As cryptocurrency investors, we are constantly on the lookout for our next lucrative investment. With more than 6,000 digital assets in the market and increasing daily, we are often confronted with the task of comparing different types of cryptocurrencies with entirely different technologies and use cases.
Litecoin vs Ethereum is one such comparison. Litecoin was designed to complement bitcoin and serve as a better medium of exchange. On the other hand, Ethereum was designed to be a blockchain platform where other cryptocurrencies and decentralized applications can be deployed using smart contracts.
Let us take a closer look at them to get a better understanding of these two leading cryptocurrencies and determine for ourselves which one is a better fit for our investment strategy.
Litecoin vs Ehtereum Comparison Table
|Ranking: 10||Ranking: 2|
|Network Fees: Low||Network Fees: Moderate to High|
|Market Capitalization: $17,580,000,000||Market Capitalization: $231,122,371,159|
|Circulating Token Supply: 67,532,000 LTC||Circulating Token Supply: 115,289,347 ETH|
|Transaction Speeds: Up to 30 TPS, though often 15 TPS (Potential for 100,000 TPS with ETH2.0 update)||Transaction Speeds: Completed transaction within 2.5sec. 4 times faster than Bitcoin|
Main Difference: Litecoin vs Ethereum
There are two main differences between Litecoin andEthereum. First, Litecoin is deflationary since it has a finite supply while Ethereum has no limit. Second, the Ethereum network is primarily used as a platform for other digital assets and decentralized applications while Litecoin serves as an alternative to bitcoin more suited as a medium of exchange.
What is Litecoin?
Litecoin was created to be the lighter alternative crypto to Bitcoin. It is based on Bitcoin’s codebase with various attributes altered. It was created by Charlie Lee, a computer scientist who formerly worked at Google and Coinbase.
According to Lee, the main purpose of Litecoin is to be an alternative payment network for smaller transactions and was never positioned to compete with bitcoin. He always refers to Litecoin as the silver of bitcoin’s gold.
Litecoin is primarily a payment network, a medium of exchange that allows transactions to be made without having to rely on any intermediary or centralized authority. It has a higher TPS and has lower transaction fees than bitcoin and ether.
There are some interesting protocol improvements coming to Litecoin in the near future. This will greatly increase the fungibility of Litecoin , bring in confidential transactions and increase scalability.
Unlike Ethereum, it does not have smart contract capabilities built into its protocol. However, there is a third-party project on the horizon that plans to bring this feature into Litecoin. As an added bonus, this project will be airdropping some of its utility tokens to LTC holders.
Litecoin Consensus Mechanism
Litecoin uses the same consensus mechanism as Ethereum, but instead of using ETHASH as its hashing algorithm, it used Scrypt, a hashing function that is resistant to GPU and ASIC devices.
By making the mining algorithm of Litecoin resistant to the said devices, Lee has hoped to make Litecoin mining more decentralized than bitcoin. He wanted to make CPU mining more attractive and was hoping that more CPU miners will join.
Unfortunately, ASIC manufacturers were able to build specialized ASIC devices that are capable of handling the Scrypt mining algorithm. Now, most LTC mining activities are done using this highly efficient mining equipment.
While it has a different mining algorithm, Litecoin uses the same time-proven and battle-tested Proof-of-work consensus mechanism. Like bitcoin, miners who are able to solve the hash problem are rewarded with block rewards with currently stand at 12.5 LTC.
Block rewards of LTC started at 50 LTC per block. This block reward is halved every 4 years reducing inflation by half. At this rate, all Litecoin will be mined by the year 2142. It follows the same block reward model of BTC.
Litecoin Total Supply
The supply of Litecoin is finite with a max supply of 84 million, unlike Ethereum, which is infinite. Charlie Lee chose to have 84 million supply to bolster the silver and gold analogy between LTC and BTC.
Currently, there are around 66.6 million in circulation, which is about 79% of all Litecoin that will ever exist. Due to the halving of block rewards, the last LTC will be mined by the year 2142.
Litecoin Block Time
Litecoin has a block time of 2.5 minutes. This is a lot longer than Ethereum’s 13-20 second average block time.
Litecoin Transaction Per Second
The theoretical TPS limit of Litecoin is around 28 transactions per second. This is a little bit faster than Ethereum’s theoretical limit of 25 TPS. This figure is set to improve once protocol updates are integrated into the Litecoin network.
Litecoin Scalability Solution
Litecoin developers are busy integrating MimbleWimble (MW) into Litecoin’s code. To do this, 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.
L2 Scalability Solution
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. According to Lee, LN should significantly increase the scalability of Litecoin.
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 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 Ethereum, it has yet to break its last record. Many Litecoin supporters are hoping that 2021 will be the year where it will set a new ATH.
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 a perfect 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 this year.
Litecoin Review: Litecoin vs Ethereum
Litecoin was designed to be a better transactional digital currency with a shorter block time, higher TPS, and lower transaction fees. To some degree, it has succeeded in doing so by taking on the role of medium of exchange from BTC.
However, without a second-layer scalability solution, the transaction bandwidth of Litecoin is very similar to that of Ethereum. The only major advantage of LTC over Ethereum is the much lower transaction fees.
There is some concern about the centralization of the Litecoin organization. This was actually 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 of 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.
Ethereum is more decentralized and hence more secure than LTC in general. However, due to the decentralized nature of Ethereum and its organization, there is very slow progress in protocol upgrades, and there is no united front to solve its most obvious problems: scalability and astronomical transaction fees.
Litecoin Pros & Cons
What is Ethereum?
Ethereum is the second most valuable digital currency by market capitalization. It was envisioned by Vitalik Buterin, who wrote Ethereum’s whitepaper in 2013 after being rejected by the Bitcoin community to integrate a scripting language into Bitcoin's protocol.
Ethereum is an open-source, decentralized blockchain with smart contract functionality. Its native digital currency is called Ether. Ethereum’s development was crowdfunded in 2014 and went live in 2015.
It uses the same consensus mechanism as Bitcoin, but instead of using the SHA-256 mining algorithm, it uses ETHASH, which is ASIC resistant and more GPU-mining friendly.
The Ethereum blockchain is the first programmable blockchain. This means blockchain developers can use the Ethereum blockchain as the platform to deploy their own tokens or decentralized applications.
Since it is the first mover in the industry, it has attracted most of the relevant and important blockchain projects in the industry. In fact, many of the newer blockchains started as ERC20 tokens, which is one of the standard protocols of Ethereum.
Many of the biggest, most relevant, and important blockchain-based projects are implemented using Ethereum’s different protocols, including non-fungible tokens (NFTs), which have been gaining mainstream media attention recently.
Ethereum Consensus Mechanism
The consensus mechanism of Ethereum is Proof of Work, similar to that use by both Litecoin and Bitcoin. It, however, uses a different mining algorithm, ETHASH. It is ASIC resistant and optimized for GPU mining.
Ethereum developers, including Vitalik Buterin, are pushing towards Proof of Stake consensus protocol to make its network more scalable and to taper transaction costs. Dubbed as ETH 2.0, it will feature sharding as its main scalability solution and will slowly roll out through 2020 and 2021.
Ethereum Total Supply
Unlike Litecoin, Ethereum has an infinite supply of ether. However, there is a cap on how many ETH can be created in a year; initially, it was around 18 million ether per year, currently, it is at around 4.9 Million ETH per year. There is around 115 million circulating supply.
The inflation of ETH is controlled through Ethereum Improvement Proposals (EIPs). Anyone can submit a proposal, and the community approves if these proposals are implemented. Any changes to the Ethereum blockchain will have to go through this process.
In April 2018, Vitalik Buterin submitted an EIP to ensure the economic sustainability of Ethereum. He proposed to hard cap the supply of Ethereum to 120 million and later submitted another at 144 million. These two EIP have not yet been accepted yet, and only time will tell if ever they will.
Ethereum Block Time
The block time of Ethereum is about 15 seconds. However, block time is not hardcoded into Ethereum protocol and is adjusted through EIPs. Currently, new blocks are created every 13 seconds. This figure was computed using Etherscan’s daily block generation chart on Ethereum, which estimates around 6.5k to 6.6k block generation daily.
Ethereum Transaction Per Second TPS
The theoretical limit of Ethereum is 25 TPS with the advent of ETH 2.0, it will be able to process over 3,000 TPS and will be at par with newer high-performance blockchain networks. No one is sure when this upgrade will happen, Ethereum developers are taking their time to ensure that the upgrade will not break the network.
Ethereum Scalability Solution
To address the scalability problem of Ethereum, there have been many second-layer solutions proposed, but none has so far gained the majority support of ETH holders. These include Rollups, State Channels, Plasma, Sidechains, and Hybrid Solutions.
Rollups execute transactions off-chain and post the transaction data on the mainnet, this allows rollups to be secure by the mainnet. State channels allow transactions to be carried out outside the main chain while only submitting two transactions on-chain, allowing it high transaction throughput.
Plasma is a different blockchain that is anchored to the main Ethereum chain and uses fraud proofs that allow users to report dishonest nodes, protect their funds and reconcile disputes. A Sidechain, on the other hand, is a separate blockchain that runs in parallel with the mainnet.
Hybrid solutions combine the best parts of multiple layer 2 technologies.
L1 Scalability Solution
The Ethereum network is moving slowly towards the PoS consensus mechanism. In this slow transition, we will see a Hybrid consensus mechanism where PoW and PoS will co-exist within the network.
Ethereum Privacy Feature
Ethereum is not really big on privacy, but there are a number of projects working pm privacy features for Ethereum. They use Zero-Knowledge Proofs, which allows for privacy by mathematically preventing certain information from being revealed in public.
Some of these projects include Aztec Protocol, Secret Network, and Zether.
Ethereum All-time High
Ethereum recently reached a new ATH last February 20, 2021, at around $2,042 USD. With the coming upgrades that will help increase scalability and reduce transaction fee, some ETH proponents revealed that Ethereum has the potential to reach 10K USD by the year’s end
Ethereum Total Capitalization
Currently, the total market capitalization of Ethereum is approximately 192.9 Billion USD. It ranks second most valuable crypto asset by market capitalization. With the continued upward trend of cryptocurrencies, it is not hard to imagine Ethereum’s capitalization will increase substantially.
Ethereum Review: Litecoin vs Ethereum
Ethereum is a second-generation blockchain that allows decentralized applications (dApps) to be built on top of it. This is made possible through its smart contract functionality, which Litecoin does not have natively. It enables blockchain developers to create different types of dApps that can leverage blockchain.
This is the major advantage of Ethereum over Litecoin as it can be used in various industries beyond the financial sector. Litecoin, on the other hand, is laser-focused on being a decentralized and efficient payment network.
Ethereum has been successful in attracting many blockchain-based applications to build their applications on top of their network. Unfortunately, in its current form, the Ethereum network does not scale enough to accommodate the sheer number of applications built on it.
This resulted in slow transactions and insanely high transaction fees, which made many of these applications impractical to use. Some applications have migrated to more scalable blockchains or have decided to take the matter into their own hands by creating their own sidechains to sidestep the high transaction fees.
Despite these challenges, Ethereum still dominates many blockchain-based applications in the industry, especially in the Defi sector, which has been seeing tremendous growth for the past few months.
The upcoming protocol upgrade will hopefully solve or improve the weaknesses of the current version of the network. If done correctly, we might see some exciting price action for its native coin ether, which many believe could reach 10K USD at the height of this current bull run.
Ethereum Pros & Cons
Litecoin vs Ethereum: Conclusion
The big question now is which between the two digital assets is a better investment for your money. In the short term, we believe that Litecoin is a better investment opportunity. Its protocol upgrade development is already complete is currently undergoing final testing.
This upgrade will bring confidential transactions and improve the transaction bandwidth of Litecoin. There is also an ongoing effort by an independent project, Flare Network, to bring smart contract capabilities to LTC, which may further stimulate an uptick to Litecoin's price, similar to what it did to XRP.
Litecoin has not yet reached a new all-time high in this current bull run cycle. Many altcoins have already reached new all-time highs, and Litecoin seems to be on a similar path considering the general market trend and its improving fundamentals.
For the mid to long-term, we think Ethereum is a better investment option. Like Litecoin, it has several protocol improvements on the way collectively known as ETH 2.0. This upgrade has been long overdue, and hopefully, Ethereum developers will be able to deliver.
Despite its obvious weaknesses, it is still the dominant smart contract platform in the industry. Once scalability and high transaction fees issues are resolved, we anticipate a huge uptick in its price.
That being said, always remember that cryptocurrencies are high-risk, high-reward assets. It is up to you to determine for yourself which between Litecoin and Ethereum is a better fit to your investment strategy and will enable you to reach your financial goal.