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Bitcoin vs. Litecoin

bitcoin vs. litecoin

Bitcoin and Litecoin are both cryptocurrencies. Today, money is created and managed by individual countries (e.g. the US issues USD, England issues pounds, etc). Bitcoin and Litecoin are revolutionary because the founders have created a global currency that can be used by anyone in the world, and isn’t tied to any country.

Bitcoin was announced in 2009 via an online academic paper. Two years later in 2011 Litecoin was forked (aka. copied) directly from the Bitcoin code because Litecoin’s founder Charlie Lee believed Litecoin could make some adjustments to the code that would offer consumers lower fees, and quicker transaction times.

The innovation behind both Bitcoin and Litecoin is that they allows two people to send money on the Internet without a third party (like a bank). For example, at the moment I can send you money via Paypal, Citibank or Bank of America, but in all of these scenarios we are trusting these companies to manage our transaction. The problem with this current system is that banks take fees to manage our money, and banks are being attacked by hackers daily. Bitcoin and Litecoin allow you and me to exchange money without using a bank, and without relying on a company.

Today, Bitcoin is often regarded as a store of value (similar to how the gold is valued as a global store of value), and for sending higher amounts of money (think: like a wire transfer), rather than for small casual transactions. Litecoin is often regarded as a currency for day-to-day transactions. The popular analogy is that: if Bitcoin is gold, Litecoin is silver (or a credit card).

Bitcoin is:

  • A decentralized global digital currency
  • Stored on a public ledger (known as a blockchain) where each transaction takes 10 minutes to clear (to be approved)
  • Developed by Satoshi Nakamoto — an unknown figure or group of people

Litecoin is:

  • A decentralized global digital currency
  • Quicker than Bitcoin because transactions take 2.5 minutes to clear
  • Developed by Charlie Lee (aka SatoshiLite)

Takeaway: Bitcoin is more like digital gold, whereas litecoin is often thought of as a digital cash.

Comparison chart: Bitcoin vs. Litecoin

Bitcoin (BTC)

Bitcoin

Litecoin (LTC)

Litecoin

 

What is it? A currency (store of value) A currency (medium of exchange)
Inventor Satoshi Nakamoto Charlie Lee
Went live January 2009 October 2011
Supply Style Deflationary (a finite # of bitcoin will be made) Deflationary (a finite # of litecoin will be made)
Supply Cap 21 million in total 84 million in total
Smallest Unit 1 Satoshi = 0.00000001 BTC 1 Litoshi = 0.00000001 LTC
New token issuance time Every 10 minutes approximately Every 2.5 minutes approximately
Amount of new token at issuance 12.5 new bitcoin are issued every 10 minutes. This number will half (to 6.5 new bitcoin) everytime Bitcoin creates 210,000 new blocks. The next halving will be reached 2020. 25 new litecoin are issued every 2.5 minutes. This number will half (to 12.5 new coins) everytime Litecoin creates 840,000 new blocks. The new halving will be reached in 2019.
Utility Bitcoin has been trending towards becoming a store of value like code. Although it is also used for purchasing goods and services Used for purchasing goods and services, as well as storing value (much like how we currently use a checking account).
Price View price View price
Purpose  “Bitcoin is an innovative payment network and a new kind of money.”[฿]

 “Litecoin is a proven medium of commerce complimentary to bitcoin.”[Ł]

Coinbase Bitcoin

Where do I buy bitcoin and litecoin?

Coinbase is the easiest place to buy both bitcoin and litecoin. If you want slightly lower service fees and a more robust interface, then Gdax (a site owned by Coinbase) offers an alternative to Coinbase.

How much does it cost?

Cryptocurrency prices are constantly fluctuating given the supply and demand. To keep an eye on bitcoin, litecoin, or any other altcoin (an altcoin is coin other than bitcoin) head to coinmarketcap.

bitcoin vs. litecoin

bitcoin vs. litecoin: How many tokens are available?

  • The max supply of Bitcoins is 21 million. Every 10 minutes a new block of bitcoin is generated. The final Bitcoin will be mined 2140.
  • The max supply of Litecoins is 84 million. Every 2.5 minutes a new block of litecoin is generated.

bitcoin vs. litecoin: What can I do with them?

Bitcoin is trending towards a replacement of gold as a store of value. Whereas gold exists with mass and weight in the physical world, bitcoin is an improvement to gold because it can be split into into very small fractions, and instantly sent to people, businesses, and banks around the world.

Litecoin is promising to replace cash. Due to its lower price and faster transaction times, it’s the perfect solution for buying a coffee, tipping a YouTuber, or gifting a friend or family member.

How to store bitcoin and litecoin:

Both web wallets, and hardware wallets exist for Bitcoin and Litecoin, and there are a multitude of options ranging high to low levels of security.

bitcoin (฿) and litecoin (Ł) bitcoin (฿) only
Hardware Trezor
Ledger
Mobile Coinomi Samourai
BitPay
Mycelium
Desktop Exodus Electrum
Web Jaxx Blockchain.info
Paper Bitcoin Paper Wallet
Litecoin Paper Wallet

Learn more about Bitcoin and Litecoin:

 

* This piece was researched and co-written by Gregg Sandler.

Proof of Work vs Proof of Stake

trezor bitcoin wallet

There are two common ways that blockchain networks mine new coins: proof-of-work and proof-of-stake. In this article we’ll explain the difference and what it means for bitcoin, Ethereum, and other altcoins.

Proof-of-work Proof-of-stake
Which blockchain adopts it Bitcoin, Ethereum*, Litecoin Nxt, Peercoin, BlackCoin, Gridcoin
How to select the block creator The one who has the proof of solving a math function. The one who locks up the wealth as a bet to enter a random selection algorithm
Reward Block reward + Transaction fee No block reward, just transaction fee
Hardware reliance Heavy Light
Potential issue 51% attack Nothing-at-stake attack

New to Blockchain?

Before reading you should know that blockchain refers to the record of transactions being sent and received on a network, for example, Bitcoin; and that miners are essentially the bookkeepers of those transactions. 

Proof-of-work: a method which requires miners to validate transactions on a blockchain by working out a mathematical function (called hash).

Proof-of-stake: a method which allows miners to validate block transactions according to how many coins they choose to put at stake on that network (as deposits). Here is a post where the founder of Ethereum explained a design philosophy of PoS.

Both methods exist to serve a common purpose on the blockchain: To validate that the person sending bitcoin (or any digital currency) has the correct amount of funds in their account. And that after the transaction is done, he or she no longer has the coin in their account (aka. to avoid double spending).

And yet, the two take an inherently different approach towards that goal.

PoW v.s. PoS: Buying a shovel v.s. Deposit in a bank

By definition, Proof-of-Work means to solve the hash function and prove the result is correct. While it’s hard to unravel the function, it’s easy for other miners to verify the result once a miner gets it – just putting it back to the function to see if it works out, like an algebraic problem. If it does, congrats! Here’s the prize. So take out your shovel, do the physical work, and show everybody you have mined the gold.

Proof-of-Stake, however, is a mechanism that needs no math. Instead, inside the network, you simply lock up a certain amount of your stake, i.e. your whatever cryptocurrency generated in this blockchain. That is your proof because something is at stake. The network uses a random selection algorithm to determine who the next block creator is, with factors like how many coins you lock up, what the coin’s age is, or how long you have locked up already, etc. Different PoS-based blockchain has various criteria, but the gist is not much hardware work is required. It’s somewhat like deposition and interests.

PoW v.s. PoS: Block reward v.s. No block reward

In PoW-based blockchain, miners do the hard work and will be rewarded. Recall Bitcoin and Ethereum, where a new block rewards 12.5 Bitcoins and 5 Ethers. But there’s another thing called a transaction fee. When you send a Bitcoin to me, that transaction needs to be validated and documented on the blockchain through the hash function math that miners are doing. But they are not doing it for free so you need to attach a transaction fee. The next lucky miner who creates the next block will receive all the transaction fees and the block reward itself, so it’s 12.5+ Bitcoins.

In PoS method, the blockchain has no block reward. Only transaction fees. That’s also why participants in the PoS blockchain should be called validators, not miners. They only facilitate the validation process of transactions without the mining activity like PoW does.

Ethereum Mining

Ethereum Mining

PoW v.s. PoS: Hardware heavy v.s. Light reliance

Because of the hefty math solving, PoW requires supercomputing power. For example, Bitcoin mining involves tons of mining chips which consume lots of electricity, depreciate fast, and could pile up at the landfill.

On the other hand, PoS relies substantially less on hardware. By just locking up your stake inside the blockchain network, you won’t expect a daunting electricity bill as you would from Bitcoin mining rigs.

PoW v.s. PoS: Potential Threat

Following the point above, since PoW mining requires physical hardware, the more powerful mining chips you have, the stronger computing capacity you own, then the more likely you can create the new blocks. It leads to a potential danger when one place accumulates over 51 percent of the entire network mining power. It is then capable of becoming a center, which is the fundamental situation that blockchain tries to eliminate. This is called 51% attack.

On the other hand, PoS imposes a threat called Nothing at Stake attack. The details can be very technical. But the important concept is that just as validators lock up a lot of their stakes, they can also lock up nothing. They may have no chance of creating the next block but because nothing is at stake for them, they have nothing to lose just to purposely mess up the blockchain. This video is recommended if you’d like a more technical explanation.

*Ethereum currently is still running on the proof-of-work protocol. But it is confirmed that proposals for Ethereum to switch to proof-of-stake, known as Casper, are being developed by the network’s founder Vitalik Buterin.