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Cryptocurrencies are no longer simply a tech topic; they are part of our daily lives but are often unperceived.
The first cryptocurrency was “digital gold” that was Bitcoin but Litecoin was created afterward as a faster and more flexible one and was referred to as the “digital silver.”
But what is Bitcoin vs Litecoin? What are the differences between Litecoin and Bitcoin? Why would you use one over the other? Let’s take this topic simply.
What is Bitcoin?
Bitcoin was the first global digital, decentralized currency that was formally introduced back in 2009. It can be traded, exchanged, and sold directly between individuals without the need to use a standard middleman like banks.
Its inception began back in 2008 when one or a group of individuals under the pseudonym “Satoshi Nakamoto” published a white paper that outlined the concept of a new currency that does not use some form of centralized authority.
The idea was new, aiming to implement a system of finance that was decentralized using the use of blockchain. The technology enhances the transparency and security of transactions through the registration of each movement within an open register that cannot be hacked.
The primary objective of Bitcoin was to implement an alternative to the traditional system of finance where one has the freedom to undertake transactions without having to use banks or governments.
How Does Bitcoin Work?
Bitcoin relies upon a collection of connected devices called “nodes.” The nodes work together to validate transactions of money and add them to an electronic record that is called the blockchain.
When a payment is made through Bitcoin, it is added to a new “block.”
Every transfer of Bitcoin is securely recorded within this ledger using complex cryptography. Since the ledger is copied to thousands of devices (nodes) around the world, the devices collectively ensure that transactions are genuine and block manipulation.
To confirm transactions and include them in the blockchain, there comes the process referred to as “mining.” During this process, the participants are referred to as “miners” and use highly computational computers to solve intricate mathematical equations.
After a miner has solved the problem, the new block is verified and included in the public ledger. This method is the chief means through which new Bitcoins are released, with the miners receiving a payment reward in the form of the currency.
What is Litecoin?
Litecoin (LTC), which was founded in 2011 by programmer Charlie Lee, was meant to be a faster and more efficient cousin to Bitcoin. Litecoin was specifically interested in making transactions faster and reducing the fee, making it more practical to use in the real world.
Litecoin has commonly been referred to as the “digital silver” to the “digital gold” that is Bitcoin. While Bitcoin has predominantly served as a store of value, Litecoin was meant to be an every-day payment system.
Litecoin follows the concept of the blockchain but differs from Bitcoin in some technicalities. Litecoin has the same basic concept of a virtual currency that is decentralized but has introduced improvements that are more efficient to utilize for everyday transactions. Litecoin has the edge over Bitcoin through the variations that include faster transactions and lower fees.
How Does Litecoin Work?
Litecoin uses the same basic underlying tech as Bitcoin, the blockchain, but relies on the Proof of Work system to validate transactions. Litecoin does have some crucial differences that distinguish it from Bitcoin.
For example, Litecoin has about 2.5 minutes to produce a new block to validate transactions, while 10 minutes are given to Bitcoin. This makes Litecoin transactions faster and cheaper to use daily.
Litecoin also has an alternate method of encryption that uses the Scrypt algorithm instead of the SHA-256 used to create Bitcoin. This makes the process simpler to mine using common computers without the need to employ expensive and specialized hardware.
Bitcoin vs Litecoin
When we talk about Bitcoin vs Litecoin, we should mention these sides:
Purpose: While Bitcoin is considered a store of value and a means for cross-border money transfers, Litecoin was designed to be a more efficient daily payment method. We can say Bitcoin is like gold, while Litecoin is like silver in terms of function.
Stability: Bitcoin is the most stable currency in the market due to its massive market value and long history. On the other hand, Litecoin is relatively more volatile but remains one of the most reliable cryptocurrencies compared to other altcoins.
Technology: As mentioned earlier, Litecoin differs from Bitcoin in block creation time and encryption algorithms. These differences make Litecoin faster and cheaper for transactions, making it more suitable for small transactions.
Supply: The maximum supply of Bitcoin is capped at 21 million coins, while Litecoin has a maximum supply of 84 million coins. This means Litecoin is more abundant, making it less scarce and therefore less valuable than Bitcoin.
Usage: Bitcoin is often used as a long-term investment or for international transfers. Litecoin, however, is more commonly used for small daily transactions, such as purchasing products or services.
Decentralization: Betcoin and Litecoin are decentralized, but Bitcoin enjoys a higher degree of decentralization due to its large network size and widespread distribution. Litecoin, although decentralized, relies on fewer nodes.
Acceptance and Adoption: Bitcoin is the most widely accepted digital currency globally, supported by many major companies and financial institutions. Litecoin, though also accepted, still faces challenges in achieving the same level of adoption.
Transaction Fees: Litecoin fees are much lower than Bitcoin’s due to faster transactions and lower mining costs.
Technological Development: Litecoin is often quicker to adopt technological improvements compared to Bitcoin, which tends to be more cautious in implementing changes.
Risks Associated with Bitcoin and Litecoin
Risks Associated with Bitcoin
Price Volatility:
The primary risk to investors is excessive volatility in the price of Bitcoin. The price of Bitcoin can fluctuate wildly within a very short time period, skyrocketing one day and crashing the next.
Fraud and illegality: The market for Bitcoins carries a high fraud risk through scams from unreliable websites or tricking people to steal cryptocurrencies. The market is also susceptible to illicit use, such as money laundering, since there is no centralized control.
Government Regulation:
The unregulated nature of the operating environment of Bitcoin leaves it vulnerable to government regulations and law amendments. If the government opts to outlaw the use of Bitcoin or trading it, the value will collapse. Its use and acceptance internationally will be negatively affected through the pressures of regulations.
Technical Drawbacks:
The innovative but faulty blockchain system used by Bitcoin has possible security threats or technical flaws that can be used to exploit the system. The system also consumes an excessive quantity of electricity.
Sensitivity to Political and Economic Events:
The cryptocurrency is highly vulnerable to global events, both political and economic. For example, government measures toward virtual currencies or economic crises can produce sharp movements in the cryptocurrency’s value, making the cryptocurrency less stable compared to other traditional assets.
Security and Cyberattacks:
It is possible to hack and steal Bitcoin. If your digital wallet has been compromised or if you lose your private key (password), there will be no possibility to recover your coins. Hence, it’s important to employ safe and reliable digital wallets such as “Kazawallet,” which provides best-of-breed protection.
Risks Associated with Litecoin
Loss of Confidence in Leadership:
Litecoin founder Charlie Lee sold the entire stake that he held in the currency back in December 2017 to avoid a conflict of interest. His future participation in the currency was questioned, and how this will impact the confidence and leadership of the investors was questioned. The selling off of the entire stake can be viewed negatively, but Lee made it clear that his aim was to be more open about the project and further contribute to the project free from personal interest.
Competition to Litecoin:
Litecoin does have some competition within this field; there are other cryptocurrencies that are comparable to Litecoin or are better than Litecoin. If Bitcoin makes adjustments to the speed of transactions or reduces the fee, Litecoin’s role as the “faster and cheaper” option will be eroded.
Unstable Laws and Regulations:
Governments are struggling to find the best method to address digital currencies, and new regulations or law amendments are likely to encroach upon the operations of Litecoin and the legal status of Litecoin. This uncertainty leaves the future uncertain.
Wealth concentration:
The majority of Litecoin is concentrated within a small group of people, which can be a source of issues like market manipulation. Such people are capable of dominating the market using big sell or buy orders.
Security and susceptibility to attacks:
Despite using the same blockchain technology as Bitcoin, Litecoin has lower security and greater susceptibility to attacks. This implies that if one group comes to control the majority of the network’s mining capability, then the transactions can be manipulated or the system can be disrupted.
Some services that help to alleviate these risks include having two-factor authentication on your online accounts and the avoidance of shady links. Also, the use of safe wallets like Kazawallet makes handling Betcoin and Litecoin easier through the convenience of a seamless and secure means to buy, store, deposit, and withdraw the currency to avoid the risks that come with using untrustworthy websites.
In the end:
By examining the Bitcoin vs Litecoin and the differences between Litecoin and Bitcoin, one can see that both are employed to serve certain functions within the virtual currency universe.
Bitcoin continues to be the store-of-value darling, while Litecoin offers more practical solutions to the transactions that occur on a daily basis.
But let us not overlook the fact that this landscape is riddled with issues, be it the volatility of the price or the threats to security.
We cannot possibly envision every part of the future, but one certainty is that digital currencies like Betcoin and Litecoin will be included in our discussions regarding the economy and finances.
