Cryptocurrency Bitcoin vs. Litecoin: What's the Difference?

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Similarities Between Bitcoin and Litecoin​

On the surface, Bitcoin and Litecoin have a lot in common. At the most basic level, they are both decentralized cryptocurrencies. Whereas fiat currencies such as the U.S. dollar or the Japanese yen rely on the backing of central banks for value, circulation control, and legitimacy, cryptocurrencies are not subject to a centralized authority: They rely only on the cryptographic integrity of the network itself.


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.3 From its founding, Litecoin was seen as being created in reaction to Bitcoin. Indeed, Litecoin’s own developers have long stated that their intention is to create the “silver” to Bitcoin’s “gold.”


For this reason, Litecoin adopts many of the features of Bitcoin that Lee and other developers felt were working well for the earlier cryptocurrency, and changes some other aspects that the development team felt could be improved.

Proof of Work​

One important similarity between Bitcoin and Litecoin is that they are both proof of work ecosystems. That means the underlying process by which both cryptocurrencies are mined—that is, generated, authenticated, and then added to a public ledger, or blockchain—is fundamentally similar (though not exactly the same, as we will see below).

Storage and Transactions​

For an investor, many of the basic elements of transacting with Bitcoin and Litecoin are very similar as well. Both of these cryptocurrencies can be bought via exchange or mined using a mining rig. Both require a digital or cold storage "wallet" in order to be safely stored between transactions.


Furthermore, the prices of both cryptocurrencies have over time proven to be subject to dramatic volatility, depending upon factors ranging from investor interest to government regulations.

Differences Between Bitcoin and Litecoin​

Market Capitalization​

One area in which Bitcoin and Litecoin differ significantly is in their market capitalization, the total dollar market value of all the outstanding coins.


As of March 2021, the total value of all bitcoins in circulation is around $1 trillion, making its market cap more than 70 times larger than Litecoin, which has a total value of $13.7 billion.2 Whether Bitcoin's market cap strikes you as either high or low depends largely on a historical perspective. When we consider that Bitcoin’s market capitalization was barely $42,000 in July 2010, its current figure seems staggering.


Bitcoin as a network still dwarfs all other digital currencies. Its closest competitor is Ethereum, the second-largest cryptocurrency, which has a market cap of nearly $212 billion.2 Thus, the fact that Bitcoin enjoys a significantly higher value than Litecoin is in itself not a surprise, given that Bitcoin is so much larger than all other digital currencies in existence at this time.

Distribution​

Another of the main differences between Bitcoin and Litecoin concerns the total number of coins that each cryptocurrency can produce. This is where Litecoin distinguishes itself. The Bitcoin network can never exceed 21 million coins, whereas Litecoin can accommodate up to 84 million coins.3


In theory, this sounds like a significant advantage for Litecoin, but its real-world effects may ultimately prove to be negligible. This is because both Bitcoin and Litecoin are divisible into nearly infinitesimal amounts. In fact, the minimum quantity of transferable Bitcoin is one hundred millionth of a bitcoin (0.00000001 bitcoins) known colloquially as one “satoshi.”4


Users of either currency should, therefore, have no difficulty purchasing low-priced goods or services, regardless of how high the general price of an undivided single Bitcoin or Litecoin may become.

Litecoin vs. Bitcoin FAQs​

What Is Litecoin Used For?​

Given all the hoopla around its prices and market cap, it may seem that Litecoin exists mainly to be bought and sold back and forth, to paraphrase the old traders' joke about soybeans. In actuality, though, Litecoin— like all cryptocurrencies—is a form of digital money. So it can be used by individuals and institutions to purchase things and to transfer funds between accounts.


Its relative speed and cheapness make it ideal for smaller, everyday transactions. Participants operate directly, without the use of an intermediary like a bank, credit card company, or payment processing service.

Can You Convert Litecoin to Bitcoin?​

You can convert litecoins to bitcoins, and vice versa—similar to the way you can exchange fiat currencies, like changing dollars into pounds, or yen into euros. Since both are leading, and highly liquid cryptocurrencies, there is generally no problem in swapping one for the other.


To do so, you need to have an account with a cryptocurrency trading or exchange platform or trading app. The amount you'll receive in the conversion depends, of course, on the current prices for each currency.

Can I Send Litecoin To a Bitcoin Address?​

It's important to understand cryptocurrency conversion because you can't send Litecoin to a Bitcoin address—even if it's in the same wallet—and vice versa. If you do, the money will be lost. Recovery may be possible if you have seed backups for the keys that let you access your account, but it's difficult.

Can Litecoin Overtake Bitcoin?​

Whether Litecoin could ever overtake Bitcoin as the number one cryptocurrency is a matter of speculation. Bitcoin remains the original digital money, and to many, its name is synonymous with cryptocurrency in general— practically a generic term, like Kleenex is to facial tissue.


If any other crypto were to knock Bitcoin off the throne, Ethereum (the current number two), or one of the other higher-ranked currencies might be more likely candidates. Still, some analysts like Litecoin's fundamentals. "Litecoin can process transactions quicker than bitcoin, and its quicker block time suggests that it can handle more capacity than bitcoin," stock-picker Sean Williams wrote in a 2018 article for The Motley Fool, adding "it most definitely has the tools to push aside bitcoin and become the go-to medium of exchange for digital currency users."12


While Bitcoin and Litecoin may, relatively speaking, be the gold and silver of the cryptocurrency space today, history has shown that the status quo in this fast-moving and still-developing sector can change in even a few months. It remains to be seen whether the cryptocurrencies with which we have become familiar will retain their stature in the months and years to come.