While they might sound similar on paper, Litecoin differs from regular Bitcoin in a few different ways. But are these differences meaningful to everyday transactions? How much do they matter to the average user?

How are they similar?

Bitcoin and Litecoin share the same proof of work algorithm, meaning that Bitcoin mining and Litecoin mining follow a similar process.

The Litecoin network is also based on the original Bitcoin protocol and system, although it has some distinct differences.

Litecoin is often called "the silver to Bitcoin's gold". In this case, the "silver to Bitcoin's gold" is purely due to age and reach - the two are very similar in many ways, with the Litecoin network only being more obscure due to its more recent age.

They also both use the SHA-256 hashing function for encryption, making them secure in a similar way to one another. This hashing algorithm is still safe enough to keep each cryptocurrency transaction very safe.

The pair are basically the same general framework with a new shell, meaning that you can easily learn to use one if you try out the other.

This also makes them direct competitors in many cases, although mostly in the context of being cryptocurrencies instead of blockchain systems.

As Payments

You can buy Bitcoin and Litecoin purely as a transaction method, and both are often used as a replacement for fiat currency due to the added privacy.

Each currency can be divided into infinitesimal amounts, meaning that both Bitcoin and Litecoin can work on fractions of fractions.

As Investments

Both currencies are commonly cited in investment advice, with Bitcoin and Litecoin taking up spots as popular ways to earn money outside of playing the stock market. Financial decisions are often made using Bitcoin and Litecoin as a starting point, mainly because Litecoin & Bitcoin have become two of the most popular crypto types in the world.

As a Tool

Bitcoin and Litecoin do not have any direct functions with other network participants, unlike later coins. They are not used to do anything specific on certain networks and are instead mostly handled as cryptocurrency by most users.

About Bitcoin (BTC)

Bitcoin (BTC) was introduced in 2009 and has become one of the top decentralized cryptocurrencies on the market. It is one of the most famous and popular cryptocurrencies in the world, to the point that many other developers use Bitcoin as a starting point for their own different currencies.

Bitcoin is generally considered to be the world's first cryptocurrency. The original creator is an unknown figure going by the pseudonym of Satoshi Nakamoto.

Unlike Litecoin's creator Charlie Lee, this means that Bitcoin feels more like a constant of the market, and many other cryptocurrency coins judge their value relative to Bitcoin.

Bitcoin's proof system allows it to be easily mined. It uses the computational power of the user's device to verify transactions and create blocks in the blockchain, providing a block reward in the form of mined Bitcoin.

About Litecoin (LTC)

Founded in 2011 by an ex-Google employee named Charlie Lee, Litecoin (LTC) is meant to be the "lite" version of Bitcoin. This involves more efforts to avoid centralization and is built to be a more refined version of Bitcoin as a whole.

Litecoin has gathered a significant market capitalization, one that could keep growing due to its higher maximum coin supply. However, it is not as widespread as Bitcoin yet, so central banks are not as willing to accept it as often.

It uses the same proof-of-work system - and block reward - as Bitcoin, but with a few technical changes.

For example, it does not use the central processing unit (CPU), or graphics processing unit (GPU), something that Bitcoin does that can often make computers run far slower when handling it.

How Are They Different?

Understanding the Litecoin vs Bitcoin argument means understanding how they differ and what makes them unique currencies beyond just their name.

Distribution

The primary differences between Bitcoin and Litecoin concern the actual transactions and amount available to users.

Bitcoin has a cap of only 21 million coins in circulation, whereas Litecoin has a total cap of 84 million coins.

More coins do not make Litecoin better than Bitcoin, though, at least not to an average user. However, it will make the total value of both vary heavily since the total coin amount influences both interest and the money value of an individual coin.

Litecoin compared to Bitcoin Transaction Speed

While Bitcoin transactions and Litecoin transactions are technically instant, they take a while to confirm on the other side. A core part of Litecoin foundation was the goal of creating a coin that put transaction time first and foremost.

Bitcoin Transactions

Bitcoin takes around nine minutes per transaction on average. This depends heavily on the traffic on the Bitcoin blockchain, and Bitcoin transaction fees average around £2 or less in total.

Litecoin Transactions

A core part of Litecoin foundation was the goal of creating a coin that put transaction time first and foremost. A transaction takes about two to three minutes, with average transaction fees of something closer to fractions of pounds.

Litecoin vs Bitcoin Network

The two networks have become fairly distinct in recent years, gaining even more features that have made them vastly different coins in specific ways.

Litecoin and Bitcoin have developed into two cryptocurrencies with the same route, rather than being identical in most ways.

Things like the rewards for mining one block are still the same, but Litecoin has developed additional features like the Lightning Network or the Segregated Witness.

Bitcoin & Litecoin Mining

Litecoin miners use the same system as Bitcoin miners - proof of stake that results in mining rewards in the form of new coins.

BTC is more popular and can be mined in more places, but miners do not need to do much extra work to earn their new cryptocurrency.

Mining either is fairly simple, making them accessible targets for new miners. While Bitcoin might be worth more, it can also be harder to mine - but it is easier to find places that allow you to mine it.

How you decide to mine it is up to you, but both options are suitable for solo mining, mining pools or even cloud services. It all depends on what you are comfortable doing and which option appeals to you most in your current situation.

Litecoin & Bitcoin Blockchain

The blockchains of both currencies do not play much of a part in them as a currency. Really, Litecoin uses the same blockchain as BTC, which is why the block reward system is the same too.

The system has been tweaked for Litecoin (LTC), but blocks are created in the same way. With each new block created, more data can be stored, and the blockchain can grow larger, but those blocks are not especially different to the blocks created on the BTC network.

Which is Best?

There are plenty of forum posts about what makes Litecoin or Bitcoin better than the other, but the Bitcoin vs Litecoin argument is pointless. In a fight between Bitcoin vs Litecoin, neither would necessarily win because they are the same basic cryptocurrency.

Look at it as a table of contents. Bitcoin may look like the larger cryptocurrency, but if you go to the contents, expand the table and see all of the closer details, the general structure is the same. Even the block system itself is basically identical, just upgraded in different ways.

If you are just interested in the money and investment angle, then either work. Neither cryptocurrency is better than the other, although their values are going to be different. For trading, it really depends on which option you prefer, rather than their overall features.