Bitcoin vs. Litecoin: What's the Difference?

Bitcoin vs. Litecoin: An Overview

Litecoin (LTC) is a Bitcoin fork, an altcoin—the term used to refer to cryptocurrencies that are not Bitcoin. Litecoin is based on the same underlying blockchain and verification method as Bitcoin, but there are several key differences that might help you decide which is right for your interests and goals.

Bitcoin

Bitcoin was the first cryptocurrency to be introduced in 2009. Since then, it has evolved from a novelty into a controversial commodity, investment, and exchangeable currency. It relies on decentralized computing power to maintain the validity and security of a distributed database called a blockchain.

Some notable Bitcoin properties that make it unique are:

• Proof-of-work: The consensus mechanism and validation process that uses computational power to verify transactions and blocks in the blockchain.
• It uses SHA-256: The cryptographic hash function that encrypts the blockchain. The hash function converts input to an output of fixed length to encrypt it.

Litecoin

Litecoin was launched in 2011 by former Google engineer Charlie Lee, who announced the debut of the "lite version of Bitcoin" via a posted message on a popular Bitcoin forum. From its founding, Litecoin was seen as being created in reaction to Bitcoin's gravitatation towards centralization.

For this reason, Litecoin adopts many of the features of Bitcoin that Lee and other developers felt worked well for Bitcoin in its early stages. Litecoin has other aspects that the development team felt could be improved upon. Some of Litecoin's notable properties are:

• Proof-of-work: Litecoin uses proof-of-work, but it is less reliant on computing power.
• Uses Scrypt: Litcoin employs Scrypt (pronounced ess-crypt) for its hashing function. Scrypt uses SHA-256 but includes much higher memory requirements for its proof-of-work mechanic.
  

Key Differences

The most significant difference between Litecoin and Bitcoin is its hashing function. As mentioned earlier, Bitcoin uses SHA-256, which is processed very quickly on graphics processing units and specialized machines.

Market Capitalization

Another area in which Bitcoin and Litecoin differ significantly is their market capitalization, the total dollar market value of all the circulating coins. Bitcoin is more popular; demand for it has risen so high that it commands a very high exchange rate. Litecoin has a much smaller market capacity because Bitcoin has a smaller supply and greater demand, and the market expects more from it.

Distribution

Another main difference between Bitcoin and Litecoin concerns the total number of coins available for each. The Bitcoin network can never exceed 21 million coins, whereas Litecoin has a limit of 84 million coins.

This might sound like an advantage for Litecoin; however, supply and demand generally dictate prices for commodities and investments—consumer and investor sentiments dictate demand for cryptocurrency. Bitcoin is more popular and commands a higher price because of market sentiment and the fact that there is a smaller supply.

Similar to Bitcoin, Litecoin has a reward-halving event that occurs about every four years. However, its halving is on a different schedule because it was introduced a few years after Bitcoin. Litecoin's next halving is projected to occur on July 30, 2027, and drop its block reward to 3.125 LTC. Bitcoin's last block halving occurred on April 19, 2024, dropping the block reward to 3.125 BTC.

Transaction Speed

Although advertised as accommodating instantaneous transactions, both the Bitcoin and Litecoin networks require time for those transactions to be confirmed by network participants. One of Litecoin's goals when it was founded was prioritizing transaction speed—it can reportedly handle more than 50 transactions per second. Bitcoin can only process about seven per second. However, Litecoin rarely reaches these speeds, likely because it is used much less than Bitcoin.

For example, on May 2, 2024, Litecoin's 24-hour transaction volume was $350 million. Bitcoin was 112 times higher at $39 billion.

The Bottom Line

Litecoin hard-forked from Bitcoin in 2011. It uses an altered proof-of-work mechanic to validate transactions and open new blocks. Litecoin is designed as a payment method but has become an instrument for speculation and investing.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own Bitcoin or Litecoin.