Litecoin isn’t a newcomer to the cryptocurrency market; in fact, it’s almost as old as Bitcoin, the first one to appear way back in 2009. Since then there have been a flurry of new coins arriving on the market, all of them based on the same blockchain technology. With so much activity it’s often easy to forget about the pioneers when newer and more exciting offerings come along. Ethereum has been making headlines for a while, rising to the number two position in the cryptocurrency world even though it’s only been around since 2015. So, is it a serious contender, or just another honey trap that’s been inflated by eager investors? So, Ethereum or Litecoin? Let’s take a look at the differences between Litecoin and Ethereum, to see if the newcomer has anything to offer that the old-timer doesn’t.
Litecoin is strictly a cryptocurrency, so it’s mostly used to buy things. It can be mined, like Bitcoin; but beyond that it has no extra special features. It’s just a straightforward digital currency.
In contrast, you can spend Ethereum, but you can also use it to create smart contracts and crowdsource money to get projects off the ground. The Ethereum infrastructure is ideal for decentralised management, and with smart contract capabilities built in, it’s easy to see that it already has an advantage.
A new organization can establish a funding period, and as soon as the goal amount is reached, participants can put forward proposals for the next steps, before voting on them. Voting rights depend on how much funding someone contributes. Basically, the more you pay, the more of a say you have.
Cryptocurrencies pay miners according to something called the proof-of-work concept. The work done to validate each block attracts a reward. Ethereum rewards miners with five Ether for one verified block, and Litecoin gives 25 LTCs. The value of each coin varies between networks, so don’t be misled by these amounts. Confirm exchange rates first so that you get a sense of the genuine reward value of these cryptocurrencies.
Just like Bitcoin, there is an upper limit on the amount of Litecoins which are allowed to exist, and as soon as that number reaches the limit, no more coins will be permitted to enter the network. Ethereum does it a bit differently though. It allows the same number of coins to be introduced every year.
Litecoin and Ethereum rely on different algorithms for mining. With Litecoin it’s the scrypt algorithm, which prefers high-speed random-access memory instead of raw computing power. This makes it attractive to people who don’t want to invest in powerful and expensive dedicated machines that eat up a lot of electricity.
Ethereum’s algorithm is named “Ethash,” and it was custom designed for the Ethereum network. The company wanted to create a brand-new algorithm to avoid something that it was seen elsewhere—"mining centralization.” This is when a small number of mining groups do the majority of the work. They essentially take over and become disproportionately powerful in their ability to influence the network.
Centralised mining can be extremely profitable. Investors rely on dedicated hardware, specialised chips called ASICs. Ordinary people don’t have the buying power required to invest in these and make profitable business, but the people behind the theory and wanted to level the playing field. So, they designed a proof-of-work algorithm that doesn’t give ASIC uses any advantage, making mining more viable for typical computer owners.
Litecoin transaction fees are very consistent. Right now, it costs around USD$0.04 for each transaction. Ethereum’s approach is a bit different. It uses what its creators call “gas” to arrive at the cost of each transaction. Ethereum transaction costs are worked out according to how complex the transaction is to compute, bandwidth use and storage requirements.
Litecoin and Ethereum may look alike, but their similarities are only surface deep, and which one you should invest in will come down to what your individual needs are.
If you’re only going to be spending your currency, Litecoin offers modest transaction fees that don’t change much. But Ethereum will be much more appealing to you if you’re going to be creating contracts, crowdsourcing, or looking to streamline management processes.
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