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Litecoin, An Evolution of Bitcoin – Explained

Evolution of Bitcoin

October 14, 2020 | 

1197 Views | 

JOHN K MWANIKI | 

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Created in 2011, Litecoin is an evolution of Bitcoin. It was to help solve some of the concerns on the first virtual currency. The creator, Charlie Lee, a Google developer, wanted a more convenient cryptocurrency. He was looking to solve the confirmation delays, scalability, and mining concerns. 

Litecoin is more of a Bitcoin's fork. They share a lot of features given Litecoin comes from Bitcoin's source code. This allowed the new decentralized coin to operate without a whitepaper. It could get away with using that of Bitcoin. The only improvement is on the open-source code of the earlier coin. 

Like Bitcoin, Litecoin works both as a digital currency and a payment system. With most coins finding it hard to keep up with Bitcoin, Litecoin has done well. It currently ranks 10th with a market cap of over $2billion. It has the Bitcoin features to thank for such stellar market performance. 

Evolution of Bitcoin Similarities Versus Litecoin

As a Bitcoin fork, Litecoin comes with several features from Bitcoin. This goes ahead to reinforce it as "the silver to Bitcoin." The analogy follows the perception that Bitcoin is the gold of digital currencies.
Here are some of the shared features between the coins;

  • Transaction validation

Litecoin and Bitcoin are both proof of work ecosystems. They both involve mining using special devices. The miners then get rewards in the form of token. They also have to halve where the miner's rewards reduce by half until they run out. The halving helps in controlling volatility by managing supply.

Other than managing supply, the miners are also crucial for transaction validation. The coins come with nodes every miner has to verify before introducing it to the blockchain. Only verified nodes are usable in transactions. 

The validation is essential in avoiding fraudulent transactions. The open ledgers validation allows anyone to flag off a fraudulent transaction.

  • Storage and transactions 

With both the assets working as storage of value, they have to operate the same. A trader can use Litecoin in place of Bitcoin in any other transaction. 

Both of the coins come from mining using mining rigs. The other option is to get them from the crypto exchanges. The crypto surge in recent times has seen a rising number of Bitcoin exchanges. These provide a reliable source for traders needing both coins. 

Both currencies also come with safety concerns. They need digital safety crypto wallets for storage. Also, they can use similar wallets. 

Both of the coins are also prone to market changes due to various economic factors. They are bound by regulations, investor interest, and several more. For that, the coins' price movements mirror each other. An increase in Bitcoin value notifies a similar move in Litecoin, and vice versa. 

Most coins have started to forge an independent market movement. Coins like Ethereum are even beginning to outperform Bitcoin. Litecoin remains to be the Bitcoin's half. 

Evolution of Bitcoin Differences Versus Litecoin

While these coins share several features, they are also distinct. They have varying features that make them stand out from each other. Here are the differences between the coin; 

  • Market capitalization 

Market capitalization is the measure of the crypto performance. For now, the Evolution of Bitcoin has the upper hand over Litecoin. Bitcoin has a market cap of $205B as of October 2020. This is almost four times that of Litecoin at $65B. 

The difference in the market cap shows how successful Bitcoin is. Still, there is an argument that Bitcoin entered the market earlier. With a market cap of $42000 in 2010, Bitcoin's success is stellar. It has also kept its place as the top cryptocurrency. 

  • Transaction speed 

Transaction speeds have been one of the major concerns for the Evolution of Bitcoin. The situation led to its first fork leading to Bitcoin Cash. Litecoin also came about to solve the transaction speeds concerns. 

Even though transaction occurs immediately on the blockchain, it takes time for verification. Data shows transactions within Bitcoin takes 9 minutes to verify. For Litecoin, the confirmation is around 2.5 minutes. 

The higher speeds in Litecoin makes it ideal for payment procedures. Merchants accepting cryptocurrencies prefer it. As with Bitcoin, they have to wait four times longer.

  • Distribution

The difference in the total coins available for each cryptocurrency is also integral. Bitcoin has a supply limit of 21 million coins. Litecoin has the capability of reaching 84million coins in the long run. 

At any other time, it looks like Litecoin has an advantage over Bitcoin. Still, both coins allow for dividing into tiny amounts. The least value one can trade in Bitcoin is 0.00000001BTC. The value is Satoshi, after the founder Satoshi Nakamoto. The value of a single coin becomes inconsequential in the long run. 

The evolution of Bitcoin has also used its scarcity to its advantage. The coin works on the laws of demand and supply. Increasing demand with scarce supply means improved value. The currency then draws value from the low, fixed supply. 

  • Algorithms 

Even though both coins work with cryptographic proof-of-work, they vary in algorithms. Bitcoin uses the traditional SHA-256 algorithm. Litecoin uses the newer algorithm, Scrypt.

The different algorithms have an impact on mining the coins. The SHA-256 is more complicated than the Scrypt. Still, it allows for more parallel processing when mining. The complexity of the algorithm means it requires more special tools to use. That is why Bitcoin mining is for special ASIC tools

Scrypt is more accessible to prospective miners. There is no need for the special ASIC miners. Anyone can still join the fray by using CPUs or GPUs. 

Evolution of Bitcoin Bottom Line 

Bitcoin and Litecoin co-relate such that they are the Silver to Gold of each side. Developers created Litecoin to help solve the underlying issues with Bitcoin. 

So far, Litecoin has performed well. It has created a demand by providing faster transaction speeds and scalability. Still, the Evolution of Bitcoin is leading. Bitcoin still has a higher market share and capitalization. 

Both Bitcoin and Litecoin work the same. They are available for thorough mining. They also need crypto exchanges and need secure wallets. Whether Litecoin will become independent as the Bitcoin evolution will take time. From previous market movements, it is a possibility. 

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