Few tokens in the crypto market have stuck around for over a decade while still remaining relevant and profitable. Yet these three cryptocurrencies have managed to pull it off.
Bitcoin has a well established reputation as the pioneer crypto. Shortly after, Litecoin came on the scene as one of the earliest BTC-inspired altcoins. Ethereum on the other hand brought a new range of functionality to the crypto sphere in 2013.
Fast forward to 2023, data from Coinmarketcap shows that even after facing a variety of market conditions over the years, all of the cryptocurrencies in question sit among the top 20 tokens globally. BTC is of course number 1 with ETH trailing right behind. Litecoin sits a little farther in the 17th position.
When it comes to choosing a coin to invest in, one has to look past the evident success of each of these cryptocurrencies. A crypto investment is a dicey decision that requires you to work out your goals before settling on an asset to put money in. Afterall, certain features in a particular token may appeal to one investor but could be a dealbreaker for another.
So what are the unique characteristics that make LTC, BTC & ETH notable investments in their own rights? And what are the core differences between these tokens? Let’s start by examining them individually.
Bitcoin is the undisputed king of cryptocurrencies, but how did it come into this title, and what exactly is Bitcoin anyway?
In basic terms Bitcoin is digital money. It was introduced to the world in a 2008 white paper that was published by an anonymous developer (or team of developers) by the name Satoshi Nakamoto. The whitepaper described Bitcoin as a “Peer-to-Peer Electronic Cash System” that would serve as an alternative to existing payment infrastructures in the wake of the year’s financial crisis.
The Bitcoin network lets users transfer its eponymous native token directly to one another cutting out middlemen like banks and other platforms. Bitcoin grants users full ownership of their assets alongside high levels of security and privacy because it utilizes blockchain technology.
It is considered the crypto king because it is the original cryptocurrency. Bitcoin paved the way for other digital tokens and has maintained its position as the topdog in terms of value. Despite literally thousands of competitors having shown up, pretty much none have come close to displacing Bitcoin.
Ethereum is the crypto second-in-command and Bitcoin’s greatest rival. Interestingly, however, its features are a far cry from Bitcoin’s singular offering. Indeed, Ethereum is a chameleon of a platform that provides users with a lot of options. It was created to enable the development and deployment of smart contracts, which are contracts that automatically execute when predefined conditions are met.
Thanks to this, developers can build decentralized applications (dApps) on Ethereum. These apps can have various use cases such as gaming, decentralized finance (DeFi), and NFT support (minting, buying and selling). It is impossible to discuss Ethereum without bringing up its native token Ether which has similar functions to Bitcoin. However, Ethereum users also need the token to pay for the network’s services.
Litecoin bears the title of the “silver to Bitcoin’s gold.” The altcoin showed up 2 years after Bitcoin’s genesis block was mined. It was created by former google engineer Charlie Lee who later became director of engineering at Coinbase.
Lee first released Litecoin on Github, describing it on a popular Bitcoin forum as the “ "lite version” of the first cryptocurrency. Indeed, Litecoin is based on Bitcoin’s original source and so shares several features with BTC.
While it functions as a peer-to-peer crypto payment system, Litecoin came with a few modifications to the BTC source code. The network sells itself as a faster, more affordable version of Bitcoin and has managed to avoid entering into direct competition with the king crypto.
Litecoin’s dedicated development team has even created upgrades that have turned out to be beneficial to its parent network. However, there is some debate around whether Litecoin will turn obsolete should Bitcoin become quicker and cheaper than its lite version.
Regardless, as it stands, Litecoin remains the better option for everyday, lightweight transactions.
We briefly touched on this during the overview of each cryptocurrency, but for greater clarity in their differences;
BTC functions mainly as a medium of exchange and as a store of value. Crypto users can transact with bitcoin as some businesses & persons accept the token as a form of payment. People also choose to hold on to the digital coin as a long-term investment in the hopes of growing or preserving their wealth.
Litecoin, however, functions like Bitcoin but aims to make up for the latter’s failings. Indeed, the network provides cheaper transaction rates and also shorter confirmation times. These improvements are a great advantage for users who prioritize speed and affordability. LTC comes second to bitcoin as a secure store of value but it functions well for small-scale, everyday operations.
Ethereum is well-known for its focus on providing smart contract functionality. The platform lets anyone interact with its network and build applications with use cases that span multiple industries. Ethereum’s design prioritizes programmability, scalability, openness, interoperability and decentralization. ETH (the network’s digital coin) functions like other cryptocurrencies but also powers transactions on the platform.
The blockchain - that is the technology cryptocurrencies are based on - is also referred to as distributed ledger technology. This system involves keeping data records across a network of computers (nodes). It’s a decentralized system that needs participants to be in agreement regarding its transaction and ownership records. That is where consensus mechanisms come in.
A consensus mechanism refers to the method a blockchain system or the participant nodes utilize to reach the aforementioned agreement.
Bitcoin and Litecoin use the proof-of-work consensus mechanism. PoW involves a process known as mining where nodes aptly named “miners'' compete to solve complex mathematical puzzles. It is time-consuming, energy-intensive, and also expensive due to the requisite hardware. The first miner to solve the problem confirms the transaction and adds it to the network. In return, they receive the network’s cryptocurrency known as the block reward.
The Ethereum blockchain uses the proof-of-stake system where validators (nodes) “stake” or lock up their cryptocurrency on the network. When a set of transactions are set for processing, the network selects a validator node to verify the block.
PoW is known for its high security while PoS consumes less energy and is a more accessible option.
Mining rewards are the tokens miners in a PoW system receive in exchange for their work. It is usually in the network’s local tokens. Thus, Bitcoin miners receive BTC while Litecoin miners receive LTC.
Here’s a breakdown of how the rewards work; after successfully mining a new block miners receive a set amount of newly created tokens. In Bitcoin’s early days miners received a total of 50 BTC as their block reward. However, due to a process known as halving, which usually occurs every four years , the reward has dropped since then.
Three halvings have taken place since Bitcoin’s 2009 debut and the block reward now sits at 6.25 BTC. Another halving is set to take place in April or May of 2024 dropping miner earnings to 3.125 BTC per block. The halvings will continue until the king crypto hits its supply cap of 21 million tokens.
Litecoin operates in a similar fashion, the Bitcoin lookalike kicked off with a 50 LTC block reward which has reduced to 6.25 LTC per block after 3 halvings. The last halving event took place on August 2, 2023.
The point of halving is to reduce the number of tokens that enter into circulation in order to create scarcity. This is the reason both Bitcoin and Litecoin are described as deflationary becase fewer tokens join the market over time.
As previously established, Ethereum does not use the proof-of-work consensus mechanism. Instead the network uses staking which involves locking up ETH for a specified duration. The incentives for staking include interest on staked coins as well as ether rewards when validators confirm transactions. The higher an individual’s stake the higher their chances of being chosen to create blocks and the greater their rewards.
Bitcoin has a maximum supply of 21 million tokens. What this means is that only 21 million BTC will ever enter the market creating scarcity that increases the token’s inherent value. Like BTC, Litecoin also has a supply cap of 84 million tokens. With 4 times Bitcoin’s supply, the LTC trades scarcity-derived value for more liquidity.
Ethereum does not operate like either of these tokens however, as it has an infinite supply of coins.
Scalability refers to a network’s capacity to efficiency deal with a rising number of users, transactions or operations without becoming congested, more expensive and slowing or even shutting down. It’s an important factor because as more users make their way onto a network it has to be able to accommodate the expansion.
Scalability used to be a major problem for the Ethereum network. However, in 2022 the platform transitioned from PoW to PoS in an upgrade dubbed “The Merge.” Following this, its high gas costs, bottlenecks, and slow transactions and other scalability problems have reduced although the network is still a long way from perfect.
As the most popular blockchain on the block scalability issues are pretty much a given for Bitcoin. The network’s huge pool of users coupled with its limited block size and block interval make for a relatively low transaction throughput. Being modeled after Bitcoin but also attempting to address some of its shortcomings, Litecoins faces these same issues though to a lesser degree.
Both networks have turned to scalability solutions such as the SegWit upgrade and layer 2 protocol the Lightning Network.
Of the 3 networks, Ethereum is the fastest, able to handle between 20,000 to 100,000 transactions per second. Ethereum transactions generally average 15 seconds and 5 minutes in terms of confirmation time.
Bitcoin transactions take roughly 10 minutes to complete and the network’s processing capacity rests at about 5 transactions per second. One major thing to consider is that each new block has a size of 1MB, a limited block space affects the number of transactions that can be added to a block. This in turn leads to congestion when the network is faced with several transactions.
Litecoin is faster than its predecessor with a transaction speed of 54 TPS while creating new blocks in roughly 2.5 minutes. The network is 4 times faster than Bitcoin, a feature that makes it a better option for daily exchange.
Table comparing BTC, LTC & ETH
Depending on prevailing conditions and personal investment goals, any of these cryptocurrencies could be the best investment choice at a certain time. For example, in the months leading up to Litecoin’s halving event prices began to surge, positioning the token as a profitable short-term investment.
Bitcoin might find itself in a similar spot come 2024 as positive price movements are characteristic of such events. Hence, rather than simply pitting these tokens against one another, try examining their features and coming developments in the light of the volatile crypto market.
These are all cryptocurrencies that have stood strong for over a decade and seem perfectly capable of offering stability and profit should you play your cards right.
Experts believe that this is unlikely but whether or not this will occur remains unpredictable due to the many factors involved.
It's unlikely that Litecoin will replace Ethereum, as they serve different purposes. Ethereum is a smart contract platform, while Litecoin is primarily a digital currency.
No. While Litecoin surpasses BTC in terms of speed, it lags far behind Ethereum.