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.
Suggested Article: Blockchain’s 5 Biggest Contributions to Tech
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.
Sergey Tarasov/Shutterstock.com
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.
Let’s start with taking a closer look at each of the three cryptocurrencies. Bitcoin is the oldest cryptocurrency that is most commonly used in transactions and many physical stores, in addition to online, have only adopted Bitcoin as a way of payment. Moreover, Bitcoin is the most valuable cryptocurrency, having recently passed the $8,000 mark, which gives it a total value of $148.33 billion. Bitcoin’s supply is limited at 21 million coins and the current circulating supply is at around 16.70 million.
Litecoin is a cryptocurrency very similar to Bitcoin in many ways. When it was launched in 2011, its founder wanted to make Litecoin as an alternative to Bitcoin (comparing it with silver to gold). In this way, Litecoin has a bigger supply, of 84 million coins, it requires less time to confirm a transaction (2.5 minutes compared to 10 minutes for Bitcoin). Litecoin also has a simpler proof-of-work, which is based on scrypt, which results in simpler and less energy-consuming mining. There are 53.99 million Litecoins in circulation, which have a total value of $4.71 billion.
Now, when it comes to Ethereum, the situation changes, because Ethereum is not a cryptocurrency strictly-speaking. Ethereum represents an open-source, blockchain-based platform that provides smart contract functionality. The platform provides the Ethereum Virtual Machine, which can run scripts using a network of nodes. Ethereum also has a cryptocurrency token called Ether, which is publicly-traded and currently has a value of around $460 and a total market capitalization of $44.13 billion, which makes it the second most-valuable cryptocurrency after Bitcoin. Ether tokens are also obtained through mining and then can be converted into other cryptocurrencies or fiat money. Ether is essential for those who want to use the Ethereum Network to run smart contracts, which automatically creates demand for the cryptocurrency. The total amount of Ether tokens is unlimited, but the system is set in such a way that no more than 18 million Ether tokens are issued every year. Another difference between Ether and other cryptocurrencies is that Ether’s block time is around 12 seconds (vs 10 minutes for Bitcoin and 2.5 minutes for Litecoin)
Now that we have presented some of the basics about each cryptocurrency, let’s proceed to the next page, were we will focus strictly on the differences between them and identify, which one is better.
As stated earlier, Litecoin and Bitcoin are pretty similar, but Bitcoin is more popular and more valuable, which sets it ahead of Litecoin. However, the fast growth of Bitcoin might also lead to a bubble, which once burst, will scare some people away from it and towards safer alternatives, one of which is Litecoin. However, at the moment, Bitcoin is the obvious choice between the two cryptocurrencies.
Comparing Ethereum with Bitcoin and Litecoin is not completely fair, given that the former is a platform that also has a cryptocurrency, thus it is much more functional. Because it’s a platform that runs apps, it is much more complex, which provides more functionality, but also exposes it to more risks, as the 2016 hack of the DAO (an organization build on the Ethereum blockchain). Ether tokens can be used not just for transactions, but they can also represent voting rights, shares, and can be used for fundraising, with most ICOs using Ether as digital assets.
Because Ethereum is more flexible and more user-friendly, it enjoys a strong support in the corporate world where it has many big backers. Earlier this year, big companies including banks like JPMorgan Chase & Co., Inc. (NYSE:JPM), tech giants like Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) and other companies united to form the Enterprise Ethereum Alliance, which aims to develop software on the Ethereum platform that would run smart contracts. Over the course of 2017, many other companies joined the EEA and it currently comprises 200 firms. Because of Ethereum’s support among companies, it’s popularity is likely to grow to match the one of the Bitcoin.
With everything being said, it’s hard to determine which is better between Bitcoin and Ethereum, given that they are different projects that have different goals. Bitcoin is most likely to remain the favorite cryptocurrency that can be used for buying stuff and other monetary transactions, as well as a potential alternative asset to invest in. However, given that Ethereum has a strong corporate backing and Ether’s popularity is directly related to the popularity of the platform, Ether tokens are the best to invest in.
