Bitcoin, the first and most famous digital cryptocurrency has been accumulating headlines due to an impressive increase in value: breaking the threshold of $ 1,000 for the first time on January 1, 2017, exceeding $ 19,000 in December of that year and then losing approximately 50 percent of its value during the first part of 2018. Since its launch in 2009, Bitcoin has become the most famous, established and valuable cryptocurrency. But it is not the only one.
Litecoin followed in 2011. Created by Charles Lee, an engineer who helped build Coinbase , the leading cryptocurrency exchange, Litecoin is based on the same code as Bitcoin but with some adjustments designed to address two of its predecessor’s limitations: transaction and access to the mining process
And in 2015, Ethereum made its debut, incorporating the basic premise of the bitcoin blockchain and Litecoin’s quest for faster transaction speed, but adding some of its own twists, including the ability to process small pieces of code , called “smart contracts”, and in its peer-to-peer virtual network instead of a dedicated server or mining equipment.
Coinbase support for bitcoin, Litecoin and Ethereum, as well as Bitcoin Cash, a new branch of the bitcoin blockchain created in August 2017, helped install them and keep them among the most visible and best-capitalized cryptocurrencies. Completing the top 10, in terms of market capitalization, there is a dynamic list that has included established and newly arrived currencies such as Ripple, Cardano, NEM, Stellar, IOTA and Tron.
In order to introduce some of the prevailing concepts behind the growing population of cryptocurrencies, let’s take a closer look at the technologies behind Litecoin and Ethereum, how they compare with bitcoin and what each of them offers to them. possible investors, miners and merchants.
Launched in October 2011, just under three years after its inspiration debut, bitcoin, Litecoin was created by Google’s former employee, Charlie Lee. Described by its creator as the “silver” of bitcoins gold, Litecoin is based on the Bitcoin Core client. Litecoin was designed to emulate its predecessor, extolling the same virtues of decentralization, but with some key features that could be said to be a more agile alternative.
While bitcoin blocks can only be processed every ten minutes, part of the reason why they have experienced longer confirmation times with the recent influx of users, Litecoin reduced that to 2.5 minutes per block. Although this has not always been possible throughout the history of cryptocurrency, it is the average that makes transactions faster and cheaper to confirm or validate.
The other key difference that Lee used with the creation of Litecoin was in his choice of the hash algorithm. The mining of all cryptocurrencies uses complicated algorithms. Most are based on the same SHA-256 algorithm that uses bitcoin, but Litecoin took advantage of the Scrypt algorithm instead. Easier to calculate, lighter in the workload, is what allows the quickest confirmation of Litecoin transactions. Its detractors argue that enabling faster transactions is a security issue, since less exhaustive data checks are required, but it has not yet manifested itself as an obvious problem in the real world.
These two major differences with respect to Bitcoin make Litecoin largely a cryptocurrency with its own merits rather than a mere pretender to the throne. Over the years, it has accumulated a base of thousands of owners around the world, exchanging millions of dollars in Litecoin every day.
Litecoin has also experienced a vertiginous growth and has made many people very rich in a relatively short period of time. Like many other cryptocurrencies in the last year, its value has increased exponentially. At the beginning of 2017, a single Litecoin was worth only $ 4. At its peak in December of that same year it reached $ 371, correcting $ 178 at the time of writing this article.
Like Litecoin, Ethereum is based on the same fundamental concept of blockchain as bitcoin, but adds its own distinctive touch. Funded in 2014 through an initial offer of currencies, Ethereum describes itself as “an enormously powerful shared global infrastructure” that, in addition to serving as a digital currency, executes special applications called “smart contracts”.
Although it has its differences, at least superficially, Ethereum works like a cryptocurrency very similar to most others. Ethereum’s token, “Ether”, works similarly to bitcoin. It can be bought and sold, with confirmations of managed transactions on the block chain. It is completely decentralized, without banks that provide the necessary confirmations to validate transactions. On the other hand, “miners” from all over the world fulfill this function by executing powerful computational algorithms. When completed, the miners are rewarded with Ether, similar to what happens with bitcoin mining, where the miners get a reward in bitcoins.
Owners can use Ether to make online transactions, or save it and potentially make money with its growing value: it grew from around $ 10 per Ether in early 2017, to more than $ 1,100 at the beginning of 2018.
Although Ethereum and Bitcoin share some similarities, the two platforms have different objectives. While Bitcoin is strictly a digital currency, designed to function as a means of payment or a stock of securities, Ethereum takes a broader approach. Ethereum works as a platform through which people can use Ether tokens to create and run applications and, most importantly, smart contracts.
Smart contracts are contracts written in code, which the developers load into the block chain. Each time one of these contracts is executed, all the nodes of the network execute it, loading in the chain of blocks; therefore, it is stored in the public book, theoretically tamper proof. Smart contracts are essentially structured as ‘If-then’ statements . When certain conditions are met, the program carries out the terms of the contract.
Which cryptocurrency is the most valuable?
Bitcoin is still the most visible cryptocurrency and the one that is usually sold most frequently. After a notable increase in November 2017, it rose to almost $ 20,000 by the end of December 2017, and after having settled at around $ 15,000 for several weeks, it has fallen to approximately $ 10,000 after South Korean regulators considered publicly banning trade. Litecoin’s price followed a valuation trend similar to bitcoin and is now around $ 180. Although the three have increased in value over the past year, Ethereum has charted its own distinctive route, increasing in June 2017 and exceeding $ 1,000 at the beginning of January.
Which is the best for you?
If only it were that easy. Nobody knows if any cryptocurrency will increase its value, or even be maintained within a year (although we believe that those described in this article will mark both boxes). None of them is regulated (yet) and only people with the highest risk capacity must enter the cryptocurrency market. That said, there are significant differences between these three that could be used to form a rational basis for investing or mining one currency over the other.
Bitcoin is the main option. If you are looking for a cryptocurrency with the advantage of being the first to appear on the scene, an unparalleled popular visibility and the highest market capitalization, it is obvious. On the downside, it is now almost impossible to mine bitcoins profitably, with incredibly high energy consumption and, after rising more than 1,000 percent in the last year, it could have spent most of its growth potential. (This is debatable, nobody knows how much it can grow).
Litecoin offers its own advantages. Its creator is a known and active entity in the cryptocurrency community. It has a capacity for faster transactions, a potential advantage in itself, which also provides a different set of use cases than bitcoin. And it still offers the potential for profitable mining, unlike Bitcoin.
Ethereum has the support of some important actors, which could be a benefit or a disadvantage, according to his opinion on the modern financial industrial complex. It has the potential of intrinsic value such as Litecoin or bitcoin, but also more obvious commercial applications. And, like bitcoin, it has generated hundreds of other currencies that have been created using its underlying blockchain technology.
Regardless of which one you find most attractive, do your own research before investing in any of these cryptocurrencies.