Litecoin vs. Ethereum – A Complete Comparison Guide

Like any other investment, it’s important to diversify to reduce the risks. This is why if you’re investing in cryptocurrency, it makes sense to invest in multiple currencies. If you’re confused between Litecoin or Ethereum, two of the early successes of crypto, this Litecoin vs. Ethereum guide will help make the decision easier. This guide will cover a charted overview comparing the coins, how Litecoin and Ethereum work, the differences, and the similarities.

At their core, both Litecoin and Ethereum are very similar in that these are blockchain-based digital currencies. However, there are many differences too. Ethereum is a high-value currency still going strong, whereas Litecoin has yet to reach the peak it achieved back in 2017. That’s not to say that it’s still not a viable option, as many people prefer it for transactional purposes.

Let’s look at the differences at a glance and then talk about each in detail. 

Litecoin vs. Ethereum Overview

What is Litecoin?

Litecoin is a cryptocurrency similar to Bitcoin that was released in 2011 and was created by Charlie Lee. 

While it’s a fork of Bitcoin, there are some unique traits to it. It was created to make transactions easy and cheap without the involvement of any central party. The main currency of the system is Litecoin, denoted by the abbreviation LTC on crypto exchanges. 

Similar to Bitcoin, Litecoin relies on Scrypt proof-of-work algorithm to approve transactions. Moreover, when it was introduced, it was much faster than Bitcoin for transactions. That made it ideal for those making many small transactions. 

Litecoin can be divided up into eight decimal places. However, unlike Bitcoin, its current value is not high enough for these smaller units to be valuable. 

This cryptocurrency also uses SegWit, which is Segregated Witness. It is this same technology that allows more transactions per block, hence faster transaction speed. 

While Bitcoin is a pioneer of cryptocurrencies, its long transaction times have always been a drawback. Lee, a former Google engineer, solved this problem when he dabbled with Bitcoin’s code and created Litecoin. 

Litecoin does have a coin supply limit, but it’s four times that of Bitcoin. The coin supply limit of Litecoin is 84 million. Currently, there are already over 64 million coins in circulation. 

This cryptocurrency doesn’t support smart contracts. These are programs that run transactions and other operations on the blockchain. 

In terms of market capitalization, Litecoin is among the top 20 cryptocurrencies globally. Its market value as of September 2021 is $14.5 billion. 

How does Litecoin work?

Litecoin is based on Bitcoin, as are most cryptocurrencies. It relies on blockchain technology as a decentralized system for recording and authenticating transactions. However, as mentioned earlier, it uses Scrypt proof-of-work concept. 

Scrypt uses an essential derivation function based on passwords. It’s a highly secure system, even better than other popular proof-of-work concepts such as bcrypt or PBKDF2. It was designed for the Tarsnap backup system. 

The Litecoin creator knew about the reliable security of Scrypt and employed it on Litecoin to make customized hardware attacks impossible. However, it does require a lot of memory (RAM) to function, whereas Bitcoin’s SHA-256 doesn’t. 

Bitcoin has been susceptible to attacks in the past because of the shortcoming of SHA-256 hashing, as it became clear in the early 2010s when mining operations started. In simpler words, with better hardware, Bitcoin could be attacked. So Lee dealt with this problem by utilizing even more hardware. 

As a peer-to-peer transfer system, Litecoin makes global payments easy and fast. Like Bitcoin, Litecoin also requires mining. You can keep these coins in wallets, both digital and hardware. Litecoin is actively traded on major crypto exchanges, including Coinbase, Binance, and Kraken. 

What is Ethereum?

Ethereum is the second biggest cryptocurrency after Bitcoin, even though it came on the crypto scene later in 2013. It’s the brainchild of a programmer named Vitalik Buterin, who published its white paper in 2013. 

Like many developers and tech enthusiasts, Buterin was also fascinated by the concept of Bitcoin. Since Bitcoin was an open-source system, he went on to make something similar yet different. 

While everyone refers to this cryptocurrency as Ethereum, the actual currency is called Ether. Ethereum is the name of the system where Ethers reside and trade. 

Ethereum didn’t pick up until 2015 when more developers joined in, and the Ethereum blockchain became a reality. The cryptocurrency Ether (ETH) quickly started gaining value. This new system wasn’t just about creating a decentralized financial platform but also empowering developers to build even more innovative applications. 

Another reason why Ethereum became a sophisticated player in the crypto market is that the developers behind it actively made it better, branching out into new applications. 

Ethereum has a market capitalization of over $341 billion. The current circulation of Ethers is over 117 million. Unlike Bitcoin and Litecoin, there’s no cap on the coin supply. 

Much like Bitcoin’s blockchain, Ethereum has gone on to power many other decentralized applications, including other alternative coins that are loosely based on its platform. Since it was more application and technology-focused from the beginning, it had a wider adoption. 

How does Ethereum work?

Ethereum uses smart contracts, which are basically codes that live and run on the blockchain. These smart contracts facilitate transactions. 

Another thing that makes Ethereum different is that it also facilitates the transfer of content, property, shares, or almost anything of value. This is why Ethereum is playing a central role in the NFT space. 

As a cryptocurrency, it works on the same principles of a decentralized blockchain with distributed nodes having equal autonomy. Those who mine Ethers are rewarded in the same currency. 

Much like Bitcoin, Ethers can also be used to buy stuff. Many platforms and businesses accept Ethers along with Bitcoin and other major cryptocurrencies. 

Since it was a rapid success early on, it quickly became a speculative cryptocurrency. It’s traded on major crypto exchanges along with Bitcoin. 

Some people believe that Ethereum as a blockchain system has a lot of potentials. It’s not just limited to the financial system but can be expanded into other sectors, with applications running on the same blockchain. 

Litecoin vs. Ethereum: How Are They Different?

Both Litecoin and Ethereum are alternative coins (any cryptocurrency other than Bitcoin), and their roots are in the same blockchain technology that powered Bitcoin. However, there are a few key differences between the two cryptocurrencies. 

• Differing Scopes: Litecoin is simply a fork of Bitcoin and has remained that way up till now. A fork means a divergence from the original source code. However, Ethereum has become a platform in its own right, evolving way beyond just a fork program based on Bitcoin. The two cryptocurrencies and their blockchains took a very different approach going forward. Litecoin stuck to the financial transactions, whereas Ethereum expanded to apply its technology to newer applications, bringing in a lot of developer talent. 
• Smart Contracts: The smart contracts on Ethereum assist the transactions, allowing the transactions to be fast. While Litecoin is relatively quicker than Bitcoin, it doesn’t employ smart contracts. It’s still reliant on proof-of-work, while Ethereum is moving towards the proof-of-stake concept. 
• Coin Supply: Another difference between the two is that Ethereum has not created a cap on the coin supply. Litecoin has a cap of 84 million coins. That’s a game-changer for Ethereum mining and prices. As of now, this unlimited supply hasn’t resulted in the loss of value because of a lack of hedge. 
• Block Time: Thanks to the smart contracts, Ethereum transactions on average take just 15 seconds, whereas Litecoin can take up to 2 minutes for a single transaction (although that’s faster than Bitcoin). This is why Ethereum is ideal for many transactions in a day and for storing personal data for other applications. 
• Value: Of course, another significant difference between the two is their market value. Litecoin has suffered notable upsets in the last year and is very gradually bouncing back. It has not even reached the peak of $371 it hit in 2017. Ethereum, on the other hand, has a much higher value. It also reached its peak in the boom of 2017-18 but has since created another record this year alone, peaking at nearly . 
• Applications: Ethereum clearly is doing something right as more and more applications are getting on the blockchain. Ethereum’s robust blockchain, paired with its founder’s ambitious goals, has set it to be the next big thing in crypto. With more applications on the horizon, Ethereum is not just for investors but for developers as well. 

Litecoin vs. Ethereum: How Are They Similar?

As both are cryptocurrencies, both have some similarities too:

• Blockchain Technology: Ethereum and Litecoin have sprung from Bitcoin, which successfully implemented blockchain and gave birth to cryptocurrency. Over the years, the technologies have evolved, but at their very core, the identical blockchain exists that championed decentralization and transparency. 
• Faster Transactions Than Bitcoin: While Ethereum is faster than Litecoin, both are way faster than Bitcoin, taking up to 60 minutes for one transaction. 
• Crypto Exchanges: Both Litecoin and Ethers are traded on dozens of crypto exchanges around the world. The most popular of these are Coinbase, Binance, OKEx, Kraken, and CoinFlex. These crypto exchanges work very similar to stock exchanges, where you can buy and sell cryptocurrencies for other cryptocurrencies or fiat currencies. 

The Bottom Line

If you’re wondering whether to invest in Ethereum or Litecoin, both are viable options. Ethereum has a much higher value and bigger market capitalization as it’s the second-biggest cryptocurrency. That means you’ll need more money to start with. 

On the other hand, Litecoin is being considered by some as a dead currency that won’t gain much value, it still has a considerable market share and a lot of coins in circulation. These days, most Litecoin holders use them for transactions exclusively rather than as an investment. 

Nevertheless, with the unpredictable nature of cryptocurrencies, changing governments’ attitudes (in both positive and negative directions), and the public’s growing interest, which is to say Litecoin won’t peak once again. 

Frequently Asked Questions