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Litecoin was one of the first altcoins to launch, with its network going live in October 2011. It was developed as a fork of Bitcoin and operates very similarly to the world’s largest cryptocurrency. It uses a proof of work consensus to verify transactions, but Litecoin’s use of a different hashing algorithm and its short block time means that transactions are processed more quickly and usually have lower transaction fees.
However, despite being heralded as a Bitcoin replacement when it was launched, Litecoin has fallen behind the likes of Ethereum and even Dogecoin in terms of market capitalization.
Litecoin Usage
Litecoin offers faster and cheaper transactions than Bitcoin, and this combination means that it has a loyal following, even though its market capitalization is a fraction of that of Bitcoin. It is commonly accepted by e-commerce businesses and gaming companies, while its speed and cost have made Litecoin dice games popular at online casinos. They offer the same anonymity and privacy as Bitcoin and other cryptocurrency games, but they have lower network fees for users.
About Litecoin
At the time of writing, Litecoin has just about retained its position in the top 20 largest cryptocurrencies by market capitalization. It has a market cap of $5.2 billion, which means it is significant in the cryptocurrency industry but falls significantly short of Bitcoin’s $1.3 trillion market cap.
It is quite widely accepted by retailers and businesses, however, at least partially due to its legacy as once being the second most important cryptocurrency on the market, but also due to its faster transaction times and lower transaction costs.
Litecoin History
While Litecoin is currently struggling to maintain its position in the top 20 cryptocurrencies, this wasn’t always the case. It was once the second largest crypto, hailed for its reduced transaction times, lower transaction fees, and lower mining requirements. It was billed as being the best choice for micro-transactions, whereas Bitcoin was considered the crypto of choice for bigger transactions.
Litecoin Benefits
While Bitcoin has a considerably larger market capitalization than Litecoin, there is no denying the understudy’s benefits.
Greater Maximum Coin Supply
Both currencies have a limited coin supply. While Bitcoin has a limited supply of 21 million coins, which it is expected to reach in around the year 2140, Litecoin has a total supply of 84 million coins. In real terms, this bears little significance.
Litecoin costs a fraction of Bitcoin and it already has around four times as many coins in circulation as Bitcoin. Both coins go through a halving event approximately every four years, which halves the reward paid to miners and will keep the supply of coins going for many decades.
Better Hashing Algorithm
Both Bitcoin and Litecoin use the same mining technique, known as proof of work. This requires miners to use their computational power to verify transactions on the network. Miners receive a small amount of the coin in exchange for this computational power. While both coins use the same technique, they use different hashing algorithms to help achieve it.
Bitcoin uses the SHA-256 hashing algorithm which is very energy inefficient. Litecoin uses the Scrypt hashing algorithm which is less energy-intensive but was initially implemented to prevent pools of minders from collaborating and taking control of the network. The improved hashing algorithm makes mining more profitable and less costly.
Faster Transactions
The single most important difference between the two coins is in their block generation time. Bitcoin takes approximately ten minutes to generate a single block, whereas Litecoin creates a block every 2.5 minutes.
This means that Litecoin can process 56 transactions every second, whereas Bitcoin can only process 7. The end result is that Litecoin transactions are faster and cost less than Bitcoin transactions.
Bitcoin Vs Litecoin – Other Differences And Similarities
Litecoin’s problems arguably arose from the fact that it was too similar to Bitcoin. Both are used primarily as a means of transferring value and not for other purposes. In contrast, a coin like Ether, which is used to pay gas fees on the Ethereum network is used by developers that use Ethereum’s blockchain to develop their own decentralized apps.
Halving Every Four Years
Bitcoin halving events are built into the network’s algorithms and take place every 210,000 blocks. This occurs approximately every four years. It halves the amount minders are rewarded for verifying transactions on the chain and helps to prevent any inflationary effects.
Because it was created as a fork of Bitcoin, Litecoin also undergoes a halving but every 840,000 blocks. Although the timing isn’t the same, it is roughly similar and Litecoin undergoes its halving events on a roughly four-year schedule, too.
Acceptance
Bitcoin is the best-known cryptocurrency in the world and this means that it is the most widely accepted of all digital currencies. However, Litecoin’s lower costs and transactions, and the fact that it has existed since 2011 mean that it is widely accepted by a lot of the companies that accept Bitcoin.
You may find a few companies that are willing to accept Litecoin and not Bitcoin, although this number is a lot lower than those that accept Bitcoin but not Litecoin.
P2P Transfers
Coins like Ether were set up and are used as a native currency to use their blockchain networks. This utility gives these coins some value and underpins their price. Bitcoin and Litecoin were set up primarily as a means of transferring value from one person to another. They are P2P transfer coins, but they have been accepted by businesses as a means of payment, too.
Uses For Litecoin
Litecoin is a digital currency, first and foremost. It is also used as an investment tool by cryptocurrency speculators who hope to see its price increase. Some online businesses, especially casinos and gaming sites, also accept the Litecoin currency for payments. And it can be used to mint NFTs and establish meme coins.
It tends to be more popular for microtransactions, compared to Bitcoin, because of the speed and cost of its transactions, but it can effectively be used for anything Bitcoin can.
