When comparing these two cryptocurrencies, the most fundamental technical difference found is the cryptographic algorithms they use. The most notable differences in these algorithms are their impact on the process of “mining” new coins.
BitCoin: The algorithm used for this network is SHA-256, a longstanding algorithm that is considered to be far more complicated, yet allows a higher degree of parallel processing. As a result, bitcoin miners have employed more sophisticated techniques to make the mining process more efficient. The most dominant method used at this time is ASIC or Application-Specific Integrated Circuits. The aftereffect of this technique is that the growing difficulty has made it increasingly difficult for the average user.
LiteCoin: The creator of litecoin deliberately choose the Scrypt algorithm, which was designed to be less susceptible to custom hardware solutions, such as the solutions employed in ASIC-based mining. This made the setup and usage of the algorithm more accessible for everyday users. This algorithm is suitable for people conducting many transactions, as the confirmation times are fast and the transaction fees are simple.
Most people getting started in cryptocurrency ask the same question: Where does the currency come from? The answer is it gets “mined” into existence. The “mining” process consists of compiling recent transactions into blocks (or files where data pertaining to the Bitcoin network is permanently recorded) and attempting a computationally tricky puzzle. The first individual to solve the puzzle places the block on the blockchain and receives the reward. The rewards consist of the newly released coin and the transaction fees which are then released to the miner.
BitCoin: Its 10 minute time to generate a block is slower in comparison to litecoin. Every 2016 blocks, or roughly every two weeks, the difficulty of the mining process automatically adjusts. Therefore, if more computational power is employed for mining, the difficulty adjusts upward to making mining harder; whereas, if the power is taken off of the network, the opposite happens to make mining easier.
LiteCoin: Like bitcoin, litecoin mining uses the proof-of-work algorithms. While this helps with security, the process requires a substantial amount of time and energy, as well as electricity. The process requires miners to compare incoming and previous transactions on the blockchain, or a continuously growing list of records linked and secured with cryptography. If no double-spends (an attack where the given set of coins is spent in more than one transaction) are found, miners create a new block and add it to the blockchain. The block reward is then paid to the miner, which acts as an incentive for miners to contribute their hashing power to the network.