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Blockchain 101: LTC vs. BTC vs. ETH: What Sets Them Apart?

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2023-02-09
Blockchain 101: LTC vs. BTC vs. ETH: What Sets Them Apart?

Bitcoin, Litecoin and Ethereum are three of the most popular cryptocurrencies in the world. While they have certain things in common, they also differ significantly in a few significant ways.

Introduction

In this article, you will learn and understand the three largest and longstanding cryptocurrencies on a deeper level. We will look at their consensus mechanisms, their scalability/at their purpose and under what purpose the currencies have been created.

To learn more about each cryptocurrency, please refer to the articles below:
What is Bitcoin?

What is Litecoin?
What is Ethereum?

Bitcoin, Litecoin and Ethereum are three of the most popular cryptocurrencies in the world. While they share some similarities, there are also some key differences that set them apart.

Bitcoin, created in 2009, was the first decentralized digital currency. It is designed as a peer-to-peer electronic cash system that allows for fast, secure, and borderless transactions. Bitcoin uses a proof-of-work consensus algorithm and has a 21 million coin maximum supply.

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Litecoin, created in 2011, was designed to be a lighter version of Bitcoin. It operates on a similar blockchain technology, but with some differences in the consensus mechanism, mining algorithm and block creation time. Litecoin aims to offer faster transaction times and lower transaction fees compared to Bitcoin. Its maximum supply is four times that of Bitcoin, at 84 million coins.

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Ethereum, developed in 2015, is a decentralized platform that makes it possible to establish smart contracts and decentralized applications (dapps). While it operates on a similar blockchain technology to Bitcoin and Litecoin, Ethereum is more flexible and programmable. It operates on a proof-of-stake consensus mechanism and has no maximum supply limit.



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Consensus Mechanism

Bitcoin operates on a proof-of-work consensus mechanism, which requires nodes in the network to perform complex computations in order to validate transactions and create new blocks. This process consumes a lot of energy and can be slow, making scalability a challenge for Bitcoin.

Litecoin also operates on a proof-of-work consensus mechanism, but uses a different algorithm that is designed to be faster and more efficient than the one used by Bitcoin. This allows for faster block creation times and lower transaction fees.

Ethereum is in the process of transitioning from proof-of-work to proof-of-stake, which requires nodes to hold a certain amount of the currency to validate transactions. This new mechanism is designed to be faster and more energy efficient than proof-of-work.

Scalability

Bitcoin is limited by its block size and the frequency of block creation, which can lead to slow transaction times and high fees during periods of high demand.

Litecoin aims to offer faster transaction times compared to Bitcoin and has a higher maximum supply, but still faces similar scalability challenges.

Ethereum has more advanced capabilities than Bitcoin and Litecoin, including the ability to run decentralized applications and smart contracts, but it too faces scalability challenges. The network is currently undergoing major upgrades to address these challenges.

Purpose

Bitcoin was created as a decentralized digital currency to serve as a peer-to-peer electronic cash system. It aims to offer a fast, secure and borderless means of payment.

Litecoin was created as a lighter version of Bitcoin with faster transaction times and lower fees. It aims to offer a more efficient alternative to Bitcoin.

Ethereum was created as a decentralized platform for the creation of decentralized applications and smart contracts. It aims to offer a flexible and programmable platform for developers to build on.

While Bitcoin, Litecoin and Ethereum share similarities, they differ in their technologies, purpose and scalability and therefore have different investment potentials. It is important for investors to understand these differences, and do extensive research before making investment decisions.

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Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.