Is Litecoin a Better Investment Than Bitcoin?
Has the underdog come to take over?
Originating as a fork to Bitcoin, Litecoin has become the go-to crypto currency in recent days for investors. Is this because the currency is simply cheaper to buy or is there more than meets the eye to the ‘silver’ to Bitcoin’s ‘gold’?
The following article analyses why there has been such a dramatic increase in the value of Litecoin in recent times (~200% this month, ~78% this week) and why it has become the go-to crypto-currency when investing in the highly volatile market.
Positives for Litecoin
Probably the most talked about difference between the two cryptos is the fact that Litecoin has 4 times as many coins as Bitcoin. This is significant in the fact that many crypto traders account for the total number of coins each cryptocurrency is programmed to make. Bitcoin is capped at 21 million coins, but Litecoin can make up to 84 million coins.
Both coins technically still have a long ways to go until they hit their cap limits however it remains a concern because of the price volatility expected as the coins reach their maximums. In theory, Bitcoin will be the first to reach its maximum limit as there are 4 Litecon for every 1 Bitcoin. If Bitcoin nears its maximum coin amount first, then Litecoin may pick up more traction with traders buying into Litecoin to avoid the Bitcoin volatility.
The above point in favor of Litecoin, however, is largely a misunderstanding: Since both Bitcoin and Litecoin can be divided into fractional amounts, the maximum coin shouldn’t impact the value storage of either coin. However, in a market so volatile and misunderstood it is a real possibility.
One of the main driving forces behind Litecoin’s rapid increase in value is the time taken to approve a transaction. Litecoin significantly improves on Bitcoin’s 10 minute time blockchain generation period by slicing that time by 75%. Therefore, should cryptos ever become the ‘new money’ as many are suspecting the time limit taken to process transactions firmly places Litecoin ahead of Bitcoin.
This ideology should be taken with a pinch of salt and is unlikely to occur any time soon. The volatility of the market means that purchasing every day products through Litecoin or Bitcoin would be near impossible. It is widely acknowledged that some form of conversion mechanism to counteract the constantly fluctuating prices is needed. This has been recognised and acted upon by MNCs this week with gaming service provider Steam stopping Bitcoin as a payment method.
Ease of Mining
While Litecoin and Bitcoin both possess a similar proof-of-work concept when it comes to how the crypto-coins are mined, the algorithms that the two blockchain systems use are distinctly different.
Litecoin's mining algorithms are significantly simpler than those of Bitcoin. As a result of this simplistic approach Litecoin can be mined on computers which are less powerful and that it will take less energy.
This is a huge benefit for the newer formed crypto as mining operations around the world take up massive amounts of electricity and there is already a shortage of powerful graphics cards needed for mining rigs.
Negatives for Litecoin
The one area when there is no doubt that Bitcoin reigns supreme over Litecoin is the acceptance of the crypto as currency. Currently more MNCs are accepting Bitcoin as currency than are accepting Litecoin. As recent as yesterday PriceWaterhouseCoopers (PWC) became the first ‘big 4’ accountancy firm to accept Bitcoin as payment.
However, there are now more Coinbase account actively being used than there are Charles Schwab accounts. If a deal could be secured to allow the number-one platform for crypto trading to act as a source of payment in their currencies the increase in value of Litecoin (as one of the three currencies) would sky-rocket.
All the Bubble Talk
I will leave you with one very interesting graph that may help you to decide if you want to take that personal risk. I came across the final graph at the top of the article this morning exhibiting the DOTCOM bubble in comparison to the crypto-currency ‘bubble’. If it is to be believed NOW is the time to invest in order to increase your wealth by unimaginable levels.
Disclosure: I have a small shareholding in Litecoin. My life does not benefit by anybody purchasing Litecoin ahead of Bitcoin nor by the use of a Coinbase account.
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© 2017 John Wolfgang