin more attractive than Bitcoin as their transactions can be completed in a fourth of the time or less on the Litecoin blockchain than they could on the Bitcoin blockchain. While merchants can always opt to complete the transaction before it is officially verified, this can be risky and opens them up to the possibility of a double-spending attack.
The fees that come along with Litecoin transactions are also much lower than with Bitcoin, which experts expect could lead it to become one of the leading cryptocurrency exchanges when it comes to making small transactions. This also makes it an attractive alternative investment solution as it is easier to move Litecoins around without having to worry about losing a substantial portion of your investment to fees.
Exchanges: This is one area where Bitcoin currently wins out over Litecoin as there are far more ways to buy bitcoins than practically all other types of cryptocurrency combined. This doesn’t mean that it is difficult to buy Litecoins, however, just that there are fewer options for doing so with USD directly. There are plenty of exchanges out there that will go from one cryptocurrency to another and back again, the only tricky part is getting into the game in the first place. Additionally, this will become less and less of an issue as time goes on as bitcoins become more commonplace, the demand for them will increase and the number of exchanges that offer USD to LTC will increase exponentially.
Security: When it comes to security, the blockchain with the greater has rate has the greater overall level of security. This is currently bitcoin by a hefty margin, aided by the fact that the way that its mining is done tends to be more decentralized as well. This is not to say that Litecoin’s security is bad, just that it can’t compare to the extreme network hash rate that Bitcoin can field. As Litecoin’s popularity continues to grow, so will its overall network hash rate and thus its overall level of security will continue to improve as well. This is somewhat countered by the fact that the proof of work model that Litecoin uses is far less common than that which Bitcoin uses, making it less statistically likely that hackers will target it specifically when they can more easily target a much larger audience.
Acceptance: Bitcoin is currently accepted in far more places than Litecoin, simply because it has much greater mindshare. As Litecoin is based on the Bitcoin blockchain, it will be easier for merchants to start accepting it as its popularity grows than it would be for those merchants to start accepting another cryptocurrency, such as one that was based on the Ethereum blockchain instead. While merchant support is currently rather low, its developer support is growing at a rapid rate. This is an important indicator of where interest is likely to lie in the future, especially as developers are currently abandoning Bitcoin in droves for platforms that have proven to be more forward-thinking.
When it comes to vendor support, the code for Litecoin is very similar to the Bitcoin code that it is based on so, while there aren’t as many mining machines or wallet options as there are for Bitcoin, there are still enough to provide users with the option to choose the hardware and software that works best for them. Additionally, in line with the trend of support moving toward Litecoin, there are more new devices coming to market that support Litecoin than support Bitcoin, largely because the Bitcoin market is so well established.
Liquidity: When it comes to liquidity, that is how readily available the cryptocurrency is, Bitcoin beats Litecoin hands down. Bitcoin is also the most stable of the cryptocurrencies, even though that isn’t saying much, and its markets are also much deeper than Litecoin’s simply because of the significant amount of investment interest in Bitcoin over the past few years. Finally, based purely on its market cap, Bitcoin can handle far more transactions overall than Litecoin can without running out of a supply of interested buyers or sellers.
Litecoin versus Ethereum
While comparing Bitcoin to Litecoin is akin to comparing gold to silver, comparing Litecoin to Ethereum is much closer to comparing apples to oranges. While Ethereum’s currency, ether, is traded in a speculative fashion and can be used to trade for primary services, Ethereum is more about being a platform through which decentralized applications and smart contracts can be used for far more than just paying for things.
The primary purpose for ether is to be used as a means to facilitate an exchange for the services that are provided by the decentralized applications that are running on the platform. You can essentially think of the Ethereum platform as one large decentralized computer with each of its nodes contributing some of the processing power required to maintain, manage and host the blockchain applications on the platform.
Furthermore, while Litecoin is going to continue using the proof of work scrypt algorithm, Ethereum will soon be moving to a proof of stake algorithm instead. This change is designed to increase the speed at which transactions can be verified and also deal with the other issues that proof of work blockchains can run into when they reach a greater mass. With the proof of stake model, instead of using an equation to gate the verification of blocks, the process is instead done by validators (not miners) who already have ether in the system, thus they will lose their stake if they misuse the system. This new type of proof is launched in 2018.
The Ethereum platforms work off of a heavily modified version of the original Bitcoin blockchain code and are generally referred to as blockchain 2.0. In addition to enhancements when it comes to scalability and transaction speeds, enhancements which Litecoin matches, it also allows for smart contracts that are much more complicated than the ones that are supported on the Litecoin blockchain.
Contrary to the name, smart contracts aren’t actually contracts, and they aren’t especially smart either. They are essentially small sections of code that are added to a block and then programmed to initiate a specific function once a specific outside condition has been met. For example, if you were leasing a car that was connected to the internet of things then a smart contract could shut off your battery if you didn’t pay your bill on time, but only if it were written in an actual contract that this was going to be acceptable.
Ethereum smart contracts are primarily created as a means of making decentralized applications work more smoothly as the easily verifiable nature of the blockchain makes it easier for contracts of all types to be enforced. The fact that they are decentralized also means they are essentially immune to either censorship or fraud and they will always be based on binary conditions that are easy to verify independently.
In fact, Ethereum’s stated goal is to use smart contracts as a way to force the costs associated with more traditional contracts to become more cost-effective for the average consumer. The applications that run these smart contracts are powered by gas which is the name Ethereum uses for its transaction fees. These fees are deducted automatically from your wallet just as they would be with Litecoin.
Block generation: The Ethereum blockchain can currently manage the creation of roughly 300 blocks per hour, though the switch to a proof of stake model will increase this number even more. Ethereum’s verification process is known to leave more blocks orphaned and unconfirmed, however.
Available units: Like Litecoin, a majority of all of the available ether is still to be mined. Unlike Litecoin, however, miners will continue to receive a steady return of 5 ether per block mined for as long as the proof of work system remains in effect. Both bitcoin and Litecoin reduce the rewards for mining on a set schedule.
Transaction costs: Both Bitcoin and Litecoin charge a fixed amount for transaction fees regardless of the complexity of the transaction in question. Ethereum, on the other hand, determines the cost of a specific transaction based on how complex it is, the amount of bandwidth that is required, and how much storage space it will ultimately take up.
Turing Complete: The Ethereum Blockchain operates on what is known as the Turning Complete Internal Code which means that given enough time and resources it can be used to complete any calculation, no matter how complex. While this is useful when it comes to making the most of the potential of smart contracts, it isn’t without its downsides as well. While it can ultimately do more than the Litecoin blockchain can, it is also more vulnerable because of it and this code was used to generate a severe attack on the blockchain in mid-2017 that led to a hard fork of the entire blockchain and the creation of Ethereum Classic.
Support: Of all the cryptocurrencies currently on the market, none have the level of support that Ethereum does. In March of 2017, numerous different Fortune 500 companies, startup companies, and research groups joined together to form the Enterprise Ethereum Alliance. While it started with just 30 members, those numbers quickly swelled to over 100 in the first three months of operation. Notable names among the founding member’s list are JP Morgan, Intel, Microsoft, Samsung, and more. The goal of the EEA is to generate a reference standard for the general Ethereum blockchain while also creating a variation of it that is permission to more easily address the common needs of businesses in a wide variety of industries.
