Bitcoin vs. Litecoin: What's the Difference?

Bitcoin vs. Litecoin: What's the Difference?

Over the past several years, public interest in cryptocurrencies has fluctuated dramatically. But with the advent of the 2020s, investor interest in cryptos has surged. The main focus of this interest has been Bitcoin, which has long been the dominant name in cryptocurrency—not surprising since it was the first digital money to really catch on.

Similarities Between Bitcoin and Litecoin

On the surface, Bitcoin and Litecoin have a lot in common. At the most basic level, they are both decentralized cryptocurrencies. Whereas fiat currencies such as the U.S. dollar or the Japanese yen rely on the backing of central banks for value, circulation control, and legitimacy, cryptocurrencies are not subject to a centralized authority: They rely only on the cryptographic integrity of the network itself.

Litecoin was launched in 2011 by former Google engineer Charlie Lee, who announced the debut of the "lite version of Bitcoin" via a posted message on a popular Bitcoin forum.3 From its founding, Litecoin was seen as being created in reaction to Bitcoin. Indeed, Litecoin’s own developers have long stated that their intention is to create the “silver” to Bitcoin’s “gold.”

For this reason, Litecoin adopts many of the features of Bitcoin that Lee and other developers felt were working well for the earlier cryptocurrency, and changes some other aspects that the development team felt could be improved.Since the founding of Bitcoin in 2009, however, hundreds of other cryptocurrencies have entered the market.1 Although it has proven increasingly difficult for digital coins to stand out given the crowded field, Litecoin (LTC) is one non-Bitcoin crypto that has managed to stand up to the competition. LTC currently trails behind Bitcoin as the 6th-largest digital currency by market cap.

Differences Between Bitcoin and Litecoin

As of March 2021, the total value of all bitcoins in circulation is around $1 trillion, making its market cap more than 70 times larger than Litecoin, which has a total value of $13.7 billion.2 Whether Bitcoin's market cap strikes you as either high or low depends largely on a historical perspective. When we consider that Bitcoin’s market capitalization was barely $42,000 in July 2010, its current figure seems staggering.

Bitcoin as a network still dwarfs all other digital currencies. Its closest competitor is Ethereum, the second-largest cryptocurrency, which has a market cap of nearly $212 billion.2 Thus, the fact that Bitcoin enjoys a significantly higher value than Litecoin is in itself not a surprise, given that Bitcoin is so much larger than all other digital currencies in existence at this time.

Litecoin vs. Bitcoin 

What Is Litecoin Used For?

Given all the hoopla around its prices and market cap, it may seem that Litecoin exists mainly to be bought and sold back and forth, to paraphrase the old traders' joke about soybeans. In actuality, though, Litecoin— like all cryptocurrencies—is a form of digital money. So it can be used by individuals and institutions to purchase things and to transfer funds between accounts.

Its relative speed and cheapness make it ideal for smaller, everyday transactions. Participants operate directly, without the use of an intermediary like a bank, credit card company, or payment processing service.

Can You Convert Litecoin to Bitcoin?

You can convert litecoins to bitcoins, and vice versa—similar to the way you can exchange fiat currencies, like changing dollars into pounds, or yen into euros. Since both are leading, and highly liquid cryptocurrencies, there is generally no problem in swapping one for the other.

To do so, you need to have an account with a cryptocurrency trading or exchange platform or trading app. The amount you'll receive in the conversion depends, of course, on the current prices for each currency.

Can I Send Litecoin To a Bitcoin Address?

It's important to understand cryptocurrency conversion because you can't send Litecoin to a Bitcoin address—even if it's in the same wallet—and vice versa. If you do, the money will be lost. Recovery may be possible if you have seed backups for the keys that let you access your account, but it's difficult.

Can Litecoin Overtake Bitcoin?

Whether Litecoin could ever overtake Bitcoin as the number one cryptocurrency is a matter of speculation. Bitcoin remains the original digital money, and to many, its name is synonymous with cryptocurrency in general— practically a generic term, like Kleenex is to facial tissue.

If any other crypto were to knock Bitcoin off the throne, Ethereum (the current number two), or one of the other higher-ranked currencies might be more likely candidates. Still, some analysts like Litecoin's fundamentals. "Litecoin can process transactions quicker than bitcoin, and its quicker block time suggests that it can handle more capacity than bitcoin," stock-picker Sean Williams wrote in a 2018 article for The Motley Fool, adding "it most definitely has the tools to push aside bitcoin and become the go-to medium of exchange for digital currency users."