Bitcoin leads the crypto market. However, people are still looking for alternative investment vehicles in the cryptocurrency space. And two cryptos usually stand out from the crowd: Litecoin — the first altcoin, and Ethereum — the first smart contract platform.
In this article, we give a full overview of these two blockchains and see how they work. Then we will directly compare ETH to LTC, giving you a good idea of their similarities and differences.
Overview of ETH
Created in 2014 by Vitalik Buterin, Ethereum is the first smart contract-capable blockchain. At its core lies the Ethereum Virtual Machine. It is a global supercomputer that can execute decentralized applications and smart contracts.
Ethereum allows developers to deploy decentralized software. Users can take part in decentralized finance apps, blockchain games, and minting and trading NFTs, among many other use cases.
Ethereum currently runs on a proof-of-work consensus. However, it is migrating towards a more eco-friendly proof-of-stake that should become live in August 2022. The ETH cryptocurrency doesn’t have a maximum supply but undergoes a deflationary burn mechanism. A part of ETH used as transaction fees is destroyed with every new block, keeping the total supply in check.
Overview of LTC
Litecoin was created in 2011 by Charlie Lee, a fervent Bitcoin proponent. It was the first alternative cryptocurrency (altcoin) and was made to complement Bitcoin rather than compete with it. Litecoin was imagined as a lighter version of Bitcoin.
Consequently, LTC is a fork of Bitcoin and retains some of its characteristics, albeit with some minor tweaks. For instance, block finality is four times faster than Bitcoin. This makes it a better and faster cryptocurrency for small transactions. Its supply is capped at 84 million coins, continuing the 4x trend in comparison to BTC.
While it also uses proof-of-work, Litecoin applies the Scrypt algorithm instead of Bitcoin’s SHA-256. Initially, it was designed to be ASIC-resistant, but it never actually achieved this feature. Worth noting is that you can also mine Dogecoin as a side-product of mining LTC.
ETH vs LTC: Key Differences and Similarities
By now, you must have realized that ETH and LTC are fundamentally very different cryptocurrencies. Let’s have an overview of these differences and similarities.
- Both Ethereum and Litecoin run on a proof-of-work consensus mechanism. However, in August 2022, Ethereum is planning to finally migrate to proof-of-stake. It will make it infinitely more scalable and environmentally friendly.
- ETH tokens are used as gas for paying transaction fees on the Ethereum network. Litecoin is a payment cryptocurrency and has a single-use case as a means of exchange.
- Ethereum doesn’t have a capped supply of coins and could theoretically be created ad infinitum. However, a burning function in its protocol was introduced in 2021 that allows the supply to be controlled automatically. Litecoin has a maximum supply of 84 million coins, of which 70 million are already in circulation.
- Currently, congestion on the Ethereum network has driven transaction fees through the roof. Consequently, transferring value with ETH is far from ideal. Litecoin fees remain as cheap as ever, making LTC one of the most popular payment-focused cryptos.
As you can see, ETH and LTC have fairly different use cases and fulfill completely different needs. Ethereum has the potential for adoption by billions of people as the DeFi ecosystem becomes the new financial paradigm. Litecoin, on the other hand, is great as a payment cryptocurrency and is ideal for merchants and eCommerce platforms. You can buy both quite easily using an anonymous exchange crypto platform.
Both Ethereum and Litecoin have proven their resilience in multiple bear markets. Consequently, either of them still has a lot of upside potential, albeit Ethereum plays on a different level. The smart contract platform will evolve into a scalable ecosystem for dApps. That could effectively drive prices higher than ever in the future.