Crypto

6 min read

September 02, 2021

Litecoin vs. Ethereum: The Differences

Breaking down the differences between two of the coins that address the shortcomings of Bitcoin, but nevertheless both serve useful purposes.

If you’re familiar with cryptocurrency at all, chances are that you’ve definitely heard of Bitcoin. But as you dig a little deeper into this world, you’ll come across a number of different types of cryptocurrencies, including Litecoin and Ethereum. 

With Bitcoin prices and volatility surging, it can be intimidating to invest in cryptocurrencies through Bitcoin. So, learning about the differences between Litecoin and Ethereum (and even other types of cryptocurrencies), can be your gateway to feeling confident about investing in this realm.

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Litecoin: An Overview

Litecoin was created in 2011 by Charlie Lee, who was an employee of Google. Lee wanted to create a network that was similar to Bitcoin, but faster. Hence, Litecoin is four times faster than Bitcoin (it can be mined in 2.5 minutes versus 10 minutes for the same fees) and uses a mechanism called “scrypt” which isn’t as demanding in terms of resources. Unlike other algorithms, “scrypt” requires less energy and is a password-based key derivation function.

Because of this, Litecoin can be used for smaller, everyday transactions, such as buying a cup of coffee. Litecoin was also made to be a cheap currency, with a maximum supply cap of 84 million coins — versus Bitcoin’s 21 million coins. 

Ethereum: An Overview

Ethereum was created in 2015 and is technically a blockchain platform, and Ether is the name of the cryptocurrency created by the Ethereum platform. Ethereum is a decentralized application platform that hosts cryptocurrency, unlike Bitcoin which is a cryptocurrency platform. What this means is that Ethereum hosts smart contracts, which is code that lives and executes on the blockchain. 

With smart contracts, trusted transactions and agreements can be self-executed among disparate or anonymous parties without the need for a central system. As such, it can facilitate monetary exchanges or the transfer of property, shares, or other items of value, based on a set of rules built into each contract. 

The Ethereum blockchain also supports NFTs, which are digital items such as art, music, or videos in the form of GIFs, MP3s, or JPEGs. NFTs are individual tokens that you can invest in and their digital record is stored on the blockchain.

Like Litecoin, Ethereum is much faster than Bitcoin, as it can be mined every 10 to 20 seconds. When comparing Litecoin vs. Ethereum, however, there is no cap on the quantity of Ether available to be transacted. Moreover, while Litecoin has transaction fees of roughly $0.05, Ethereum doesn’t use transaction fees — it has gas fees, instead. Gas is a unit that measures the amount of computational effort required to execute transactions. So, when users send Ether tokens, they pay a gas fee to complete the transaction which is around $0.85.

Litecoin vs. Ethereum: Which is Better For Your Needs?

Both Litecoin and Ethereum were created to address the shortcomings of Bitcoin. While they both enable faster transactions than Bitcoin, Litecoin is primarily seen as a form of currency — a transactional alternative to Bitcoin. 

Ethereum, on the other hand, attracts the attention of developers who are able to consider various applications of its platform. Its platform creates smart contracts and can even crowdsource funds for new projects. Moreover, since Ethereum supports NFTs, if you are hoping to invest in those tokens you will have a preference for Ethereum vs. Litecoin.

For users weighing up Litecoin vs. Ethereum, there’s a number of important factors to consider. In reality, the two tokens are very different, serving different purposes for their users. Litecoin is also seen as a safe, alternative investment to Bitcoin — a secondary choice, if you will, for handling similar types of transactions as Bitcoin, but with better transaction rates. 

However, Ethereum is by far the more popular cryptocurrency and has such a unique platform that its community of developers and supporters tends to be stronger than that around Litecoin.

Bottom Line

Ultimately, both of these coins are well-known and transacted in the cryptocurrency space. The final decision between Litecoin vs. Ethereum boils down to what you hope to do with your cryptocurrency. 

If you’re looking to transact, primarily, then Litecoin may be better for you. If you want to take advantage of smart contracts or want a token with more utility like NFTs, then Ethereum is your best bet. 

And if you’re simply searching for options for a diversified cryptocurrency portfolio, then don’t worry about the whole Litecoin vs. Ethereum debate — just get a little bit of both and enjoy! Good luck.

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Keertana Anandraj
Keertana Anandraj is a recent college grad living in San Francisco. When she isn’t conducting international macroeconomic research at her day job, you can find her in the spin room or planning her next adventure.

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