Throughout the short history of cryptocurrencies, Litecoin vs Bitcoin has become one of the most storied narratives in the industry. Pundits and crypto enthusiasts alike often compare these two coins to each other as they are very similar in both technology and use case.
Let us take a closer look at them to determine which one presents a better opportunity in 2021. Join us as we discuss the latest development of these two coins, discover how they have been performing during this bull market, and ascertain which between the two is a better cryptocurrency to invest in.
We hope after reading this article, you will have a better understanding and appreciation of these two leading cryptocurrencies and be able to decide for yourself which between these two is a better fit for your crypto investing strategy.
Now, let us hit the ground running by comparing some of their key features.
Litecoin vs Bitcoin Comparison Table
|Crypto Token: BTC||Crypto Token: LTC|
|Token Market Capitalization: $901,560,000,000||Token Market Capitalization: $12,110,000,000|
|Total Supply: 21,000,000||Total Supply: 84,000,000|
|Volatility: High||Volatility: High|
|2L Scalability: LN, Liquid||2L Scalability: LN |
Main Difference: Litecoin Vs Bitcoin
The main difference between Litecoin and Bitcoin is their current use case. Bitcoin has become more of a Store of Value or Safe Haven Asset instead of a payment network. This fell on the lap of Litecoin, which has better scalability, faster confirmation time, and less transaction fees.
What is Bitcoin?
Bitcoin is the first and most dominant cryptocurrency in the industry. It was conceived by a person or group who call themselves Satoshi Nakamoto as a peer-to-peer payment network using blockchain technology, allowing them to solve the double-spend problem of digital currencies.
It was the first successful attempt to create a digital currency. Bitcoin presented an alternative financial system that does not rely on any intermediary, central authority, or trusted third-party to ensure secure and successful transactions.
Transactions in the bitcoin network are censorship-resistant, immutable, unstoppable, and irreversible. All transactions are final, and the only way to introduce changes is through another transaction that has to pass decentralized consensus.
Decentralization is the single most important aspect of the industry. This is what gives cryptocurrencies their value and what differentiates them from becoming just another glorified database or spreadsheet.
Bitcoin Consensus Mechanism
Bitcoin uses Proof-of-Work (PoW) as its consensus mechanism. Bitcoin’s Proof-of-Work (PoW) consensus mechanism is widely considered as the most secured and successful of its kind. It has never been compromised in its relatively short history.
It uses SHA-256, a cryptographic hash function that consensus participants (miners) try to solve using computationally powerful devices. The random miner that solves the mathematical function gets to write the next block and is rewarded with 6.25 BTC, the current rate for block rewards.
Decentralization is achieved by randomizing the miner that writes the next block through the gamification of mining. This ensures a more trustworthy network and serves as an effective safeguard from bad actors who might want to take over the network for their own gain.
The more consensus participants, the more decentralized the bitcoin network becomes and the more secure it gets. With the current bull market, we could expect more miners to join the network making the network safer and more robust.
Bitcoin Total Supply
The total supply of Bitcoin is 21,000,000. New Bitcoin is introduced into circulation through the process of mining. Miners are rewarded with a fixed amount of bitcoin whenever they are able to solve a cryptographic mathematical problem. This is called the block reward.
The bitcoin network was designed to adjust the mining difficulty whenever there is a change of hashing power (or mining power) on its network – this ensures the supply of bitcoin is predictable. The inflation rate (block reward) of BTC started at 50 BTC and is halved every 4 years.
It is estimated that the last Bitcoin will be mined by the year 2140.
Bitcoin Block Time
The block time of bitcoin is around 10 minutes. Block time is the time it takes to create the next block. This is only an estimate and the actual time to produce the next block depends on the mining difficulty associated with that particular block. This is also the amount of time it takes for one transaction to be confirmed.
Bitcoin Transaction Per Second
The Bitcoin network can process transactions at the rate of 3.3 to 7 transactions per second (TPS). To put this into perspective, Visa does around 1,700 TPS on average. The great disparity between these two totally different financial networks is the fact that one is decentralized and the other is centralized.
The previous block or record on a blockchain is continuously validated by all the consensus participants of the blockchain network. When a new block is created and added into the network the new info is propagated throughout the network, making a copy of its entire blockchain records.
Visa, on the other hand, does not need to reconcile with thousands of nodes on its network or needs to update each one of them. Instead, it just needs to update a centralized database controlled by a person who is authorized to access this database.
Bitcoin Scalability Solution
There have been many scalability solutions that have been suggested by developers throughout the years. However, because of the decentralized nature of Bitcoin, many of these scalability solutions failed to see the light of day due to a lack of consensus.
One of the most hotly contested solutions is increasing the block size limit of Bitcoin. By increasing the block limit, Bitcoin would be able to process more transactions concurrently at any given time.
While there was substantial support especially coming from the Chinese mining community, it was met by vigorous resistance from the larger BTC community. This resulted in a hard fork, or a network split, within the BTC network. It resulted in the creation of Bitcoin Cash or BCH.
Currently, the theoretical block size limit of BTC is around 4 megabytes, while Bitcoin Cash is around 32 megabytes. Bitcoin Cash later further forked again to create Bitcoin Satoshi’s Vision (BSV) which has a block size of 128MB.
Other Scalability Solution of Bitcoin
Other scalability solutions for bitcoin have also taken shape. These are the Lightning Network (LN) and the Liquid Network (L-BTC). LN is a second-layer payment protocol that operates on top of the Bitcoin network. L-BTC, on the other hand, is a sidechain-based settlement network that enables faster transactions.
While these two scalability solutions serve the same purpose, they are fundamentally different in their implementation. A second-layer solution relies on the security features of the main chain. A sidechain, on the other hand, relies on its own security features.
Nonetheless, both scalability solutions add additional dynamics in Bitcoin transactions which may introduce new vulnerabilities in the network. Moreover, both are still in their experimental stage and will need more time to mature.
Bitcoin Privacy Feature
Contrary to popular belief, Bitcoin transactions are very transparent, they aren’t private at all. However, transactions can be made more confidential by using things like additional applications, services, or privacy solutions. According to Blockstream, the developer of sidechain Liquid Network, all transactions in Liquid are by default confidential transactions.
What is important to note here is the fact that confidential transactions are not implemented in the main network of Bitcoin. Given the increasingly hostile stance of regulators with privacy-centric cryptocurrencies, this feature may not rank very high on the priority list of bitcoin developers.
Bitcoin All-time High
Bitcoin achieved it's all-time high last February 21, 2021, when its price reached $58,640. This is twice as much as the previous bull market all-time high of late 2017 and early 2018. Many analysts believe that it will even go higher, with some predicting it will reach 100,000 USD in value by the end of the year.
What makes this current bull market different from the previous bull market cycle is the substantial increase of institutional investors’ participation. Today’s bull market is primarily led by institutional investors who mostly stayed away from the new asset class during the retail investors-led crypto market rally of late 2017 and early 2018.
Bitcoin Total Capitalization
The total market capitalization of Bitcoin currently stands at approximately around $901.56 B USD. It is on its way to becoming the first cryptocurrency market to reach $1 trillion dollars. It has around 59% of all capitalization in the cryptocurrency industry, showing the immense confidence of investors in this digital asset.
Bitcoin Review: Litecoin vs Bitcoin
Bitcoin remains the most dominant cryptocurrency in the industry. It is still widely regarded as the most secure and robust cryptocurrency in existence, with many jurisdictions recognizing it as a valid digital asset.
Being a first-mover in the industry, it set the pace of the digital currency revolution by presenting an alternative financial system that does not require any intermediary for it to work.
Its blockchain technology enabled developers to codify trust into their applications leading the way to the creation of a new breed of applications that can disrupt virtually every industry in existence.
The capitalization that flowed into Bitcoin is a strong testament to the confidence it has from investors. Despite its technological limitation compared to other newer-generation blockchain networks, it has continually outperformed them in the crypto markets.
Bitcoin’s price also has a significant influence on the price action of other digital currencies, or altcoins. More often than not, it has a direct correlation with many of the leading altcoins in the market.
Bitcoin is also the most popular and most recognizable digital currency globally. Any business that deals with cryptocurrency will always have BTC as one of its supported digital currencies
However, Bitcoin outside the cryptocurrency industry is still not yet widely accepted. It has also gained notoriety as the preferred currency by criminals who want to use alternative financial systems to avoid detection.
Bitcoin’s volatile value makes it difficult for consumers to use as a medium of exchange. This is on top of the slow transaction and high fees. It is not uncommon that the value of bitcoin has already changed before transactions can be confirmed.
This means consumers can lose or gain purchasing power by the minute while merchants can lose their margins prior to confirmation of payments. Of course, this problem has been addressed with scalability solutions discussed earlier, but without these solutions, this problem persists.
Bitcoin Pros & Cons
What is Litecoin?
Litecoin was created to be the lighter version of Bitcoin. It was based on Bitcoin’s codebase with some modifications. It was the brainchild of Charlie Lee, a computer scientist who used to work for Google and Coinbase.
Lee has said in the past that Litecoin was not meant to be a competitor of Bitcoin but was created to complement it. Its main purpose is to be an alternative for smaller transactions. He further said that it was to be the silver to Bitcoin’s gold.
The silver and gold analogy makes perfect sense as silver is cheaper and has much more supply than gold. Currently, the valuation of Litecoin is much less than bitcoin at around $178.56 USD compared to Bitcoin’s $47,700 USD.
It also has much more supply than Bitcoin at 84,000,000 total supply. This is four times more than bitcoin. According to Lee, he determined that silver has around 4 times as much supply as gold hence the 4x more supply than BTC.
Litecoin was primarily designed to be a transactional currency than bitcoin, addressing some of bitcoin’s weaknesses. It was built with faster block times and capable of processing more transactions per second.
With these attributes, Litecoin has become a more practical medium of exchange compared to Bitcoin, which throughout the years, seems to have become more and more of a store of value or safe-haven asset.
Litecoin Consensus Mechanism
Litecoin was built with the same consensus mechanism as Bitcoin with one fundamental change. Instead of using SHA-256 as its hashing algorithm, it used Scrypt, a hashing function that is said to be more GPU and ASICs resistant.
Lee wanted to make Litecoin mining more decentralized by limiting the advantage of miners who has the capacity to buy more expensive and powerful mining equipment such as GPU and ASIC miners. He was hoping more CPU miners would join in mining LTC.
Unfortunately, Scrypt-capable ASICs were manufactured, later on, making it the most efficient way of mining Litecoin. Now Litecoin mining is predominantly done using ASIC devices like Bitcoin.
Other than the change in its mining algorithm, the consensus mechanism of Litecoin remains virtually the same as Bitcoins'. It uses the same Proof-of-Work (PoW) consensus mechanism where miners solve a cryptographic problem, and the miner solves the problem is rewarded with the block reward, which stands at 12.5 LTC.
Block rewards of LTC started at 50 LTC per block produced. Like Bitcoin’s block rewards, this is halved every 4 years reducing inflation by half. At this rate, all Litecoins will be mined by the year 2142.
Litecoin Total Supply
The total supply of Litecoin is 84 million, exactly four times larger than that of Bitcoin, which has only 21 million. Charlie Lee chose to have 84 million supply to bolster the silver and gold analogy between the two leading PoW cryptocurrencies.
Currently, there are around 66.6 million in circulation, which is about 79% of all Litecoin that will ever exist. We don’t suspect that the whole 84 million Litecoins will be in circulation as the emission rate of LTC halves every 4 years.
It is expected that the last LTC will be mined by the year 2142, a full two years after all BTC has been mined. This is not surprising as LTC came to the market two years later compared to Bitcoin.
Litecoin Block Time
Litecoin’s block time is four times shorter than Bitcoin's, it has a block time of 2.5 minutes. Compared to Bitcoin, which has around 10 minutes which allows Litecoin higher transaction bandwidth making it more ideal for day-to-day transactions.
Litecoin Transaction Per Second
According to multiple sources, the theoretical TPS limit of Litecoin is around 28 transactions per second. This is more than three times more than Bitcoin's. While still far from Visa’s 1,700 TPS, it is relatively fast compared to the bitcoin network, which can only process a maximum of 7 transactions per second.
Comparing the max TPS of Visa and cryptocurrencies like Litecoin and Bitcoin is like comparing oranges and apples. Visa is a centralized database (single node), while Litecoin and bitcoin is a blockchain that is decentralized, requires consensus in every block added, and needs to be copied to all nodes in the network.
However, it is important to note the transaction bandwidth of traditional finance is a good benchmark to achieve for the seamless integration of cryptocurrencies when it goes mainstream.
Litecoin Scalability Solution
Despite its relatively more scalable blockchain, Litecoin developers continuously explore different technologies to help Litecoin to scale. In fact, many scalabilities or protocol improvements of Bitcoin were first implemented on Litecoin prior to implementing them to bitcoin.
Lightning Network is also supported as a second-layer scalability solution for Litecoin. There have been some services that have integrated LN but have not yet achieved widespread acceptance as LN is still considered in its experimentation stage.
L1 Scalability Solution
Litecoin developers are actually busy trying to integrate a layer 1 scalability solution into Litecoin . Their latest attempt is the integration of MimbleWimble (MW) into Litecoin’s code. The Litecoin foundation has acquired the services of David Burkett, the developer of Grin++, to be the lead developer.
While the main feature that MW brings to the table is confidential transactions, it has been argued that MW can decrease blocksize and increase scalability. This is made possible through the MimbleWimble Extension Block or MWEB.
Extension Blocks are different from sidechains and layer two solutions as it does not require to run on an entirely different network or subnetwork instead, it only affects a small portion of the main net and is enforced by miners.
Litecoin Privacy Feature
Litecoin hopes to achieve confidential transactions by integrating MimbleWimble into its codebase. This should help the fungibility of Litecoin, which in turn greatly improves its privacy feature. The integration of MW was suggested by Charlie Lee himself.
Fungibility simply means that the digital assets are indistinguishable from another digital asset of the same kind, making them absolutely interchangeable. This increases privacy as it would make it harder to monitor the movement and ownership of Litecoin.
Litecoin All-time High
The all-time high (ATH) of litecoin is $360 USD. It reached this value on December 18, 2017. Unlike Bitcoin, it has not yet broken this record, and with the ongoing bull market, many Litecoin holders are hopeful it will be able to break this soon.
Many pundits believe that the bull market is just beginning and will run through this year, culminating at the end of the year with some major price action. As one of the top cryptocurrencies that have been recognized by many well-established financial institutions, Litecoin is in an excellent position to reach and overtake its previous ATH.
Litecoin Total Capitalization
Litecoin has a total market capitalization of $12.11 B USD. The highest total market value of Litecoin reached $19.6 B USD when its price reached its all-time high. With increasing interest from institutional investors and a growing list of partnerships with traditional finance, Litecoin may surpass its previous highest total market value.
Litecoin was never designed to compete with Bitcoin, Charlie Lee made this pretty clear when he said that Litecoin serves as silver to bitcoin’s gold. However, some protocol adjustments made by Lee made Litecoin a better transactional digital currency than bitcoin.
This means Litecoin is a better medium of exchange. Without a second-layer scalability solution, Bitcoin is not an ideal payment network. The Bitcoin network slows down into a grinding halt whenever its network is congested, and network fees shoot off the roof whenever this happens.
This does not happen with Litecoin. With the continuous improvement of its protocol and faster implementations, we can expect Litecoin to continue to be a better payment network than bitcoin.
However, there is some concern about the centralization of the Litecoin organization as was pointed out by Charlie Lee himself. He recognizes that he has too much influence over the Litecoin Foundation.
While there are some advantages of a central authority overseeing the development of the project, like faster decision making and a more cohesive plan of development, centralization defeats the purpose why cryptocurrencies existed in the first place.
Lee’s overarching influence is not surprising since he is the single biggest donor in the Litecoin Foundation. This points us to another challenge of Litecoin, the limited financial resources it has for its continued development.
Finally, Litecoin is not as secure as bitcoin. Sure they use the same consensus protocol, but there aren’t as many miners mining LTC compared to BTC. Remember, the more miners in a blockchain network, the more secure it gets.
More miners mean it is better equipped to fend off a 51% attack that can lead to bad actors controlling the network and executing double-spends.
Litecoin Pros & Cons
Litecoin vs Bitcoin: Conclusion
It is increasingly obvious that comparing Litecoin and Bitcoin is like, once again, comparing apples and oranges. Bitcoin has evolved to become more of an investment vehicle, a store of value, or a safe haven asset while Litecoin has taken up the role of a more transactional currency, more fit as a medium of exchange.
It's true that they share a common DNA and will continue to do so since in certain aspects, as Litecoin developers integrate code upgrades of Bitcoin into Litecoin. In fact, many protocol upgrades of Bitcoin were first implemented on Litecoin to test.
Litecoin was never intended to compete with bitcoin but was designed to complement it. Its creator, Charlie Lee, is not bothered that his creation often plays second fiddle to Bitcoin. He actually seems to encourage this to strengthen Litecoin’s position as a complimentary digital asset to Bitcoin.
But playing second fiddle does not diminish the fact that Litecoin is ahead in terms of the implementation of protocol upgrades to improve scalability and privacy. It seems that Litecoin gives cryptocurrency enthusiasts a preview of possible protocol improvements of Bitcoin in the future.
The slow implementation of protocol improvements in Bitcoin is brought about by the decentralized nature of bitcoin’s development. New protocol upgrades will have to go through the head of a needle before it can be considered and wait years before it can be implemented.
Decentralization is a major challenge in Litecoin in terms of its organization. Too much influence is wielded by its creator, Charlie Lee, who is also the biggest donor in the Litecoin foundation, the organization that backs the development of Litecoin .
So which one is better to invest in right now? Taking into account the current bull market and the market performance of the two digital assets, Bitcoin is your safest bet. It has broken several all-time highs in just a span of three months, and many analysts believe the uptrend will reach its peak at the end of the year.
There is, however, the possibility of Litecoin following this trend, keep in mind that it has yet to break its previous all-time high of the last great crypto bull market. With many protocol improvements on the way and some exciting partnerships with traditional finance, there is a good chance it will also see new ATH in the near future.