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Over the past few years, interest in cryptocurrencies has continued to surge. Despite the influx of new digital currencies, three cryptocurrencies have been around for over a decade and continue dominating the market.
Bitcoin (BTC) has maintained its dominance in the space by remaining the top crypto overall. Ethereum (ETH) has turned out to be a worthy contender to Bitcoin through its innovative and thriving ecosystem. And another cryptocurrency that has continued to exert its dominance through the years is Litecoin (LTC).
To learn more about these three cryptocurrencies, please refer to these articles:
In this article, we’ll be looking at the main differences between these three cryptocurrencies, and also analyze which is the best crypto to invest in.
Key Takeaways:
Bitcoin, Ethereum and Litecoin each have their unique features and use cases.
Bitcoin is renowned for being a secure store of value and facilitating cross-border payments. Ethereum focuses on smart contracts and DApps, while Litecoin offers faster transactions and serves as a popular crypto payment method.
Bitcoin was founded in 2009. Since then, the cryptocurrency market has arguably gone through three bull markets, specifically in 2013, 2017 and, most recently, in 2020, a particularly prominent year with various altcoins reaching all-time highs alongside Bitcoin’s ATH of $69,000 in November 2021.
Aside from these bull cycles, other market catalysts have included the explosion of decentralized finance (DeFi), non-fungible tokens (NFTs) and the metaverse, which have brought innovative products into the market. In addition, the periodic emergence of meme coins such as Dogecoin and Shiba Inu (in 2013 and 2020, respectively) has expanded the crypto market.
Within the past decade, cryptocurrencies have been widely adopted, especially (for example) by companies such as Tesla, and institutional investors adding them to their investment portfolios. There’s also the unfolding potential of web3, which is expected to take the crypto industry to the next level of mass adoption.
As the earliest entrant into the crypto space, Bitcoin broke ground for the world to explore the possibilities of blockchain technology. The coin continues to hit a new high with every bull cycle. Part of its popularity is driven by the astronomical returns for those who bought it when it was trading below $100.
Case in point: If you’d bought Bitcoin when it was at its low price of $67.81 on July 6, 2013 (almost 10 years ago) and held it, you’re up over 38,800% on your initial investment at the current price of $ 26,278 as of May 26, 2023. As such, Bitcoin is seen as a secure asset to store value for long-term investors.
Bitcoin has remained the king of cryptocurrencies. Most of the time, altcoins move in the direction that Bitcoin does. It also has a solid architecture that allows for fast and cheap cross-border payments, as compared to traditional banking systems.
Yes. As the top blue chip crypto, Bitcoin is considered one of the safest cryptocurrencies you can hold. The coin has been around longer than any other, and hasn’t experienced any massive instability, unlike many of the newer cryptocurrencies in the market.
Also, Bitcoin’s supply is becoming scarce with every Bitcoin halving event, which occurs roughly every four years. Since Bitcoin becomes increasingly difficult to mine, this drives its value up. With the next halving expected to occur in April 2024, it’s expected that Bitcoin’s price will rally next year.
After Bitcoin, Ethereum is the second most popular cryptocurrency in the market. The community-ran platform introduced the world to the power of smart contracts and the usefulness of decentralized applications (DApps).
Ethereum’s popularity is driven by its secure technology, which has created a thriving developer ecosystem. Furthermore, the platform is continuously working to upgrade its operations to make them faster and cheaper. In 2021, Ethereum began its migration from a proof of work (PoW) blockchain to a proof of stake (PoS) blockchain and successfully completed The Merge in September 2022.
Ethereum also successfully underwent a major update known as the Ethereum Shanghai upgrade, which went live in April 2023. The upgrade allowed the withdrawal of ETH that had been staked for nearly two years on the platform.
Yes. The successful implementation of the Ethereum Shanghai upgrade has shone new light on Ethereum. It lets you unstake your tokens anytime (which was previously impossible, since they were indefinitely locked). The update is expected to attract more investors to the project, who can now secure the network without sacrificing liquidity.
The successful completion of The Merge and other ongoing improvements on Ethereum’s platform are tackling the challenge of high gas fees, which have been an ongoing issue. Ethereum’s solid architecture, thriving ecosystem, stability over the years and continued upgrades to its platform make Ethereum a worthy crypto to invest in.
It’s currently ideal to invest in Litecoin, due to its thriving payment system and the much anticipated halving event coming in August 2023.
Litecoin has been around since 2011, and has remained popular as one of the most preferred crypto payment methods worldwide. The digital currency has experienced phenomenal growth over the years. As a “lighter” version of Bitcoin, Litecoin continues providing crypto users a faster and more secure way to transact.
The price of Litecoin has continued to surge in anticipation of the upcoming halving event. Many observers are bullish, because it will make it more challenging to mine LTC, thereby creating scarcity and driving the price of Litecoin up in the long run.
Bitcoin, Litecoin and Ethereum are all open-source software platforms, and their codes are publicly accessible. Despite all three cryptocurrencies being blockchain-based, there are certain underlying differences between them.
Let’s start off with some specific details pertaining to each of these cryptocurrencies.
Cryptocurrency | Litecoin | Bitcoin | Ethereum |
Date Founded | October 7, 2011 | January 9, 2009 | July 30, 2015 |
Creator | |||
(May 2023) | $6.3 billion | $518 billion | $217 billion |
Since blockchains are publicly shared ledgers, they require an effective, fair, real-time, dependable and secure mechanism to ensure that all transactions taking place on the network are genuine.
The consensus mechanism is essentially a set of guidelines to determine the validity of contributions made by the participants of the blockchain. In a blockchain’s dynamically changing environment, all participants have to agree on a consensus on the ledger’s status before transactions can be confirmed.
There are two main types of consensus mechanisms: proof of work (PoW) and proof of stake (PoS).
Using PoW, Bitcoin and Litecoin rely on miners, who solve complex mathematical equations using specialized hardware to add blocks to the networks. On the other hand, the Ethereum blockchain uses PoS, whereby validators stake their currency to validate new blocks on the blockchain. PoS requires significantly less computational power than PoW, which lowers both hardware requirements and energy consumption.
A hashing algorithm, which determines how incoming data is incorporated and verified on a blockchain, differs for the three cryptocurrencies. Bitcoin makes use of the SHA-256 algorithm and Litecoin uses Scrypt, while Ethereum previously relied on Ethash, no longer relevant since the network has switched to PoS as part of its Ethereum 2.0 upgrade.
The SHA-256 algorithm utilized by Bitcoin uses the computational power of GPUs (graphics processing units) and, to a lesser extent, CPUs (central processing units) to verify transactions and blocks. The most common method for Bitcoin mining consists of the use of application-specific integrated circuits (ASICs), a hardware system that can be tailor-made to mine Bitcoins.
However, many people prefer not to use ASICs because they’re expensive, challenging to maintain and necessitate specialized knowledge. Bitcoin mining has become more centralized and exclusive because fewer people have the skills, resources and time to buy, set up and maintain ASICs. This centralization compromises the security and resilience of the network.
Scrypt is a modified version of SHA-256, but is more memory-intensive, which reputedly lessens its reliance on GPU arithmetic logic units (ALUs) and, consequently, ASIC mining equipment. Scrypt aims to make mining more accessible to individuals, as not all users can afford hardware equipment such as ASICs. This contributes to the decentralization of a blockchain network.
Nonetheless, since 2021, when Scrypt ASIC mining machines were introduced, Litecoin mining has once again fallen under the control of a few dominant players.
Bitcoin and Litecoin each have a supply cap on the number of tokens, with Bitcoin’s set at 21 million and Litecoin’s at 84 million. Since Litecoin has four times the supply of tokens, its network possesses greater liquidity as compared to Bitcoin. However, the scarcity of Bitcoin makes it more valuable.
Ethereum, on the other hand, doesn’t have any ceiling for its supply of ETH. Nonetheless, its rate of growth is limited to 4.5% per annum.
Miners are rewarded for their efforts in the form of a blockchain’s native currency.
In 2009, Bitcoin started off with a 50 Bitcoin reward per block mined. After going through three halvings, the reward is now set at 6.5 BTC.
Similarly, Litecoin began with a reward of 50 LTC per block mined. Following two halvings, the current reward stands at 12.5 LTC per block, with a third halving scheduled for 2023, which will reduce the reward to 6.25 LTC.
These rewards are halved in order to limit the quantity of each cryptocurrency released into the circulating supply, thus creating scarcity. Bitcoin block rewards are halved every 210,000 blocks, while Litecoin block rewards are halved every 840,000 blocks. This difference is proportional to the different supply cap.
Since Ethereum now utilizes a PoS consensus mechanism, there are no rewards for block mining. Instead, participants are rewarded by staking their Ether on the network to participate in block validation. Depending on the staking program in which users choose to participate, their rewards can fluctuate, anywhere from 2% to 20%.
Another significant difference among the three cryptocurrencies lies in each one’s transaction speed, or TPS (transactions per second).
Bitcoin processes approximately 5 TPS, and takes about 10 minutes to create a new block. In addition, its network’s software limits the size of a new block to 1MB. Not all Bitcoin transactions are processed within ten minutes. This is especially the case when the network is congested due to a large number of transactions.
Litecoin processes 54 TPS, taking approximately 2 1⁄2 minutes to create a new block. Transactions on Litecoin are roughly four times faster than Bitcoin’s. As a result, Litecoin is often regarded as a currency for day-to-day transactions, while Bitcoin is considered to be more of a store of value. With its recent upgrade, the Ethereum network is now able to handle up to 100,000 TPS.
(May 2023)
Bitcoin: ~$3 to $6
Litecoin: ~$0.03 to $0.04
Ethereum: Ethereum employs a different mechanism, called gas, in place of transaction fees. Ethereum’s gas fee ranges from $50 to $70.
One of the biggest issues for the Bitcoin network is scalability. The more users trying to send funds over the network at a given moment, the more congested the network becomes. Since transaction fees are defined on the basis of an auction, those who make higher bids get their transactions confirmed first.
This leads to high network fees and longer confirmation times. Though Litecoin has much lower fees, its network experiences the same problem.
To speed up transaction times and lower transaction costs, Bitcoin and Litecoin have implemented some improvements. Among these are SegWit, which increases the block size limit by pulling signature data from transactions, and Lightning Network, a Layer 2 that opens up microchannels between transacting parties.
Since Ethereum has switched over to PoS, problems with scalability aren’t as prominent. However, scalability has been a major issue for the popular Ethereum network while it was using a PoW consensus. Layer 2 solutions were implemented as a partial remedy for Ethereum’s former transaction rate of 12–15 TPS.
The use cases for each of these three cryptocurrencies differ quite drastically.
Although Bitcoin was created as a form of technology to allow for decentralized peer-to-peer (P2P) payments, its slow transaction speed makes it impractical for daily use. It’s been referred to as digital gold, serving primarily as a store of value.
Litecoin was forked from Bitcoin’s code to tackle issues of cost and scalability. These differences make Litecoin more favorable for merchants, since payments and transactions can be carried out quickly at a cheaper rate.
Ethereum focuses on smart contracts, transfer of asset ownership and DApp production. Smart contracts are software programs that take action when specific predetermined criteria are met. This procedure makes sure that every Ethereum transaction is secure for the user.
Additionally, exchanges like the transfer of property or money may be included in the contracts. Ethereum’s unique feature is that it allows programmers to directly interact with its underlying network, a capability that Bitcoin and Litecoin do not support.
Bitcoin, Ethereum and Litecoin are some of the most stable cryptocurrencies to invest in since they have solid architectures and have stood the test of time. However, when looking at the best crypto to invest in, it's essential to consider their market caps, prices and ongoing ecosystem developments.
With Bitcoin’s halving not occurring until 2024, Litecoin looks to be the most profitable investment for now with it upcoming halving event that could see its prices soar in the short term. History has shown that a crypto's price often pumps right before such a monumental event, as investors anticipate a price rally in the following months.
Furthermore, Litecoin has registered phenomenal growth, despite a slump in the crypto market due to bearish conditions. While nothing is guaranteed in the highly volatile crypto market, buying Litecoin could provide good returns.
NOTE: While any one of these cryptocurrencies may be the most stable crypto to invest in, it should be noted that the crypto market itself is highly volatile, so always do your own research and invest only what you can afford to lose.
The crypto industry has experienced massive growth since its inception in 2011. It’s encountered various challenges, such as security breaches, heightened attention from regulators and a slow speed of mass adoption.
Despite these challenges, Bitcoin, Ethereum and Litecoin have remained strong and seem destined for even more price increases. Furthermore, the upcoming Litecoin and Bitcoin halving events could provide investors with a potential opportunity to make significant returns.
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