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Bitcoin vs. Litecoin: What's the Difference?

Bitcoin vs. Litecoin: An Overview

Since Bitcoin was founded, hundreds of other cryptocurrencies have been forked from it or been created. Litecoin (LTC), a Bitcoin fork, is one of these altcoins—the term for cryptocurrencies that are not Bitcoin. While Litecoin is based on the same underlying blockchain and verification method as Bitcoin, several key differences might help you decide which is right for your interests and goals.

Key Takeaways

  • Bitcoin and Litecoin use different cryptographic algorithms: Bitcoin uses SHA-256 encryption algorithm, and Litecoin uses Scrypt.
  • Both Bitcoin and Litecoin are cryptocurrencies that use the proof-of-work consensus mechanism.
  • Litecoin can produce a greater number of coins than Bitcoin.
  • Bitcoin's market cap remains much higher than Litecoin's.

Bitcoin

Bitcoin was the first cryptocurrency to be introduced in 2009. Since then, it has evolved from a novelty into a controversial commodity, investment, and exchangeable currency. It relies on decentralized and community computing power to maintain the validity and security of a centralized database, called a blockchain.

Some notable Bitcoin properties that make it unique are:

  • Proof-of-work: The consensus mechanism and validation process that uses computational power to verify transactions and blocks in the blockchain.
  • It uses SHA-256: The cryptographic hash function that encrypts the blockchain. The hash function converts input to an output of fixed length to encrypt it.

Litecoin

Litecoin was launched in 2011 by former Google engineer Charlie Lee, who announced the debut of the "lite version of Bitcoin" via a posted message on a popular Bitcoin forum. From its founding, Litecoin was seen as being created in reaction to Bitcoin's tendency to gravitate towards centralization.

For this reason, Litecoin adopts many of the features of Bitcoin that Lee and other developers felt worked well for Bitcoin in its early stages. Litecoin has other aspects that the development team felt could be improved upon. Some of Litecoin's notable properties are:

  • Proof-of-work: Litecoin uses proof-of-work, but it relies on access to large amounts of memory rather than processing unit computing power only.
  • Uses Scrypt: Litcoin employs Scrypt (pronounced ess-crypt) for its hashing function. Scrypt uses SHA-256 but includes much higher memory requirements for proof-of-work.

While Litecoin uses proof-of-work, it is a much less energy-intensive network than Bitcoin, possibly due to the difference in popularity. On Nov. 1, 2023, the Litecoin network hashrate averaged 750,307 Th/s, while the Bitcoin network hashed at 477,282 Eh/sec—more than 1 million times that of Litecoin.

Key Differences

The most significant difference between Litecoin and Bitcoin is its hashing function. As mentioned earlier, Bitcoin uses SHA-256, which is processed very quickly on the ALUs of graphics processing units and specialized machines.

Market Capitalization

Another area in which Bitcoin and Litecoin differ significantly is their market capitalization, the total dollar market value of all the created coins. Bitcoin is more popular because of its ability to be mined by large farms and mining pools; also, demand for it has risen so high that it commands a very high exchange rate. Litecoin has a much smaller market capacity because Bitcoin has a smaller supply and greater demand, and the market expects more from it.

Distribution

Another of the main differences between Bitcoin and Litecoin concerns the total number of coins each cryptocurrency can produce. This is where Litecoin distinguishes itself. The Bitcoin network can never exceed 21 million coins, whereas Litecoin can accommodate 84 million coins.

In theory, this sounds like a significant advantage for Litecoin; however, supply and demand generally dictate prices for commodities and investments—along with consumer and investor sentiments. Both appear to believe that Bitcoin aligns with their interests, values, and financial goals, so its price reflects that.

Transaction Speed

Although advertised as accommodating instantaneous transactions, both the Bitcoin and Litecoin networks require time for those transactions to be confirmed by network participants. Litecoin was founded with the goal of prioritizing transaction speed.

The Bitcoin network’s average transaction confirmation time (the time it takes for a block to be verified and added to the blockchain) is around nine minutes per transaction. However, this can vary widely depending on network traffic. The equivalent figure for Litecoin is roughly two and a half minutes.

Is Litecoin Better Than Bitcoin?

Which is better depends on your goals, what you want to do with your coins, and your views on cryptocurrency. Litecoins are generated faster than Bitcoin, but Bitcoin is worth more. Bitcoin might be better if you want more value per coin, while Litecoin might be better if you want more coins at a lesser value.

How Many Litecoins Are Left?

Litecoin has a limit of 84 million coins. There were 73.83 million on Nov. 1, 2023, so as of that date, there were roughly 10.2 million left.

Does Litecoin Have a Future?

Litecoin's future depends on consumer and investor sentiments. Government regulations, economic conditions, government-sponsored cryptocurrency, and more can also affect its future. It's possible that future technological advancements could render cryptocurrencies obsolete.

Why Is Litecoin So Cheap?

Litecoin has a lower LTC/USD exchange rate and less purchasing power because it has a larger supply and lower demand than other cryptocurrencies. This is largely due to consumer and investor perspectives—if a means of exchange can purchase more goods, it is worth more. If a commodity or investment has a higher value for people, they will pay more for it. Bitcoin is currently perceived as a more valuable asset, so it is worth more.

The Bottom Line

Bitcoin is the original and most popular cryptocurrency. Litecoin is a hard fork of Bitcoin that uses a different consensus mechanism. Each is designed as a payment method, but they have also become instruments for speculation and investing.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own Bitcoin or Litecoin.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
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