Bitcoin vs Ethereum vs Litecoin: What are the Differences?
The cryptocurrency market has expanded, and now encompasses hundreds of currencies. The major cryptocurrencies all offer something seemingly different, whereas the rest are mostly copy-and-paste clones. However, there are some big differences between the major cryptocurrencies. Otherwise, it would be uninteresting, at best, to try to distinguish them from each other. Bitcoin is the best-known and most popular coin. However, there are over 1000 other digital currencies (known as “altcoins”) that can also be purchased and exchanged in the crypto marketplace.
Bitcoin was the first, and thus has become the most widely-known. It is established, and holds the most value of all the cryptocurrencies. Despite the fact that it has some problems that need to be addressed, such as scalability and privacy, it has become the world’s leading cryptocurrency with relative ease. Bitcoin was designed to make global transactions possible and boost financial inclusion. Moreover, thousands of merchants all over the world have started accepting BTC for payment, both online and offline.
Then came Litecoin. It is based on the same code as Bitcoin but with a few enhancements: transaction speed, and access to the mining process. To a lot of people, LTC is either a BTC clone or one of the first “original” outcomes to gain traction. LTC is accepted as payment in various places, although it has nowhere near Bitcoin’s level of acceptance (yet?)
In 2015, Ethereum incorporated Bitcoin’s basic blockchain premise and Litecoin’s transaction speed. It also added a few of its own twists — including the ability to process little pieces of code, called “smart contracts” — and has its virtual peer-to-peer network, as opposed to a dedicated server or mining rig. Over the past year or so, many people have compared Ethereum to Bitcoin. That is like comparing apples to oranges, since the two ecosystems are nothing alike. Ethereum focuses on the technical side of blockchain development, including native tokens, smart contracts, and decentralized applications.
BTC is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. As Roger Ver, early BTC investor, admitted: “Bitcoins are the most important invention since the Internet itself. They will change the way the entire world does business.”
Bitcoin was invented in 2009 and since then has become the largest cryptocurrency by value. A white paper was released by Satoshi Nakamoto. The original document stated that Bitcoin is a “peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution.”
It runs on a technology known as blockchain, which is a digital ledger of activity that cannot be tampered with. It’s decentralized because there is no central authority governing cryptocurrency. Instead, a network of so-called “miners” with high-powered computers work together to verify transactions through complex cryptography. Coins can also be purchased with standard national money currencies and placed into a crypto wallet that is accessed through a smartphone or computer.
Anonymity. BTC purchases are discrete and never associated with a seller’s personal identity, much like cash-only purchases, and cannot be traced back to him. In fact, the anonymous address that is generated for user purchases changes with each transaction.
No taxes. Since there is no way for third parties to identify, track or intercept transactions that are denominated in Bitcoins, one of the major advantages of Bitcoin is that sales taxes are not added onto any purchases.
Mobile Payments. Bitcoin users can pay for their coins anywhere they have Internet access. However, unlike online payments made with U.S. bank accounts or credit cards, personal information is not necessary to complete a transaction.
People would complain about BTC transaction times and fees. Users sometimes have to pay miners to prioritize their transaction. As a result, the average fees have risen to $27, while each transaction takes an average of 70 minutes to clear.
While Satoshi Nakamoto referred to Bitcoin as electronic cash, many experts have called it “digital gold” and said it could be a long-term store of value. Also, several analysts remain bullish about Bitcoin’s future, with Fundstrat’s Tom Lee explaining that he still believes BTC will strike the $25,000 mark by the end of 2018.
ETH is a cryptocurrency whose blockchain is generated by the Ethereum platform. But, Ethereum and ether are now used interchangeably to refer to the cryptocurrency. It is the second biggest digital currency in the market with a market capitalization of over $75 billion.
By definition, Ethereum is a decentralized platform that runs smart contracts. The platform was developed by the Ethereum Foundation, a Swiss non-profit, with some expert advice from great minds across the globe. In January 2014, the core Ethereum team was Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. Development was funded by an online public sale with the participants buying the Ethereum value token (Ether) with another digital currency, Bitcoin.
Ethereum is an open-source public service that uses blockchain technology to facilitate smart contracts and cryptocurrency trading securely without a third party. There are two accounts available through Ethereum: externally owned accounts (controlled by private keys influenced by human users) and contract accounts. Ethereum allows developers to deploy all kinds of decentralized apps.
Ether is backed by a blockchain, much like Bitcoin, but the technology is slightly different and aimed at a specific use case: smart contracts. Smart contracts are computer protocols that create digital contracts which are intended to facilitate, verify, and enforce contractual agreements between two parties. These contracts can also include self-executing payments when certain contractual agreements are met. Ether is the currency for these payments.
Open and decentralized. Just like Bitcoin, the Ethereum network is based on blockchain technology, is open and decentralized, meaning that there is no single authority that processes transactions or makes decisions about what happens on the network.
Smart contracts. A smart contract is a way of using a cryptocurrency to create agreements between parties on blockchain networks. Smart contracts do not add capabilities to regular contracts. Instead, they allow parties to create contracts in a way that does not require a lot of trust or a presence of a third party. Smart contracts on the Ethereum network use Distributed Autonomous Organization (or DAO), also known as Decentralized Autonomous Corporation (or DAC). Like the Ethereum network itself, DAO is open-source and, just as its name suggests, decentralized. It does not belong to any person, organization, or country.
Smaller fees and expenses. Because the Ethereum network runs smart contracts on DAO, the network eliminates the need for third-party supervision by performing all functions associated with a contract automatically. With the Ethereum network, the network executes the contracts. The structure of the network and the way it works are what guarantees that the contract will go through.
Speed of transactions: Ethereum is a platform, and, thus, will never be seen as efficient as other faster blockchains. Many complain about the speed of transactions for its cryptocurrency ETH.
Lack of documentation. There is not enough information to help those people who want to become Ethereum developers.
Thus, the Ethereum blockchain has gathered substantial interest from financial institutions and corporations. They believe that the ability to securely store and transfer data using the blockchain technology, combined with self-executing smart contracts, will reduce operational costs and streamline business processes in future.
LTC was created to provide a peer-to-peer transaction system. It allows individuals to make payments or transactions anywhere in the world with relatively low fees. And like BTC, LTC is decentralized currency. There’s no centralized authority, building, or headquarters for it. The currency flows freely on the Internet.
Litecoin was released via an open-source client on GitHub in 2011 by Charlie Lee, a former Google employee. It was a fork of the Bitcoin Core client, differing primarily by having a decreased block generation time (2.5 minutes), an increased maximum number of coins, a different hashing algorithm (scrypt, instead of SHA-256), and a slightly modified user interface.
When Litecoin first launched in 2011, it was said that “if Bitcoin is digital gold, then Litecoin is digital silver”. For a long time, that was the case. LTC quickly emerged as the second largest digital currency after BTC, as measured by market capitalization. But its popularity faded somewhat as the Ethereum project and its native digital currency, ether, became the second largest digital currency in 2016.
In May 2017, LTC became the first of the top 5 (by market cap) cryptocurrencies to adopt Segregated Witness. And in February 2018, the EU online retailer Alza.cz began accepting LTC as a payment method.
The creation and transfer of coins is based on an open source cryptographic protocol and is not managed by any central authority. The coin was inspired by, and in technical details is nearly identical to BTC. The Litecoin Network aims to process a block every 2.5 minutes, rather than Bitcoin’s 10 minutes. The developers claim that this allows LTC to have faster transaction confirmation.
Like almost all digital currencies, Litecoins are produced through a process called “mining.” Miners use computers to process LTC transactions, which are presented as algorithms that the computers must solve. When the computers solve the problems, more Litecoins are added to the network and the miners are rewarded with their shares.
More Litecoins. There will be 4x as many Litecoins produced than Bitcoins (while BTC limit is set to 21 million, LTC is set to 84 million). So the coins should be cheaper, more widespread and easier to acquire.
Better Blockchain. LTC has a much faster transaction speed, with a transaction being confirmed every 2.5 minutes, compared to the 10 minutes it takes to confirm a BTC transaction. This appeals to both users and merchants who want faster transactions. With Litecoin, you get both security and speed. And this speed just kicked up a notch.
Simpler Algorithm. Litecoin uses a scrypt-hashing algorithm that makes it easier for miners to access the system. And the simplicity of LTC mining could actually steal Bitcoin miners.
Not widely used. Currently very few stores accept payment in LTC, though this is changing by the day.
Not famous. Litecoins are still relatively unknown compared to Bitcoins. This is mainly due to the fact that there is no central authority.
Litecoin has become a very popular digital currency because it has all the benefits of Bitcoin, but has faster transaction times and lower transaction fees. This is why many digital currency experts believe it has the potential to challenge Bitcoin as the go-to digital currency of the future.
Differences Between These Currencies
|Use||Peer-to-peer payments||Smart Contracts with Embedded Payments||Peer-to-peer payments|
|Rank (According to Market Cap)||1||2||5|
Which cryptocurrency is the most valuable?
CrocoSource tracks the value of nearly 1,500 tokens across the board and ranks them accordingly to their market capitalization – their perceived total value. We all know that Bitcoin is the forerunner of all cryptocurrencies and that’s why it is always ranked at number one on the coinmarketcap site, but what about other coins?
Bitcoin was created by an anonymous programmer or group of individuals under the pseudonym of Satoshi Nakamoto. The token rose to spectacular popularity in 2017. But despite rapidly skyrocketing in value, Bitcoin’s detractors are worried about the token’s incredible volatility, slow speeds and transaction fees. There are currently more than 16.8 million BTC tokens in circulation, out of a predetermined 21 million token limit.
Ethereum is the second most popular platform in the crypto community and is often touted as Bitcoin’s main rival. All of the apps developed on Ethereum are on a distributed public platform where miners work to earn Ether to fuel the network. Ethereum co-founder Joseph Lubin argued that BTC laid the foundation for Blockchain technology but ETH has the potential to be “a more programmable money”.
Litecoin is a peer-to-peer cryptocurrency and is often referred to as Bitcoin’s little brother. But the most notable differences are Litecoin’s much faster transaction speeds, its 84 million token limit, and a more memory-intensive mining process. Litecoin was made with the idea of it being a better, faster version of Bitcoin. It introduced features like SegWit and lightening network, which were supposed to make the transactions faster and cheaper.
Which one is a better investment, Bitcoin, Ethereum or Litecoin?
Bitcoin is the most battle-hardened network in existence. Bitcoin has withstood the test of time and multiple attacks by well-resourced adversaries. It is a cryptocurrency which can be relied upon.
Ethereum is a general-purpose scripting Blockchain founded by one of the greatest minds of our generation. As the foundation for hundreds of other mainstream cryptocurrencies, Ether has the potential to rival Bitcoin one day.
Litecoin is one of the first true ‘Altcoins’. It doesn’t offer exciting technological developments over the Bitcoin protocol but is likely to be a permanent fixture in the crypto ecosystem for many years to come.
After reading this article, you probably have an answer to the ‘What’s the difference?’ question, as every digital currency is unique in its own way. BTC is the mainstream choice. Ethereum has the potential for intrinsic value like Litecoin or Bitcoin, but also more obvious commercial applications. While Litecoin has a capacity for faster transactions — a potential advantage in and of itself, which also provides for a different set of use cases than Bitcoin. But nobody knows if any coin will increase in value – or even be around in a year’s time.