Litecoin vs Ethereum: Compare Before You Buy
It is worth to know the differences between Litecoin vs Ethereum. Like this you can decide whether you want to invest in one, both or neither. Although Litecoin and Ethereum are both cryptocurrencies they are like chalk and cheese. They are very different from each other because they were developed for different purposes.
Some investors pick one crypto over the other to invest in. This is because they see more potential in Litecoin vs Ethereum or vice versa. This could be from the point of view of the value that one crypto can offer over the other to society. Some look purely to speculate on the cryptocurrencies that will likely give them the most gains.
Some investors invest in both cryptos. This is because both Ethereum and Litecoin are well known and they see the benefit of diversifying their crypto portfolio.
Cryptocurrencies are a new type of asset class. It will pay in the long run to have a selection of coins. The alternative is taking a bet on only one which may or may not pay off. You never know what might happen.
Of course this does not mean you should invest in Litecoin vs Ethereum or Ethereum vs Litecoin. There may be others that you might want to consider. In this case you might want to check out the crypto guides here.
On that note it must be said:
this article is based on thorough research. Nothing on this article should be considered financial advice. If you are considering buying either crypto you should do your own research. Additionally you should seek a financial advisor if you require one.
Litecoin vs Ethereum. The Differences Between the Two Cryptos
Litecoin and Ethereum have two different use cases. Litecoin was modelled on Bitcoin. Due to this Litecoin was made to function as a currency and nothing more.
To clarify, this does not mean that Litecoin cannot be developed further. Litecoin’s code is somewhat rigid, but nevertheless developers working on Litecoin are able to do quite a lot on Litecoin. They can work on Litecoin and do upgrades and modifications that the code will allow.
On the other hand the Ethereum developers wanted Ethereum to offer much more than cryptocurrency. So Ethereum does support its own crypto called Ether. However the developers wanted Ethereum to support other cryptocurrencies and services as well.
They envisioned that Ethereum would be able to support a larger ecosystem in a sense. So when they developed the code they set up the blockchain to support this kind of functionality from the start.
For these reasons, Litecoin is a classic example of a cryptocurrency. It is made to be used as a medium of exchange. On the other hand Ethereum is what is called a crypto commodity because it is a platform. It is like a raw material hence why it has commodity in its name.
What is Happening With Litecoin
Since the early days Litecoin has had some more development and upgrades to its blockchain. The most news worthy and recent upgrade is the implementation of Mimblewimble.
Mimblewimble is a protocol that enables privacy. This is so third parties cannot know which parties are transacting between each other. Additionally they cannot see the amounts being transacted.
Privacy is great for sound money. Sound money is a really important aspect for a society to flourish. You can read about what is sound money vs easy money here.
It all sounds well and good. However Litecoin’s implementation of privacy is not by default. People have to opt into using this privacy feature. Unless privacy is by default on the blockchain it is relatively useless as third parties can still see some transactions. They might still be able to get the full picture of what is happening on the blockchain.
Since they can see some transactions they might still be able to put the puzzle pieces together. As a result third parties can still get the full picture of what is happening on the blockchain.
For this reason Litecoin’s implementation of privacy is not great. There are much better cryptocurrencies that implement privacy by default. You can have a look at the best privacy coins here to see what makes them good.
This is not to say there is no value in Litecoin. Litecoin has some good aspects to it. Including the fact that it has a cap of 84 million coins that can ever be mined from the blockchain. This is good as it is does not promote inflation of goods and services.
Additionally it processes transactions much faster than Bitcoin. As a result it may make Litecoin more of an attractive solution for merchants.
Litecoin was launched in 2011. This year it celebrates its 10 year mark of being around. This speaks to the longevity of the cryptocurrency. Where other cryptos have failed, Litecoin has so far stood the test of time.
Investors are still attracted to Litecoin and have continued to buy Litecoin. On the other hand they do not tend to have a large allocation of Litecoin in their portfolio. The Litecoin chart is looking pretty good lately. You can have a look at the live Litecoin chart here on CoinMarketCap.
What is Happening With Ethereum
In the discussion of Litecoin vs Ethereum its important to mention the properties of sound money. In the past Ether had an unlimited supply. This is inflationary and not good as a sound money.
However there is good and bad news on this front. The Ethereum platform has had a recent update called EIP-1559. This update destroys Ether which are derived from the fees usually given to miners whenever a transaction takes place.
So far more than 200,000 Ether has been burned by EIP-1559. It does sound rather odd because it is the equivalent of throwing money down the drain. However it has a very valid purpose to incentivise the transition of Ethereum from proof of work to a proof of stake blockchain.
Ethereum is centralised and its code is very flexible. Although so much Ether has been burned the developers could easily add more Ether whenever is necessary. The problem is that leaving the control of the money supply to people is never the best solution.
Human beings are prone to corruption and unless they have some sort of constraint they will happily ‘print’ money. Increasing the money supply to the point until it is worthless has happened consistently throughout history. You can see what is happening now with the dollar and the euro on the article what is inflation?
However this is more of a long term problem. For the short to medium term this sort of thing has no bearing on the price of Ethereum.The price of Ethereum is going to be driven mostly by innovation at this point.
As mentioned Ethereum is going to be transitioning to a proof of stake crypto. This is part of the Ethereum 2.0 upgrade. The upgrade consists of a number of interconnected upgrades that will make Ethereum more secure, more scalable and sustainable.
Scalability is really a fancy way of saying how many transactions the network can handle per second. Ethereum will be able to handle around 10,000 transactions per second instead of 15. This vastly improves its performance.
Additionally fees (gas) will be drastically reduced. That is a very good thing because the network was getting congested at times and gas fees went up. At some point people complained because they were being charged $50 worth of Ether fees even on small transactions.
The Ethereum platform has really evolved to incorporate much more than its own crypto. It has grown to support the DeFi space. DeFi is short for decentralised finance. It is essentially everything our current financial system offers, but in a decentralised way.
There is a lot of innovation happening in this area. Most people do not realise the extent of what is happening. What is nice to see is that it is only just started. You can have a look at what is DeFi to get the bigger picture.
So far there has been billions of dollars poured into DeFi.
Ethereum As the First Mover
Ethereum was the first crypto commodity on the market. For this reason Ethereum benefits from what is known as the first mover advantage. It has brand recognition and is well known.
However one of the drawbacks of being a first mover is that competitors can come up with better products. Competitors are able to analyse what works and what doesn’t with the first movers. They optimise their product so that they are able to compete when they launch.
Ethereum Short Falls
At this stage there are a number of other crypto commodities. Of course Ethereum is further along the road than they are since they launched later. However they will be offering better scalability and interoperability.
Scalability is really a fancy way of saying how many transactions the network can handle per second. Ethereum is currently working on improving its scalability. However, even with Ethereum’s upgrade competitors are still able to scale more. Albeit they provided projected values, so they are not able to offer vastly improved scalability just yet. Besides, Ethereum could always do more upgrades.
Ethereum is not working on interoperability. Interoperability would enable blockchains outside of the network to interact with each other. For example Cosmos is able to interact with Bitcoin even though it is not on its platform. Interoperability is great because each blockchain would not operate in its own ecosystem. Otherwise the crypto space will fragment.
Having said that, the Ethereum team can always adapt and update Ethereum’s code. If the market really wants interoperability then they can deliver it. The only issue is that it does take time to do these sorts of upgrades.
Regardless interoperability may not necessarily be something Ethereum has to concern itself with. Interoperability allows all the different blockchains to become collaborative instead of being competitors. So Ethereum could just rely on others to offer interoperability to connect it to other blockchains. It just depends on how the crypto commodity niche develops.
Litecoin vs Ethereum Percentage Gains
Although Litecoin and Ethereum are completely different it might help to compare their percentage gains.
Litecoin yearly percentage gains
Sourced from CoinMarketCap
Ethereum Yearly Percentage Gains
Sourced from CoinMarketCap
The average yearly gain for hodling Litecoin since 2013 is 625%. On the other hand if you had hodled Ethereum since 2015 you would have had 1529% average yearly gains.
As mentioned Ethereum is the first mover in the crypto commodity space. Litecoin is not. Ethereum has really flourished and it continues to grow. This is because of the vast amount of value it is bringing to the crypto space. It is creating an ecosystem.
Litecoin vs Ethereum Conclusion
To sum up this article for Litecoin vs Ethereum both cryptos have their pros and cons. So far Ethereum has vastly outperformed Litecoin when it comes to percentage gains over the years. Ethereum last year had 404% gains whereas Litecoin has had a 16%.
This is because Ethereum has so much going for it at the moment. Ethereum offers much more than cryptocurrency. It is offering a new financial system on new rails. Out of all the cryptos Ethereum is getting a lot of attention and for good reason. So even though it may have some drawbacks it is a good crypto with a lot of investor interest. A lot of investors hold Ethereum in the portfolios.
Litecoin is the silver equivalent to Bitcoin’s gold. Even though privacy has not been implemented well, it is a great coin and the chart is looking fantastic. It is up to you on which crypto/s you want to buy if any.
If you want some more in-depth knowledge on cryptos then you should consider following some expert crypto advisors. For example The Crypto Vigilante or Real Vision. You can find a longer list of crypto advisors here. Some advise which cryptos they are fans of and which cryptos they have in their own portfolio.