No two cryptocurrencies are the same, even if they borrow some code from one another. Litecoin and Bitcoin are two complex projects, despite sharing a lot of similar code. Even so, there are many differences to take note of.
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Bitcoin Was Created First
Historically speaking, Bitcoin is the older of the two cryptocurrencies. Satoshi Nakamoto designed Bitcoin in November 2008 through the whitepaper and released the software in 2009. It did not get much attention at first, which is not entirely uncommon for the time. The concept of a “new form of money” has been tried before, with numerous attempts coming to an abrupt halt.
Charlie Lee, the developer of Litecoin, looked at Bitcoin as something to improve upon further. Rather than starting from scratch, Lee borrowed large portions of Bitcoin’s code and added his own ruleset to it. Ultimately, he wanted to be at the forefront of creating a more efficient and cheaper cryptocurrency, a vision that still holds up today.
The forking of Bitcoin’s code is always a bit frowned upon. As this software is open source, anyone can clone the Bitcoin code and change whatever they want. Whether one agrees to this approach or not is ultimately irrelevant. Nothing prevents developers from taking this action, even though it is challenging to live up to Bitcoin’s reputation.
Under the hood, Bitcoin and Litecoin are not the same either. As Litecoin is designed to be the more efficient version of the two, Charlie Lee altered the average transaction time and supply limit. Moreover, both currencies have a very different market cap and value, which is only normal.
A Different Mining Algorithm
Both Bitcoin and Litecoin rely on proof-of-work to validate transactions and add new blocks to the blockchain. For Bitcoin, the mining algorithm is SHA-256, which is very electricity-intensive and requires dedicated ASIC hardware to mine successfully. While it was possible to mine Bitcoin with a computer early on, that is no longer feasible today.
Litecoin, on the other hand, uses the Scrypt mining algorithm. It is still possible to engage in mining with a regular computer, although it may not be too competitive. Scrypt mining is less energy-intensive and much faster compared to SHA-256. However, there are dedicated ASIC machines to mine Litecoin, which now dominate the overall network.
Which Is The Store Of Value?
On paper, one is inclined to think Bitcoin is the only store of value between the two. Not only does BTC hold its value better, but it also provides much more upward price potential. That said, it is a much more volatile currency, as its price fluctuations can be rather severe. It is not abnormal to see a price difference of several thousands of dollars per BTC for no apparent reason.
Litecoin has never been considered to be much of a store of value, as its price performance hasn’t been too stellar. Even though it is one of the oldest cryptocurrencies on the market today, many people associate it with a short-term investment opportunity. That situation may change over time, but it seems unlikely that LTC can be a long-term store of value.
Where To Spend It
For cryptocurrency users, it is always a matter of spending one’s Bitcoin or Litecoin holdings. The difference between the two is very large in this regard, even though Litecoin payment adoption has been on the rise lately. As more payment processors have begun supporting LTC alongside Bitcoin, it is relatively easy to integrate both payment options into one’s platform.
One notable development is how the Miami Dolphins accept LTC payments. It is not the only platform to do so, but that news took many people by surprise. Today, over 2,500 companies claim to accept Litecoin as a payment option, which is more than respectable. However, this number is a lot lower than BTC payments, which is only to be expected.
New Code and Features
As mentioned in the broader Litecoin article, this network is often considered a testbed for new Bitcoin software upgrades. As both currencies share a lot of code, it is relatively easy to implement upcoming Bitcoin features into Litecoin. Two notable examples include Segregated Witness and the Lightning Network, which activated on Litecoin before coming to Bitcoin.
It is plausible to assume this situation will remain unchanged for years to come. If a software upgrade successfully goes live on Litecoin’s network and no significant bugs pop up, it is often deemed safe to launch the code on Bitcoin’s network as well.
There is no “superior” currency as both Litecoin and Bitcoin are very different from one another. Despite sharing large portions of computer code, the projects have headed in different directions over the years. Bitcoin is a store of value and long-term investment yet is often a bit tricky to use for payments and purchases. Litecoin has a lot of potential in the payments space yet may not necessarily act as a store of value.
As these currencies serve their specific purposes, it is often a matter of exploring what you can do with them exactly. Diversification in the cryptocurrency world is crucial, not just for investing but also for using these currencies in the future. Having Litecoin on hand for payments, and Bitcoin as a long-term store of value is one option to explore.