Bitcoins and Litecoins have a lot in common. Both of them are cryptocurrencies at the most basic level. While state currencies like the U.S. dollar rely on political and legal mechanisms of value and legitimacy, cryptocurrencies depend only on the cryptographic integrity of the network itself. Even then, both have significant differences between them.
One of the primary differences between these two cryptocurrencies lies in the total number of coins that each of them can produce. And that is precisely where Litecoin stands out.
Bitcoins can never exceed the number of 21 million, while Litecoins can accommodate up to 84 million coins. In theory, this sounds like a significant benefit in favour of Litecoin but in reality, this may not be the case.
After all, Bitcoins and Litecoins are divisible into almost infinitesimal amounts. The minimum amount of transferable Bitcoin is 0.00000001 Bitcoins colloquially called a “satoshi”.
Although technically, transactions occur instantly on the Bitcoin and Litecoin networks, it takes time for these transactions to be confirmed by other participants in the network. The average time to confirm Bitcoin network long-term transactions is just over 10 minutes per transaction, although this can vary greatly when traffic is high.
The equivalent figure for Litecoin is around 2.5 minutes. This difference could, therefore, make Litecoin more attractive to traders. For example, a merchant who sells a product in exchange for Bitcoin would have to wait almost four times longer to confirm payment than if the same product were sold in exchange for Litecoin. On the other hand, traders can always choose to accept transactions without waiting for any confirmation. The security of these zero-confirmation transactions is the subject of debate.
The most basic technical difference between Bitcoin and Litecoin is by far the different cryptographic algorithms they use. Bitcoin uses the longstanding SHA-256 algorithm, while Litecoin uses a relatively new algorithm called Scrypt.
The main practical significance of these different algorithms is their impact on the process of “mining” new parts. In Bitcoin and Litecoin, the transaction confirmation process requires significant computing power. Certain members of the monetary network, called miners, allocate their IT resources to confirm the transactions of other users. These miners, in return, are rewarded by earning certain units of the currency they have mined.
Also, the SHA-256 is a more complicated algorithm than Scrypt, while allowing a greater degree of parallel processing. Therefore, Bitcoin miners have used increasingly sophisticated methods in recent years to mine Bitcoins as efficiently as possible.
The commonest method for bitcoin mining is to deploy ASIC (Application Specific Integrated Circuits). These are hardware systems which, unlike the simple CPUs and GPUs that preceded them, can be custom designed to extract Bitcoins. The practical consequence of this is that the exploitation of Bitcoin has become increasingly out of reach for the everyday user.
Scrypt, on the other hand, was designed to be less sensitive to the types of custom hardware solutions used in ASIC-based mining. This has led many commentators to consider Scrypt-based cryptocurrencies such as Litecoin to be more accessible to users.
So that’s basically it. We hope some of the basic concepts are clear to you now. Remember, now you can increase your crypto knowledge on the AiBB app itself. Our “learn” module is more than capable of clearing all your doubts about most cryptocurrencies starting from Bitcoin to Ethereum to Litecoin and many more. Download the app NOW!