Cryptocurrency has become a hot topic in the last year. Many people are familiar with Bitcoin but have now become aware that many other cryptocurrencies also exist. Litecoin is one of the cryptocurrencies that followed Bitcoin. In fact, Litecoin was created to complement the use of Bitcoin.
Cryptocurrencies make use of algorithms to encrypt transactions. As transactions occur, the transaction information is added to the blockchain. This method allows the participants in the network to generate more blocks for rewards, and to regulate the transactions without the interference of a centralized authority, such as a bank. Furthermore, the encryption avoids duplication of transactions.
What is Bitcoin?
Bitcoin is a cryptocurrency created by Satoshi Nakamato in 2009. Nakamato wanted to create a decentralized currency that would use advanced encryption to avoid transaction processing errors. Bitcoin was sold for less than $1 when it was originally released but has experienced tremendous growth. It now costs more than $8000 for a Bitcoin. However, Bitcoin has experienced extreme fluctuations which have resulted in the value crashing at times.
Bitcoin has made 21 million coins available, which are generated as transactions occur. Bitcoin uses a powerful algorithm to confirm transactions. It has immense parallel processing power.
What is Litecoin?
Charlie Lee, an engineer who previously worked at Google, created Litecoin. Lee used the open source code released by Satoshi Nakamato to create this new cryptocurrency. Furthermore, Lee released Litecoin with the aim of becoming the “silver” which complements the “gold” of Bitcoin.
There are 84 million Litecoins available. The algorithm used to confirm a transaction is easier to understand for ordinary individuals. This means there are larger possibilities for mining Litecoin instead of just purchasing coins.
Difference between Bitcoin and Litecoin
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Creation details
Bitcoin was created by Satoshi Nakamoto in January 2009; Litecoin was created by Charles Lee in October 2011.
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Amount available
Bitcoin will make 21 million coins available whereas Litecoin will make 84 million coins available.
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Current value
The value of Bitcoin and Litecoin fluctuates in a similar fashion to stocks. On 17 May, one Bitcoin was valued at $8263, whereas the value of one Litecoin was $137.74.
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Algorithms
Bitcoin uses an algorithm called SHA-256. It is a complex algorithm for processing but can process parallel transactions. Most individuals have difficulty understanding the algorithm and thus do not mine Bitcoin.
Litecoin makes use of the Scrypt algorithm, which is easier to understand for most people. It allows users to purchase and mine Litecoin, thus providing additional rewards.
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Transaction speeds
Technically, the transactions for both cryptocurrencies happen instantaneously. However, cryptocurrency transactions need to be confirmed by other users of the network. The time it takes for the transaction to be confirmed is what constitutes the transaction speed. This can also be called the average block speed.
It takes about 10 minutes for a Bitcoin transaction to be processed in contrast to a 2.5 minute transaction speed for Litecoin. The faster transacting speed of Litecoin makes it more appealing to merchants who accept cryptocurrencies as a payment method, especially if the merchant waits for confirmation.
The faster transaction speed of Litecoin also makes it possible for more transactions to be completed in a set time, when compared to the amount of transactions possible by Bitcoin in the same time period.
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Reward for new block
New blocks result in the creation of new Bitcoins and Litecoins. This process is called “mining” and individuals that mine Bitcoin or Litecoin are rewarded with coins.
Bitcoin (BTC) initially rewarded miners with 50BTC per block and this amount halves with every 210,000 blocks mined. Currently, the Bitcoin reward per block is 12.5BTC.
Litecoin (LTC) also started with a reward of 50 BTC with the amount halving every 840,000 blocks. The current reward per block is 25LTC.
Bitcoin vs. Litecoin: Comparison Chart
Summary of Bitcoin vs. Litecoin
- Bitcoin and Litecoin are cryptocurrencies created from the same open source code but run on different blockchains.
- Bitcoin has made 21 million coins available, whereas Litecoin made 84 million coins available.
- Each Bitcoin has a much higher dollar value than a single Litecoin; this makes true the view that Litecoins is “silver” and Bitcoin is “gold”.
- Bitcoin runs on the SHA-256 algorithm and Litecoin runs on the Scrypt algorithm.
- Bitcoin’s algorithm is complex, whereas Litecoin’s algorithm is easy to understand.
- Transactions happen instantaneously but transaction speed is based on how long it takes for a transaction to be confirmed. This can also be described as the amount of time to create a new block.
- The algorithms affect the transaction speed: Bitcoin’s complex algorithm takes approximately 10 minutes to confirm a transaction, whereas a transaction with Litecoin takes about 2.5 minutes before receiving confirmation.
- Litecoin’s faster transacting speed makes it appealing to merchants that would like to offer clients an opportunity to pay with a cryptocurrency.
- Miners are individuals that confirm transactions (create a block) and are all part of the network. A miner receives a reward for a completed block.
- Bitcoin currently rewards miners with 12.5BTC per block, but this value is halved with every 210,000 blocks. Litecoin rewards a miner with 25LTC per block and this value is halved with every 840,000 blocks created.
- Cryptocurrencies are becoming very popular. The creation of Bitcoin and subsequent release of its open-source code has made it possible for many other cryptocurrencies to be created, including Litecoin.