Cryptocurrency | Differences Between Bitcoin and Litecoin. Are they similar?
There are many similarities between Bitcoin and Litecoin. They are both decentralized cryptocurrencies at their core. A cryptocurrency is decentralized: It relies only on the inconsiegrity of the network itself to maintain its integrity, unlike fiat currencies like the US dollar and the Japanese yen. A former Google engineer named Charlie Lee announced the launch of Litecoin in 2011 via a message posted on a Bitcoin forum.3 From the very beginning, Litecoin was seen as a response to Bitcoin. According to Litecoin’s own developers, they intend to create the “silver” to Bitcoin’s “gold.”
Because of this, Lee and other developers of Litecoin adopted many of the characteristics of Bitcoin that they thought would work well for that cryptocurrency while changing some other characteristics they thought could be improved.
Proof of Work
Bitcoin and Litecoin both rely on a proof of work system.
Storage and Transactions
The two cryptocurrencies have quite a few features in common as well. Both of these cryptocurrencies can be bought with an exchange or mined with a mining rig. For both to be safely stored between transactions, a digital or cold storage “wallet” is required.
Moreover, both cryptocurrencies have exhibited dramatic volatility over time, dependent on everything from investor interest to government policies.
Differences Between Bitcoin and Litecoin
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Capitalization of the market
There is a significant difference between Bitcoin and Litecoin’s market capitalization, the value of all outstanding coins combined. Bitcoin’s market cap, as of March 2021, is over 1 trillion dollars, a figure more than 70 times larger than Litecoin’s, which has a total value of $13.7 billion.2 Bitcoin’s market cap is either high or low depending on your historical perspective. Â It is astounding that Bitcoin’s market capitalization is now worth $42,000 when it was only $42,000 in July 2010.
Bitcoin remains the largest digital currency network to this day. Ethereum, the second-largest cryptocurrency, has a market cap of nearly $212 billion.2 Given that Bitcoin is a much larger currency than all other digital currencies in existence, its higher value is not surprising.
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Distribution
Bitcoin and Litecoin differ from each other in terms of the number of coins that each can produce. Litecoin stands out in this regard. Bitcoin can never handle more than 21 million coins, but Litecoin can accommodate up to 84 million coins.  Although this sounds like a significant advantage for Litecoin, in reality it is unlikely to have any real-world impact. Bitcoin and Litecoin are both divisible into nearly infinitesimal amounts. As far as transferable Bitcoins are concerned, the minimum quantity is one hundred millionth (0.00000001 bitcoins), also called a “satoshi.”
As a result, both Bitcoin and Litecoin users should be able to purchase low-priced goods and services, regardless of how high the price of an undivided Bitcoin or Litecoin may rise. As IBM executive Richard Brown suggested in November 2013, some users might prefer transacting in whole units rather than fractions, a potential advantage for Litecoin.5 Nevertheless, even if this were true, the problem could be easily resolved through changes implemented in digital wallets.
There are already wallets that display Bitcoin’s value in a traditional as well as official (or fiat) currency like the U.S. dollar such as Coinbase and Trezor, which overcomes the psychological aversion to fractional payment.
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Transaction Speed
The Bitcoin and Litecoin networks both perform instantaneous transactions, but it takes time for those transactions to be confirmed by other participants. Its founders wanted to emphasize transaction speed, and that has proven to be an advantage as it has grown in popularity. According to data from Blockchain.com, the average confirmation time for Bitcoin transactions (the time it takes to verify and add a block to the blockchain) is just under nine minutes per transaction.7 The comparable figure for Litecoin is about 2.5 minutes.
Litecoin’s confirmation time difference could make it more attractive for merchants. Merchants can also choose to accept transactions without waiting for any confirmation at all. Zero-confirmation transactions generate some debate about their security.
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Algorithms
Different cryptographic algorithms are employed by Bitcoin and Litecoin, which constitutes one of their fundamental differences. Litecoin employs the relatively new Scrypt algorithm in place of Bitcoin’s longstanding SHA-256.
These algorithms differ in their impact on the process of mining new coins, which is their main practical significance. Â In order to confirm transactions, both Bitcoin and Litecoin require significant computing power. Members of the currency network, known as miners, utilize their computing resources to confirm the transactions of other users. Mining rewards miners by providing them with units of the cryptocurrency they are mining.
It is generally considered that the SHA-256 algorithm is more complex than Scrypt, even though it is more parallelizable. The result is that Bitcoin miners have used increasingly sophisticated methods to mine bitcoins as efficiently as possible in recent years. The most common method of mining Bitcoin is with Application-Specific Integrated Circuits (ASICs).
In contrast to the simple CPUs and GPUs that came before, these hardware systems can be specifically tailored for mining Bitcoins. Due to this, Bitcoin mining has become increasingly out of reach for regular users unless they join a mining pool.
On the other hand, Scrypt was designed to be less vulnerable to the kind of custom hardware used for ASIC mining. Litecoin has been viewed by many commentators as having a more accessible mining environment than other cryptocurrencies, such as Scrypt-based coins. Despite some Scrypt ASICs hitting the market, Litecoin’s vision of more easily accessible mining remains true, as the majority of Litecoin mining is still done via miners’ CPUs or GPUs.
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