ZoneBitcoin EditorialCurrently ranked 15th among cryptocurrencies in terms of market capitalization, Litecoin already enjoys a certain reputation. For years, Litecoin remained in third place after Bitcoin and Ethereum. Of course, with the appearance of new cryptocurrencies, Litecoin has lost its splendor, let's say it clearly.
But what exactly is it and how does it differ from Bitcoin? We previously looked at the specifics of Bitcoin, as well as its mining, storage, sending and receiving.
Litecoin has a number of similarities with Bitcoin; it is frequently referred to as “silver” compared to Bitcoin referred to as “gold”. The main reason for this is that Litecoin was created to improve Bitcoin. In fact, litecoin is even based on bitcoin technology and it is even a copy in some ways. It was launched in 2011 by Charlie Lee, two years after the creation of Bitcoin. Charlie Lee is a former Google engineer and served as Head of Engineering at Coinbase.
The difference between the two lies mainly in the methods of their mining, in particular the algorithms used and the constraints imposed on the network. Users perceive the impact of different protocols mainly on the speed of transactions.
Litecoin Mining vs. Bitcoin
Among the most important constraints weighing on Bitcoin, that of scalability is one of the most significant (as for many blockchains including Ethereum). This difficulty is mainly due to the initial assumptions and technology that govern the protocols. There are also concerns that it is becoming more and more centralized as large mining companies take over the industry. Litecoin aims to address these concerns and relies primarily on the algorithm used for mining.
The Scrypt algorithm
The algorithm and hash function used to confirm transactions and mining on the Bitcoin network is a SHA 256 algorithm. This hash algorithm is one of the most complex and therefore requires much more time to confirm.
Litecoin, on the other hand, uses a hashing algorithm called “Scrypt” and pronounced “Script”. This algorithm is generally faster and less complex than the other two. This means that transactions can be completed faster as blocks are released more efficiently. Thus, the average block time on the Litecoin network is 2,5 minutes, compared to 10 minutes for Bitcoin.
Litecoin can be mined more easily
Knowing that Bitcoin uses a SHA 256 algorithm, many miners realized that their ability to compete in the market was dependent on the use of parallel processing. To do this, they started using integrated circuits on specialized machines (ASICS). These circuits are designed for the sole purpose of mining bitcoins and their introduction has caused a significant increase in the difficulty of mining.
Moreover, unless individual miners have the necessary resources (almost impossible) to obtain ASIC, they are then forced to join pools.
The Scrypt algorithm's calculations are much more serialized, meaning it prioritizes massive amounts of computer memory over raw processing power. Most notably, Scrypt is a "hard memory problem". In other words, users can use CPUs and GPUs to efficiently mine Litecoin without requiring significant resources to participate in the process.
As a direct comparison of hash power on the network, the Bitcoin network currently has over 7 million Terra hashes per second, while Litecoin only has 23. This means that mining networks are still as decentralized.
Other protocol differences between Bitcoin and Litecoin
Other differences should be noted in the Litecoin protocol. In terms of overall mining supply, Bitcoin is limited to 21 million coins while Litecoin is limited to 84 million coins. Regarding difficulty adjustments, the block reward for Bitcoin is halved every 210 blocks and halved every 000 blocks for Litecoin. The block reward is also different with 840 BTC for a block on Bitcoin and 000 LTC for a block of Litecoin.
To compensate for the increased processing power and increased supply already in the market, the block reward also needs some adjustment to change incentives. Regarding Bitcoin, the rewards are halved every 210 blocks (approximately every 000 years with halving) while those of Litecoin are halved every 4 blocks, or approximately every 840 years. This is still good to know for Litecoin investors.
Transactions on Litecoin vs. Bitcoin
Seen the utlitecoin's use of the Scrypt algorithm, transactions are completed in a much shorter period of time. And thanks to faster block generation, more transactions are included in the block and therefore released. While this result may seem excellent, it also implies a considerable expansion of the Blockchain with more orphan blocks.
If the speed of transactions is indeed an advantage, most supporters of Bitcoin see few disadvantages. A merchant who accepts funds in Bitcoin is generally satisfied with a transaction sent, whether it is confirmed or not yet. He knows she will come and he is willing to wait a few more minutes...
Segwit implementation
Litecoin had implemented the distinct witness (SegWit) in its protocol. We've already looked at the details of SegWit. This is essentially a way to separate the witness (signer data) from the rest of the transaction data.
This implementation also represented a backwards compatible change allowing previous blocks to remain valid even if distinct witness transactions were not implemented. It is evident that most users are eager to get the Lightning Network up and running on Litecoin. This proposal, which initially aimed to improve Bitcoin, was taken up by the developers of Litecoin.
In fact, now we are doing a lot of testing on Litecoin to improve Bitcoin.
A dedicated development team
The debates also focused a lot on the future of Bitcoin and the possibility of scaling it properly. These issues caused a lot of controversy, as stakeholders had different motivations. There are miners, users, developers and payment processors. As a result, disagreements were legion and consensus difficult to achieve. The result was that Bitcoin underwent a hard fork and this led to the creation of Bitcoin Cash.
As for Litecoin, the team of developers is smaller but much more united. There are fewer highly powerful stakeholders able to control discussions and related protocols. The consequence is that the Litecoin team reached consensus in a generally more efficient way. For example, when the decision to move to Segwit was made, there was no disagreement…
For supporters of Litecoin, it is an improved version of Bitcoin and should experience the same success if we follow their logic. For others, the new third-generation cryptocurrencies must bury the first cryptocurrencies. Only time will tell, eh ;)
In the meantime, we hope that this article has helped you see more clearly between litecoin and bitcoin.
And you what do you think?
- Discover Litecoin
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Disclaimer : This article is provided for informational purposes only. This is not financial, legal, tax or investment advice. Always do your own research before investing in a project.
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