Over the last few years, public interest in digital currencies has increased dramatically. While Bitcoin has been at the forefront of this attention, a number of other altcoins have emerged (825+ of them according to Coinmarketcap). One currency, in particular, Litecoin, has been quietly gaining popularity. Litecoin was founded in 2011 by ex-Googler and MIT alumni Charlie Lee who recently left his job at Coinbase to focus his efforts on Litecoin. Since launch, Litecoin has grown its market capitalization to over US$ 2Bn and currently ranks 4th after Ripple. Based on the Bitcoin Core client, Litecoin runs on the Bitcoin-based Blockchain; however, it has had already adopted Segregated Witness and is the first large Blockchain with Lightning Network. It’s often said Litecoin’s founders strive to create the “silver” to Bitcoin’s “gold”. In this post, we will analyze how Litecoin compares to its counterpart, Bitcoin, in terms of transaction speed and cost and, mining.
Transaction Speed and Cost
While Bitcoin is the largest and most well-known cryptocurrency, it takes approximately 10 minutes to confirm a digital transaction using Bitcoin. It could take up to an hour for particular cases. Part of the reason is a large number of daily transactions on the Bitcoin Blockchain. This, coupled with the Bitcoin block size of 1MB results in network “congestion”. This is not feasible if you want to make a quick exchange. On the contrary, Litecoin has been built with the premise to improve Bitcoin’s shortcomings and make transactions as easy and as fast as sending an email.
The required time to generate a new block takes on average 2.5 minutes vs. 10 minutes for a block of Bitcoin. This enables a transaction confirmation time of approximately 2.5 minutes, albeit much slower than debit or credit cards. Also, the faster block generation allows Litecoin to handle a larger number of transactions. With the Lightning Network implementation, the speed of transfer is almost instant.
In terms of transaction fees, an average Bitcoin transaction costs between 2 to 5 dollars, which is not viable for smaller value purchases such as a morning cup of coffee. Litecoin transactions cost on average 5 to 15 cents, making it a good alternative to buy smaller token items.
Also worth noting that Litecoin has technical improvements over Bitcoin due to the adoption of Segregated Witness (SegWit) and the Lightning Network. Once the technical improvements are implemented for Bitcoin, we will see a better transaction flow for Bitcoin. However, in the meantime, Litecoin has the advantage in terms of both cost and speed over Bitcoin.
Both Bitcoin and Litecoin are generated through mining. For the most part, cryptocurrencies employ either SHA-256 or Scrypt as their proof-of-work hashing algorithm.
Bitcoin uses an SHA-256 hashing algorithm, which is optimized using a process called parallel processing. Essentially, this is a mode of a computer operation where the task is split into parts that execute simultaneously on different processors attached to the same computer. This is what made mining Bitcoin extremely difficult and gave a rise to the new graphic cards (ASICs).
Litecoin uses Scrypt as their hashing algorithm. Compared to SHA-256, a Scrypt is more memory or RAM intensive, hence a large amount of high-speed memory is often sufficient and more effective than high-performance GPUs. To illustrate, Bitcoin is much more difficult to mine. Let’s look at the difference in hashing power between the two. The total hashing rate of the Bitcoin network is about 5.6 EH/s compared to 12.5 TH/s (trillion hashes per second); for Litecoin, about 500,000x higher. Currently, Litecoin can be mined using PCs with several graphics cards and fast memory. For Bitcoin; however, ASICs cards are absolutely required to optimize the hashing rate and speed.
Currently, the most powerful Litecoin mining hardware is China-based Bitmain’s Antminer L3+. Due to popular demand, the product is not available for shipping until Fall 2017; however, is available on Amazon and eBay for US$ 4,000 – $5,000. The miner operates at a peak hash rate of 504 MH/s while consuming around 800W to get ~500 MH/s. The official price of the L3+ hardware is around US$ 2,000.
Before mining, please check out the following Mining Profitability calculator or similar resources to assess the profitability of your configuration.
- 1 MH/s is 1,000,000 (one million) hashes per second
- 1 TH/s is 1,000,000,000,000 (one trillion) hashes per second
- 1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second
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