On January 9th, 2009 the first Bitcoin block was mined signaling the start of the modern age of cryptocurrencies. Decades previously, the groundwork had been laid by American cryptographer David Chaum, who conceptualized ecash in 1983 and launched DigiCash in 1995.
The previous generation of cryptocurrencies shared the same philosophical underpinnings as the modern one. Chaum launched DigiCash with the aim of providing an anonymous electronic money which could be used via the internet just like cash. If you’ve read Satoshi’s white paper you will know that this is exactly the mission Bitcoin has.
Whereas the corporation behind DigiCash soon went bankrupt, Bitcoin has thrived since its inception in 2009. This is due to many factors but the technological innovations behind Bitcoin have played a large part in securing a lasting legacy. Once Satoshi Nakamoto introduced the concept of a blockchain the modern era of cryptocurrency was born.
Crucially, Satoshi made Bitcoin open-source, meaning that developers, entrepreneurs and businesses could study its revolutionary code. As a result, offshoots – known as alt(alternative)coins – soon sprung up.
One of the first was Litecoin. Authored by Charlie Lee in 2011, Litecoin marketed itself as the silver to Bitcoin’s gold. The reality was a little more prosaic, considering Lee launched Litecoin as an experiment, taking learnings from his previous cryptocurrency Fairbrix and using them to create a token which had both better performance and better marketing potential.
Four years later, a revolutionary new cryptocurrency called Ethereum mined its first block. First described by Vitalik Buterin in 2013 and subsequently launched in 2015, Ethereum has arguably introduced blockchain v2.0. Besides Buterin’s remarkable precociousness (he was 19 when he thought of the idea and 21 when it launched), Ethereum is special for making Satoshi’s blockchain “smart”.
More specifically, Ethereum added a host of functions and technological advances to Bitcoin’s now rudimentary stack. Most importantly, Buterin added smart contracts to the Ethereum blockchain, opening up a new world of possibilities. ICOs, DAPPs and blockchain-based prediction markets are just a few of the innovations made possible by Ethereum.
As we can see cryptocurrencies have already completed a long journey. It is without question that Bitcoin, Litecoin and Ethereum are special for each providing a proof of concept. Bitcoin proved that cryptocurrencies could solve the double spend problem by using a blockchain. Litecoin proved that altcoins could be successful, and Ethereum proved that blockchains could be made smart.
As this article will show, it makes sense to group these three into two groups. Bitcoin and Litecoin can be considered as Blockchain v1.0, and Ethereum as the first member of Blockchain v2.0.
Let’s now take a look at how these three hall-of-fame cryptocurrencies stack up.
Bitcoin (BTC) vs Ethereum (ETH) vs Litecoin (LTC)
|Creation date (first block)||Jan 9th 2009||July 30th 2015||October 8th 2011|
|Blocksize limit||1 Megabyte||No Limit||1 Megabyte|
|Transaction limit per day||~867,000||~1,296,000||~3,468,000|
|Transaction avg per hour||~11,157||~24,755||~959|
|Avg transaction fee||$0.249 USD||$0.105 USD||$0.021|
|Average transaction value (last 24 hours)||3.46 BTC||5.61 ETH||134.59 LTC|
|Current difficulty||5,106,422,924,660||2.334 P||5,880,166|
|Active addresses (last 24 hours)||456,328||320,967||66,619|
|Hashrate||45.411 Ehash/s||185.17 Thash/s||171.912 Thash/s|
|Block confirmation time||~10 minutes||~14 minutes||~2 minutes|
|Block reward||12.5 BTC||~3.4 ETH||25 LTC|
|Mining Reward halves every||210,000 blocks||N/A||840,000 blocks|
|Average block size||0.82 Megabytes||17.293 Kilobytes||22.312 Kilobytes|
|Consensus Algorithm||Proof of Work||Proof of Work||(Scrypt) Proof of Work|
|Maximum Supply||21 million||None||84 million|
|Developer team||Bitcoin core team||Ethereum Foundation||Litecoin Foundation|
|Original Author||Satoshi Nakamoto||Vitalik Buterin||Charlie Lee|
Bitcoin vs Litecoin – What’s the difference?
At first glance, these two coins look very similar. Lee retained many of the cryptographic principles underlying Bitcoin and did not publish a white paper. Nevertheless, Lee introduced several important changes which he thought would help Litecoin avoid many of the problems starting to surface for Bitcoin.
Perhaps the most obvious difference is the significantly reduced block confirmation time. As Lee discusses in this presentation, he believes Bitcoin’s 10 minute confirmation time to be a cumbersome and arbitrary solution.
Instead, Lee designed Litecoin to confirm transactions on the blockchain every 2.5 minutes. As he cogently argues, network members requiring more security can simply wait 10 minutes for 4 Litecoin blocks to be mined. For everyone else, Litecoin offers much faster transaction confirmations than Bitcoin.
Besides the increased level of convenience, this measure also vastly increases the maximum number of transactions Litecoin can perform per day (~3.5 million compared with Bitcoin’s ~850,000). As a result, Litecoin is perhaps better suited as a medium of exchange than either Bitcoin or Ethereum, especially at scale.
A final important consequence of reducing the block confirmation times, is the significantly increased liquidity. More specifically, every time a block is added to the blockchain, the miner receives a reward. For Litecoin the block reward is currently 25 LTC, with the reward halving every 840,000 blocks, compared to Bitcoin’s 210,000. This translates into 14,400 LTC mined per day, compared with only 1,800 BTC in the same time frame.
Litecoin also differs from Bitcoin because of its use of scrypted proof of work as its underlying hash function. Scrypted proof of work works similarly to Bitcoin’s sha256d hash function but is designed specifically for CPU mining.
As Lee explained, he feared that using Bitcoin’s sha256d hash function would pit Litecoin against its ancestor. If Bitcoin miners began mining Litecoin it would skyrocket the mining difficulty, making mining unprofitable for most enthusiasts and network members.
Despite these subtle differences Bitcoin and Litecoin share enough similarities to be considered as cornerstones of Blockchain v1.0.
Blockchain v1.0 vs Blockchain v2.0 – Which is better?
Now that we have an overview of the main differences between Bitcoin and Litecoin, the next step is to look at how Ethereum introduced Blockchain v2.0 and how it compares to Blockchain v1.0.
Referring to Ethereum as a revolutionary cryptocurrency might seem a tad hyperbolic but it fits the bill on closer examination. Ethereum introduced smart contract functionality, which allows for the creation, verification, and enforcement of digital contracts without the need for a third party.
This is a huge deal because it provides a framework in which condition-based decision making can be verified and enforced by trustless computations, rather than corruptible humans. Where Bitcoin removed the need for Banks, Ethereum could remove the need for intermediaries altogether.
This is possible because Ethereum acts and operates much like a massive decentralized computer. Unlike Bitcoin and Litecoin, Ethereum is considered Turing Complete, meaning it can perform complex computations and can actively change the state of its system through the use of its native programming language solidity.
Although Ethereum’s capabilities are clearly impressive, concerns have been raised over the potential for vulnerabilities to enter the codebase. In 2016, the Decentralized Autonomous Organization (DAO) built on the Ethereum blockchain confirmed those concerns by suffering a devastating hack.
Not only did the DAO hack showcase the potential damage hackers could do, but the aftermath shed light on another important differentiator between Blockchain v1.0 and Blockchain v2.0: centralization of power.
More specifically, the Ethereum developer community, along with out-of-pocket investors, decided to hard-fork the blockchain in order to recoup their funds. Although this measure proved to be a short-term success, a dangerous precedent was set. One in which a small group of elites could sidestep the trustless nature underlying cryptocurrencies and instead bend the blockchain to their will.
This impression is exacerbated by the power wielded by the Ethereum Foundation developer team. In August 2018 for example, a group of 15 developers decided to cut Ethereum’s block reward from 3 ETH to 2ETH. This is troubling because the block reward has a huge impact on the ecosystem and a small group of individuals should not be able to make such a fundamental change without consent from the network.
Conclusion: Bitcoin vs Ethereum vs Litecoin
Regardless of their flaws, Bitcoin, Ethereum and Litecoin have had a breathtaking impact.
Bitcoin not only introduced blockchain technology but also improved on many of the principles underlying Digicash and other technological forebears. Litecoin managed to establish itself as a credible altcoin by taking the best bits of Bitcoin and suggesting solutions to some of its problems. This didn’t always work and today Litecoin has fallen far behind Bitcoin both in terms of active wallets and transaction volumes.
Ethereum, on the other hand, is a radical next step in the world of blockchain-powered technology solutions. Its relative centralization of power may well cause some raised eyebrows but the possibilities unlocked by Ethereum’s groundbreaking work will reverberate through the ages.