Litecoin vs. Ethereum: Better Buy?

Nov 16, 2021 06:39 PM ET
Litecoin vs. Ethereum: Better Buy?

Litecoin and Ethereum are two popular blockchain projects. At the time of writing, Ethereum was the second-biggest cryptocurrency in the world, with a market capitalization of more than $547 billion. Litecoin, on the other hand, was the 14th biggest cryptocurrency in the world, with a market cap of more than $17 billion. In this article, we will look at what Litecoin and Ethereum are, how they work, and the better one to invest in.

What is Litecoin?

Litecoin is a blockchain project that was launched in 2011 by Charlie Lee. This makes it one of the oldest cryptocurrencies in the world. Bitcoin was launched about two years earlier. Today, while Litecoin is fully decentralized, it is overseen by the Litecoin Foundation.

Litecoin’s goal was relatively simple. At the time, the developers understood the promise that Bitcoin had. But they also identified the vulnerabilities and the limitations that the network had. Some of the vulnerabilities were that Bitcoin was relatively slow and its transactions were relatively expensive. Litecoin has a supply limit of about 84 million coins.

Today, Litecoin is used as a medium of exchange. It is used by several companies that accept cryptocurrencies. As a medium of exchange, users love it for its relatively fast speed and the fact that it is cheaper than Bitcoin. Additionally, Litecoin has a long track record, which makes it a relatively secure payment platform for both companies and individuals.

Litecoin price performance

Litecoin, as a first-generation cryptocurrency, uses a proof-of-work technology. This means that new coins are minted through mining. This mining involves solving complex mathematical calculations using computers. It is a technology that most blockchain projects are shifting from because of its inefficiencies. Since 2014, the Litecoin price has jumped by more than 500%.

What is Ethereum?

Ethereum is a blockchain project that was built by a group of computer scientists led by Vitalik Buterin. Other co-founders of the platform have moved on to build highly popular projects as well. For example, Gavin Wood has built both Polkadot and Kusama that are now valued at more than $50 billion. Similarly, Charles Hoskinson has founded Cardano, which is valued at more than $70 billion.

Ethereum is an “infrastructure” platform that enables developers to build decentralized applications (dApps) and decentralized autonomous organizations (DAO). 

Today, Ethereum has been used to build some of the best-known cryptocurrency projects in the world. For example, Shiba Inu, the popular meme coin, has been built using Ethereum. Similarly, OpenSea, the popular non-fungible token (NFT) marketplace, has been built using Ethereum’s technology. 

Like Litecoin, new Ethereum coins are minted using a proof-of-work technology. However, the developers are currently transitioning the network into proof-of-stake, which will make it quicker and more environmentally friendly.

Today, Ethereum has a pole position in its industry. For example, while it is facing stiff competition, the platform has a substantial market share in the Decentralized Finance (DeFi) industry. As shown below, there are 288 DeFi platforms built using Ethereum. These projects have a total value locked (TVL) of more than $179 billion. This is significantly further than Binance, which has about 154 DeFi projects that have a TVL of about $21 billion.

Ethereum has a pole position in DeFi

In addition, Ethereum dominates other blockchain industries like gaming, non-fungible tokens (NFT), and even the metaverse.

ETH performance

The chart above shows that Ethereum’s historical price has jumped by more than 32,000% since 2015. Therefore, based on historical performance, Ethereum is a better investment than Litecoin.

Litecoin vs. Ethereum: Which is better?

There are several reasons why Ethereum is a better investment than Litecoin. 

PoS vs PoW

First, the Ethereum Foundation is currently in a transition process known as Ethereum 2.0. This is a relatively long and multi-phased process that seeks to transition Ethereum from a proof-of-work (PoW) platform into a proof-of-stake network. When the process is complete, I suspect that it will attract more investors who are mostly focused on the environment. 

On the other hand, Litecoin Foundation has not announced plans to transition its network into a proof-of-stake. Therefore, as investors focus more on ESG concerns, there is a likelihood that they will remain solidly behind Ethereum.

Use case

Second, the overall use case of Litecoin is relatively limited. For one, it is just a platform that enables people to send and receive payments. It has relatively limited uses. 

On the other hand, Ethereum’s use case is unlimited. For example, it is possible to build a new cryptocurrency using Ethereum. Indeed, several stablecoins and cryptocurrencies have been built using Ethereum’s technology. Some of the most popular stablecoins that use Ethereum’s technology are Dai, USDC, and TrueUSD.

In addition, many DeFi projects have been built using Ethereum’s technology. These include popular platforms like Aave, Compound, Maker, InstaDapp, and Abracadabra, among others. Meanwhile, Ethereum has been used to build decentralized games and NFT platforms like Decentraland. 

Therefore, as the industry grows, we will see more use cases in the near future. And while it is facing strong competition from the likes of Solana, Avalanche, and Binance, it also has a strong market share.

Burning

The supply of Litecoin is fixed at about 84 million coins. This is similar to how Bitcoin’s supply has been capped at about 21 million coins. This capping makes Litecoin a good investment as the supply reduces.

However, Ethereum recently introduced an important feature that makes it more attractive. In its Alonzo hard fork, Ethereum introduced the concept of burning, which is reducing the volume of coins in circulation. This process will make it relatively rare and more valuable.

Summary

In this article, we have looked at what Ethereum and Litecoin are and how they work. We have also looked at their historic performance and the pros and cons of each. In my view, I believe that Ethereum is a better investment because of its substantial market share.


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