Is Litecoin the same as Bitcoin? In a word, no. There are significant differences. However, there are similarities, and these are intentional. Because Litecoin was unknown when it launched in 2011, the similarities in the mining process and the distribution of blocks helped it place itself as a slightly different alternative to Bitcoin. It effectively rode Bitcoin’s coattails and used that to become a real player in the cryptocurrency game. Let’s have a look at some of the differences to help gain a better understanding of what Litecoin is in relation to Bitcoin.
Litecoin’s Mining Process is Different
All cryptocurrencies are gained through the process of mining. To mine a cryptocurrency a miner needs to solve a complex math problem. This is done using algorithms. Bitcoin uses the SHA-256 hashing algorithm. Litecoin incorporates the same one but also uses a script algorithm. To put it simply, the algorithms used to mine Bitcoin require a lot of raw processing power, but the algorithms used to mine Litecoin require larger amounts of high-speed RAM. Therefore, as of now, Litecoin requires a lot of memory to mine.
Using Litecoin is Different Than Using Bitcoin
Perhaps you’ve heard of times when it takes many hours to process a Bitcoin transaction. This has deterred many potential consumers. Litecoin, on the other hand, can handle transactions faster. This is because its block chains can be mined faster. That is great for transactions but bad for the long-term value of Litecoin. When it’s easier to mine a cryptocurrency, its value won’t increase as quickly as that of one that takes more effort to mine.
Litecoin is Halved Differently
As Bitcoin gets mined, the volume of available Bitcoin gets halved, which of course affects its value. This happens with Litecoin as well, but the halving happens at a different point. For Bitcoin, halving occurs every 210,000 blocks. For Litecoin, halving doesn’t happen until the sum of 840,000 blocks has been hit.
The Creator Is Not As Mysterious
Bitcoin was created by the ever-enigmatic Satoshi Nakamoto. Is this a man? A woman? A corporation? No one knows for sure. However, Litecoin was founded by Charles Lee. Mr. Lee is more of a “real person” because he is a tangible individual. The mystery around the creator of Bitcoin helps the cryptocurrency in that it increases the amount of intrigue and therefore its appeal. However, the lack of anonymity of the creator of Litecoin benefits that cryptocurrency because it makes it more tangible and therefore more trustworthy in the minds of some investors and consumers.
Litecoin Requires Less Time to Generate a Block
Litecoin’s mining differences described earlier, make it so it takes less time to generate a block. The mean block time is 2.5 minutes, far less than Bitcoin’s 10 minutes. This has affected Litecoin’s popularity, and this is partially responsible for another difference, the size of its market cap.
Litecoin Has a Lower Market Cap, But It’s Still Huge
It is not surprising that Litecoin has a lower market cap when compared to Bitcoin. Bitcoin’s presence in the news and pop culture have earned it a place in the minds of many investors and consumers. This results in greater overall popularity. Litecoin has a market cap around 1/20th the size of Bitcoins. However, it is in a respectable second place behind the cryptocurrency giant. For this reason, its smaller capitalization footprint is not necessarily a negative factor.
All-in-all, Litecoin is somewhat similar like the Toyota to Bitcoin’s Lexus. It is easier to obtain, costs less and works nearly as well. However, it’s immediate value is seen as inferior to that of Bitcoin. For an investor, while both have similar overall chart patterns, Litecoin’s variations are not as volatile as Bitcoin’s. Depending on the investment style, this could be a good or bad thing for the growing cryptocurrency. Regardless, time, as it always does, will tell.