In 1999, Professor Milton Friedman, a Nobel Prize holder in economics, declared that the internet would be one of the major forces in reducing the role of the government. He went on to say that the one thing that is needed, but will soon be developed is “..a reliable e-cash.”
In 2009, the world’s first cryptocurrency was launched, named BitCoin. The code has remained an open source so that anyone can modify or use it for other projects. Subsequently, many cryptocurrencies have launched with differing levels of success.
In 2011, a new cryptocurrency was announced: Litecoin. Next to bitcoin, this currency has the highest market cap of any mined cryptocurrency. It’s creator, Charles Lee, announced that litecoin was created to offer a real alternative currency similar to bitcoin. “We wanted to make a coin that is silver to Bitcoin’s gold.”
At first glance, Bitcoin and Litecoin have many similarities; however, they also have key differences. The following will focus on the fundamental distinctions between the two cryptocurrencies.
One of the main difference between these two cryptocurrencies is the total number of coins that each currency can produce. While the differences do seem vast, the effects may be trivial in the real-world due to the coins being divisible into minuscule amounts. Because of this, users of either currency should have no issues with purchasing low-priced goods, regardless of the general price of a single coin.
BitCoin: This network can never exceed 21 million coins. The limited production of bitcoins was intended to counteract the endless printing cycle of paper currency. So rules were set in place to govern how much bitcoin will be released and how that supply is reduced over time. Each time a new block is added to the network, new coins are awarded to the discovering miner. About every 210,000 blocks, this reward is “halved” where the reward amount decreases. For example, initially the prize was 50 bitcoin per new block, but in 2012 it fell to 25 bitcoin.
LiteCoin: LiteCoin is very similar to bitcoin. The process for mining is nearly the same. However, this network can accommodate up to 84 million coins. For litecoin, the reward is halved every 840,000 blocks. The halving process works to guarantee that there will never be more than 84 million coins in circulation in such a way that the currency remains inflation-proof.
In The Key Differences Between Bitcoin and Litecoin Pt. 2, the algorithm disparities and mining distinctions of the two cryptocurrencies will be discussed.