With many new cryptocurrencies hitting the market, many wonder if it is time to switch over from investments in bitcoin and Ethereum and consider some of the other top 10 currencies such as Litecoin. A brief Litecoin explanation will show you that the cryptocurrency is the “silver” to Bitcoin’s “gold.” Litecoin has many advantages that may make the currency an appealing investment. One of these is its significantly faster transaction times when compared to Bitcoin.
To identify the differences between these two currencies, we must first start with what each cryptocurrency is.
Bitcoin vs. Litecoin
Bitcoin is seen by the majority of the population as the original cryptocurrency. The token itself was created in 2009 by an individual or group known as Satoshi Nakamoto. Bitcoin was quickly recognized as a solution to increase safety in financial transactions throughout the network.
Miners could mine bitcoin and add coins to the public blockchain network through a concept known as proof of work (PoW). As the currency became more widespread, bitcoin miners could now purchase their tokens through online exchanges.
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Bitcoin may be known primarily as an alternate currency. However, considering the manner in which the coin is bought and sold, many have drawn similarities to a stock. Litecoin is similar in many ways and has since been known as one of the few non-Bitcoin cryptocurrencies (altcoins) that still hold a place on the leaderboards.
Like other cryptocurrencies, the value can be transferred between parties. The only difference is that this value is signified by a Litecoin. The currency is considered the 7th-largest digital currency by market cap, only a few places behind bitcoin.
How is Litecoin different?
That said, Charlie Lee, the founder of bitcoin, created Litecoin with the intention to improve on Bitcoin. So, what exactly was improved?
The mining process
One of the main differences between Litecoin and bitcoin is how they are mined. Although they both use a proof-of-work algorithm, bitcoin uses SHA-256. In contrast, Litecoin uses an algorithm known as Scrypt. Scrypt is used by many cryptocurrencies since it can be run on almost any CPU and requires less energy than SHA-256.
The result is that Litecoin can be mined significantly quicker than other comparable cryptocurrencies. As a comparison, Litecoin can produce one coin every two and a half minutes, which is four times faster than bitcoin’s production of one every ten minutes.
The amount of coins in circulation
Another major difference between the two currencies is the total number of coins that exist. Both cryptocurrencies are limited in supply. Bitcoin was created to produce a total of 21 million coins.
In comparison, Litecoin is aimed to produce four times as many coins (84 million). While a major difference can be seen, both currencies are also divisible into eight decimal places suggesting the utility for both in smaller amounts also exists.
While the number of Litecoins that will ever exist is greater than the number of bitcoins, bitcoin has a significantly larger market capitalization. Bitcoin has recently hit a market cap of 1 trillion due to the high price of the coin, whereas, Litecoin currently sits at about 12.75 billion. These numbers have been known to fluctuate with market volatility, suggesting that Litecoin may close the gap in upcoming years.
The block reward for bitcoin is currently 6.25 bitcoins in 2021. This reward is halved every 210,000 blocks or approximately every four years until it reaches 0 in 2140. In comparison, Litecoin is now 12.5 LTC which will be halved again in 2023 (roughly).
Choosing your cryptocurrency investment
For most investors, the question won’t be which cryptocurrency to invest in but rather how much of each. Bitcoin can now be acquired on most major exchanges such as Coinbase, Binance, and CryptoExchange. Litecoin, although available on fewer exchanges, can be purchased on several of the same platforms.
When choosing a platform, investors must be careful to research each platform’s reputability in accordance with third-party reviews. Doing so will ensure that any scams for fake cryptocurrency exchanges are avoided.