When it comes to investing in cryptocurrencies, nothing is a sure thing. If last year’s major booms and busts told us anything, it’s that you can expect volatility, wherever you go. That said, diversifying your crypto-portfolio is a wise move, as although bitcoin often drags everything up and down with it, there are some tokens that do things better than others.
But which alternative currencies should you invest in? We have our favorites, but if you want to put your eggs into one specific basket, you need to look at the differences between some of the best options. What about if we pit Litecoin vs. Ethereum? Which one comes out on top?
Litecoin has been around a lot longer than Ethereum, but Ether has grown in value far quicker. Then there are smart-contracts to consider. In this guide we’ll break down the key differences between these two altcoins, to give you the best basis for your own cryptocurrency investments.
As a store of value
With all the furor surrounding Bitcoin and its contemporaries’ massive value spike throughout — and particularly at the end — of 2017, one of the biggest concerns for those looking to buy cryptocurrency is whether they’ll retain their value. The short answer to that is nobody knows. Cryptocurrencies are incredibly volatile and can rise and crash tens of percentage points in a single day, but some are proven more than others and may be more stable investments for the future.
Debuting in 2011, Litecoin is one of the oldest cryptocurrencies, so it has one of the best records for retaining or increasing in value. It also has strong name recognition, which with many hundreds of alternative cryptocurrencies out there, is an important facet in and of itself. Many exchanges now support Litecoin, which makes buying and selling it easier. That too should help it store value long-term.
Ethereum is not as old as Litecoin — it only came into existence in 2015 — but it’s quickly garnered interest for its potential uses beyond cryptocurrencies, which we’ll address in more detail later in this guide.
That interest has increased Ethereum’s name recognition. It’s separate enough from the “coin” nomenclature that it can strike out on its own a little easier, and it’s seeing growing support from exchanges. It’s still not common to see Ether used as a payment method, but that is steadily growing too.
Other factors worth considering in this debate are that Litecoin has a definitive 84 million token maximum, meaning that at some point in the future there will be no new Litecoin created. Ether, on the other hand, will continue to be awarded for mining into the foreseeable future. The developers may one day cap it, but that has yet to happen. The scarcity brought about by a limitation on the number of tokens could mean that Litecoin ends up being a more valuable cryptocurrency in the future.
For now, Ethereum seems likely to be the best store of value. It has a much higher and growing interest from the wider cryptocurrency community, and despite its younger age, its growing name recognition and availability should drive it forward, making it easier to purchase, access, and spend. Ethereum would likely disappear only if cryptocurrencies, as a whole, went kaput.
As a transaction medium
The main reason cryptocurrencies came to exist, at least initially, was as a form of entirely decentralized digital money. That means using it to buy goods and services. As we’ve seen with Bitcoin, scaling difficulties can make that far harder to achieve, especially if you aren’t willing to pay huge fees. So how do Litecoin and Ethereum compare in that respect?
Considering Litecoin was originally created to be a better online transactional medium than Bitcoin, it’s no surprise that it’s pretty good at it. At the time of writing its median transaction fee is just $0.04 with a block time average of 2:19 (minutes/seconds). Confirmations come pretty quick — around four times faster than Bitcoin.
That makes Litecoin great for conducting transactions online, especially considering the growing number of online outlets that accept it. Ethereum is equally viable, however. Although its average fees are much higher — its median rate is around $0.85 — the Ethereum block time is under 15 seconds. You can expect your transfers to receive multiple confirmations in a minute or less.
That’s why over the past year we’re seen Ethereum become the most traded cryptocurrency in the world, with more than a million transactions taking place some days. In comparison, Litecoin handles just over 50,000 transactions a day, while even Bitcoin handles 230,000 or so. Ethereum is trading hands with incredible frequency.
Both Litecoin and Ethereum have their strengths in transactions. While Litecoin is the cheaper of the two to spend online, owners appear to be more interested in using Ether for the time being. Its short block time is hard to beat.
While Litecoin is a cryptocurrency through and through, Ethereum is a little smarter than that. Ethereum itself is more than the Ether token. It’s also a platform that can facilitate Ether transactions in its own right. These are called “smart contracts.”
We go into more detail on smart contracts in our discussion of Ethereum, but in short, blockchain technology underpins a smart contact to engender trust. Instead of lawyers confirming a contract has been adhered to, the blockchain does it automatically. The contracts can tell when goods or services have been transferred, and Ether payments are then automatically sent.
It’s a pie in the sky idea, but theoretically smart contracts could eliminate all sorts of middlemen, from crowd-funding websites — have a smart contract send funds when milestones are reached — to real estate — send purchase funds when the owners have completed their end of the bargain.
Litecoin has no such goals and that’s fine, but it does mean it’s decidedly less functional than its younger sibling. Ethereum is the natural evolution of the decentralizing idea of cryptocurrencies that began with Bitcoin. Litecoin is more of an iteration on that early idea.
So which is best?
As with all cryptocurrency head to heads, naming one a champion over the other is hard. There are no guarantees in any of them and one could crash and burn tomorrow while another soars in value. That said, we do have our favorites and as it stands, Ethereum is the more functional, the more versatile, and the more technically impressive of these two cryptocurrencies.