Comparing Bitcoin, Litecoin and Ethereum
Over time, especially since the launch of Bitcoin in 2009, cryptocurrencies have drawn the attention and interest of many investors. For those not conversant with what cryptocurrency entails, it is simply a new kind of virtual currency or digital currency that is based on a peer-to-peer system. This peer-to-peer system enables cryptocurrencies to be totally decentralised and independent from any central banks or government.
Participants are able to exchange money directly with each other without the involvement of a 3rd party like banks and other financial institutions, in carrying out transactions.
Cryptography is what enables you conduct these transactions securely. How does it do that? It does this by encrypting the data and making it better protected by a combination of private and public keys. These keys are asymmetrical numbers paired together. From this pair you are given a public key, which you can share with anyone, and a private key, which is only known to you and should be kept secret.
While one key is used for encryption, the other is used for decryption. For instance, let’s say you have the public key of your brother, Ken, and you want to send him some cryptocurrency to help you buy some stuffs. This is how you would do it. You will lock or encrypt your cryptocurrency with his public key, this way only Ken is able to unlock or decrypt it using his private key. This is simply known as asymmetric cryptography.
Thanks to the blockchain technology, cryptocurrencies enable the exchange and storage of information in a transparent, yet secure, way without 3rd party involvement. It is somewhat like a giant database that accumulates information on all the transactions that have taken place between users.
Once the blockchain records a transaction, it cannot be deleted or adjusted. The interesting thing about the blockchain is that it is not owned by a single individual or organisation. In actual fact, users are the maintainers and contributors to this network through what is known as mining.
History of blockchains
A lot of people have often asked, which is the better cryptocurrency to invest in bitcoin, litecoin, or ethereum? It generally depends on your preference. But before we go deep into it, let’s briefly discuss the history of these cryptocurrencies.
Bitcoin was at the forefront of cryptocurrency blockchain as the entire industry was created based on it. Since its release in 2008, it has been growing rapidly and has the most marketing power behind it.
Despite the exponential growth of the industry, Bitcoin has remained the most recognised and widely used cryptocurrency in the world.
After the creation of Bitcoin, an improvement was needed which led to the invention of Litecoin. These improvements didn’t deviate too much from what Bitcoin already had to offer, as the difference was very minor.
Unlike Bitcoin, Litecoin has made significant headway by implementing the Segwit protocol, even after a long time being considered the silver to Bitcoin gold.
Different from other competitors, Ethereum is a totally new blockchain architecture. The Ethereum Virtual Machine was included in their node, and this allows for new applications as well as processes complex smart contracts.
Since its invention, Ethereum has opened itself up to become the primary platform to delivering various kinds of decentralised services.
Difference between Bitcoin, Litecoin, and Ethereum
Since the launch of Bitcoin, numerous cryptocurrencies have been introduced, with the most traded currencies among these being Litecoin, Ethereum, and Ripple. But let’s focus on just Bitcoin, Litecoin, and Ethereum.
Bitcoin was created by a group of people under the pseudonym “Satoshi Nakamoto”, and is the most widely accepted by shops, restaurants, bars, and stores.
The Ethereum platform was launched in 2015 by a programmer named Vitalik Buterin. What makes Ethereum unique is that you can run any application on it with ease. The cryptocurrency attached to the Ethereum is known as Ether.
A new type of blockchain technology was developed by Ethereum where you create “smart contracts” that cannot be deleted or changed once uploaded to the blockchain. These “smart contracts” are structured in the form of “if” and “then” statements, and are executed automatically once pre-determined terms and conditions are met.
Let’s look at an example of these contract: you want to pay 20 Ethers to your nanny if she comes on Saturday at 7 to clean your house. If she comes at that time, then she will receive the Ether automatically. However, you can decide that is she comes after 8pm, the contract should be cancelled. This way she doesn’t receive anything.
The open source code of the blockchain technology allows everyone to have access to it. Litecoin was born based on the open source code of the Bitcoin in 2011 by Charles Lee. They are used for smaller payments compared to those of Bitcoins, and also have a shorter payment time; the payment time for litecoin is about 2.5 minutes, while that of bitcoin is about 10 minutes. For this reason Litecoin is a more preferable option for most merchants and small businesses.
Another difference is that Litecoin has lower fees and a bigger cap than Bitcoin; Bitcoin has a hard cap of 21 million coins, while Litecoin has a hard cap of 84 million coins.
Possible Future of Blockchains
To ascertain the value of a blockchain does not have a specific answer. However, there are a couple of values or lenses that you can view this industry through that would help you predict the value of each blockchain in the long run.
Every day technology advances, and we see things moving in that direction also so as not to be left behind. One of the many ways you can predict the value of a cryptocurrency is by tying their worth or value to their future use in the technological world.
Let’s take a model for instance. In this model, the worth of a blockchain comes from its capacity to innovate and add value to a substantial amount of tech-aware users.
Let’s call it ‘Blockchain X’. The model looks something like this:
- Blockchain X supports many new services and technologies therefore….
- A large amount of people will need cryptocurrency to run many applications, therefore…
- Blockchain X’s cryptocurrency will become rare, therefore….
- Blockchain X’s cryptocurrency is very valuable.
With this model, who has the highest potential in the long run?
Using technological advancement as a value, it totally makes a lot of sense now why Bitcoin is so valuable. Being the first cryptocurrency, it gained the most users and had the largest audience. Litecoin which came after Bitcoin had a smaller audience and not that much users, so it had a lower, yet significant, value.
On the other hand, Ethereum is making waves with innovation and future applications. It has a much larger potential audience it can be useful to, both those in finance and different other industries. Ethereum’s has a rapidly growing community with new technologies being built based on Ethereum.
Bitcoin, due to some political in-fighting, is having issues innovating. Litecoin has picked up the pace and is moving forward with adding new technologies, but still hasn’t advanced as much as Ethereum.
Using this model, you would realise that Ethereum comes way ahead and would likely over surpass Bitcoin’ value soon.
If you want to make investments, then using this model is your best bet. Many developers also prefer using this model.
If you are trying to compare the value of different cryptocurrencies, another way to do that is by seeing them as an alternate store of value. We see people having financial assets like silver, diamond and gold, not because they are useful, but because they are highly valuable and scarce.
Using the same Blockchain X, this model would look like this:
- Is Blockchain X’s cryptocurrency a limited commodity traded on a market?
- Is Blockchain X’s cryptocurrency well known and gaining more investors? If yes for both, then…
- Blockchain X’s cryptocurrency will continue to rise in value, which would mean that….
- Blockchain X’s cryptocurrency is valuable.
In this model, technology doesn’t actually matter as much as their market presence and investment community. For beginners, or those that don’t really understand the industry, this might be hard to accept because there is a precedent for assets to be valuable just because everyone believes they are valuable. Though Blockchain asset and cryptocurrency are a different ball game, it’s not a stretch to assume that they could join that class of assets.
Who has the highest potential in the long run?
As we all know, Bitcoin is and will remain the market leader in this industry for a long time with the rate at which it continues to grow in value. It is by far the most popular blockchain and is the entry point for almost every one that wants to invest in cryptocurrency. Most investors still believe in the growth of the Bitcoin blockchain despite the political in-fighting, and this is why they continue to invest.
Bitcoin’s counterparts, Litecoin and Ethereum, don’t really have much strong ground here. Why? Well, though Litecoin will always remain an aftermath of Bitcoin, it will most likely not be able to overcome Bitcoin’s marketing without a substantial Bitcoin crash, even with a tangible amount of innovation.
Ethereum on the other hand does not fare well in this model, not because of its investment community and marketing, but because of the way its blockchain is designed. The Bitcoin blockchain is designed with a hard cap of about 21 million Bitcoin that will ever be created, which can’t be changed even with a hard fork. This feature makes Bitcoin’s supply limited and valuable.
The Ethereum’s blockchain, however, does not have thus hard cap feature. As the rate of Ethereum cryptocurrency (ETH) created decreases, there is no set of hard cap to manage the amount of currency being created. Because of this, Ethereum will become less valuable as it will not hit the same hard limit that is built into Bitcoin.
Benefits of Cryptocurrency CFD Trading
Obtaining and storing cryptocurrencies requires your time and dedication. From installing your wallet, buy your currency, and then storing them. Hacks and breaches in cyber security are issues that cannot be overlooked when buying and storing cryptocurrencies. This is why a lot of individuals and investors are using CFDs on cryptocurrencies, allowing them gain from the difference in price between the closing price and the opening price without actually owning the asset.
With CFD enables you profit from both rising and falling markets. That is, you win whether the price goes up or down.
One of the great ways you can get involved in the digital currency industry is by trading cryptocurrency CFDs with brilliant capital. And you also don’t have to deal with the concerned cryptocurrency directly.
Now you know the difference between bitcoin, litecoin, and ethereum. Which do you think is best for you to start trading?