While there are well over 1,000 cryptocurrencies that are currently available, only a handful are widely popular. Three cryptocurrencies that stand-out are Bitcoin, Litecoin, and Ethereum, which have market values worth billions of dollars. There is also Ripple, which even though costs around $0.23 per token, has a total capitalization of over $8.80 billion. Other large cryptocurrencies include Dash, NEO, Iota, Monero, NEM, Lisk, and Qtum, all of which have aggregate values north of $1.0 billion. Given that digital cryptocurrencies are gaining more ground, let’s compare Litecoin, Ethereum, and Bitcoin and try to assess which one is better.
Cryptocurrencies have been around only since 2009 when Satoshi Nakamoto introduced the Bitcoin and other cryptocurrencies appeared in the last several years, although the concept has been around for a couple of decades. Cryptocurrency represents a digital way of exchange that is outside the government control and is regulated only by its users. Developers design cryptocurrencies using protocols that encrypt data transfers, which makes them anonymous and virtually impossible to break. The protocols that use advanced mathematics principles ensure that cryptocurrencies are safe and cannot be counterfeited or duplicated. All transactions that use a cryptocurrency are stored in a ledger, which is distributed among all users in a cryptocurrency network.
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Once a cryptocurrency transaction is requested, it has to be validated by the network and then it is added to the ledger, which is called a blockchain. Once a transaction is validated it cannot be reversed, or altered in any way as it is an immovable part of the blockchain. Transactions are confirmed by miners, who have to identify the so-called “Proof of Work” which connects the new block to its predecessor. Each cryptocurrency can have a different Proof of Work, for Bitcoin it’s based on the SHA 256 Hash algorithm, Litecoin uses scrypt, while Ethereum uses Esthash, a native proof-of-work function. Miners that identify a new block are rewarded with newly created coins.
Because cryptocurrency transactions have to be approved by the entire network, they don’t require a server that keeps record about the balances, which means that cryptocurrencies represent decentralized network. Each entity in the network has to keep record of all transactions in order to verify that future transactions are valid and cryptocurrencies are not double spent. However, this also requires that every single peer of the network has to agree on everything and a consensus within the network has to be established. If at least one entity disagrees, the whole network can be broken. Earlier this year, a disagreement arose within the Bitcoin community, which resulted in a hard fork in August. The Bitcoin network was split into two incompatible networks with similar properties and mining process, but different values. In November, the Bitcoin network had another split, which resulted in the creation of Bitcoin Gold. A similar fork happened in the Ethereum network in October.
While initially cryptocurrencies were mostly used by tech savvy people interested in discovering a new technology, over the years, they grew to attract more attention from consumers and businesses, and even large companies have adopted it, like these 25 big companies that accept Bitcoin, Ethereum and other cryptocurrencies. Venture capitalists and other investors started to invest in Ethereum, Bitcoin, Litecoin and other promising cryptocurrencies as a way to generate returns and started supporting cryptocurrency start-ups through Initial Coin Offerings, which offer tokens that can be converted into Bitcoin or other major cryptocurrency and then exchanged into fiat money (take a look at 15 best Bitcoin exchange and trading platforms by volume).
With this in mind, let’s compare Litecoin, Ethereum, and Bitcoin from different standpoints in order to understand which one is better.