Litecoin VS Ethereum: [The Comprehensive Comparison Guide]

Rajarshi Mitra

4 months ago
Litecoin VS Ethereum: [The Comprehensive Comparison Guide]
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Litecoin VS Ethereum

Litecoin and Ethereum are two of the most exciting projects in the crypto space. Both of these coins are consistently in the top five coins when it comes to market cap. Even though both of these projects are extremely popular, their main purposes are entirely different. In the guide, Litecoin VS Ethereum, we are going to take a look at the differences and similarities between these project.

Ethereum at a Glance

November 2013: Vitalik Buterin publishes the Ethereum whitepaper

Key Highlights

  • January 2014: The development of the Ethereum platform was publicly announced. The original Ethereum development team consisted of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson.
  • August 2014: Ethereum ends their ICO and raises $18.4 million.
  • May 2015: “Olympic” the Ethereum testnet releases.
  • July 30, 2015: The first stage of Ethereum’s development, “Frontier” was released.
  • March 14, 2016: Homestead, the first “stable” Ethereum release, went out on block 1,150,000.
  • June 2016: The DAO hack happens and the $50 million worth of Ether, which was 15% of the total Ether in circulation back at the time.
  • October 25, 2016: Ethereum Classic forks away from the original Ethereum protocol.
  • October 16, 2017: The Metropolis Byzantium hardfork update happens.
  • February 28, 2019: The Metropolis Constantinople hardfork update happens.

Litecoin at a Glance

Key Highlights

  • October 7, 2011: Charlie Lee releases Litecoin open-source client on GitHub.
  • October 13, 2011: Litecoin network goes live.
  • November 2013: Litecoin reaches $1 billion market capitalization.
  • April 2014: Version of Litecoin launches which fixed several bugs.
  • May 2017: Litecoin activates SegWit and Lightning Protocol.
  • January 28, 2019: Charlie Lee states that Litecoin will attempt to be fungible by incorporating privacy.

We will be mainly focussing on the four main categories of differences:

  • Purpose
  • Mining
  • Gas vs Transaction Fees.
  • Internal Economics.

#1 Litecoin VS Ethereum:  Purpose

When we are looking into the differences between the projects, it is critical to look into the purpose and core philosophy behind them. So, why were Litecoin and Ethereum created in the first place? Let’s take a look.


Charlie Lee, the creator of Litecoin, has always been a staunch advocate of Bitcoin. According to him, if Bitcoin is gold, then Litecoin is silver. So, why was Litecoin created? There several problems plaguing Bitcoin right now. While it was created solely as a mode of payment and store-of-value, there are certain factors which makes it impractical for normal transactions. To put it, Bitcoin is slow. As the size of the network increases, it takes a longer time for a consensus to be reached. This coupled with the 10-min block time plummets network throughput down to 7 transactions per second.

To counteract these issues, Litecoin was given a block time of 2.5 mins which boosted its throughput to 56 transactions per second, which is nearly 8X the throughput of Bitcoin. As per Lee, Litecoin was created to be a straightforward mode of payment between different parties. Litecoin is a hard fork of the main Bitcoin protocol.

Main Aim: Be a decentralized mode of payment for normal transactions


Ethereum, on the other hand, is not a payment-only system. Ethereum founder Vitalik Buterin believes that the blockchain has more utility than just being a payment-service provider. Buterin thought that leveraging the blockchain technology, developers can create real-world applications on top of it. The way they can do that is by creating smart contracts and executing them on top of Ethereum.


Smart Contract is a computer code running on top of a blockchain containing a set of rules under which the participants of the contract agree to interact with each other. There are certain features of smart contract interactions:

  • The participants of the smart contract can directly interact with each other without the need for a middleman or a third-party.
  • Each step of a smart contract can only be implemented after the execution of the immediate former step.
  • The smart contract acts as a blueprint for a decentralized application (DApp).
  • All the contents and data inside a DApp is not owned by one single entity.

Main Aim: Ethereum wants to be a decentralized, global supercomputer which will give computational power to developers around the world to build their applications

#2 Litecoin VS Ethereum: Mining

The second point of difference between the two is the way they go about their mining.

Litecoin Mining

Since Litecoin is a hard fork of the Bitcoin protocol, it utilizes the proof-of-work (POW) consensus protocol. The idea of POW is for miners to use their computational power to solve cryptographically hard puzzles. The miner who gets to solve the problem, adds a new block to the blockchain and gets a block reward in return.

Bitcoin uses the SHA-256 hashing algorithm for its mining purposes. Before long, miners discovered that they could exponentially increase their mining power by joining together and forming mining pools via parallel processing.

In parallel processing, program instructions are divided among multiple processors. By doing this, the running time of that program decreases, and that is basically what the mining pools are doing.

The SHA 256 puzzles require a lot of processing power, and that gave rise to specialized “application-specific integrated circuits aka ASICs. The only purpose that these ASICs served was bitcoin mining.

These mining pools would have an entire powerplant of ASICs explicitly designed for bitcoin mining.

  • Mining, as initially envisioned by Satoshi, was supposed to be a very democratic process. The idea was that any average Joe could sit on his laptop and contribute to the system by becoming a miner. However, with the rise of the ASIC plants, the average Joes have no chance to compete with the big companies.
  • Each pool can increase their mining power by acquiring more ASICs. When a pool becomes more powerful, it can mine more blocks and then get more rewards. Using the reward, the pool can buy more ASICs. Now, this is a problem:
    Litecoin Vs Ethereum
    The chart above shows the hashrate distribution of Bitcoin. As you can see –, AntPool, Poolin, and SlushPool combined have 51% hashrate of the market. Theoretically speaking, they can take over the overall blockchain.

So, to prevent this centralization, Litecoin uses the Scrypt hashing algorithm.

What is Scrypt?

Scrypt was initially named “s-crypt” however it is pronounced as “script.” While this algorithm does utilize the SHA 256 algorithm, its calculations are way more serialized than the SHA-256 in bitcoin. As such, parallelizing the computations is not possible.

What does this mean?

Suppose we have two processes A and B.

In bitcoin, it will be possible for the ASICs to do A and B together at the same time by parallelizing them.

However, in Litecoin, you will need to do A and then B serially. If you try to parallelize them, the memory required becomes way too much too handle.

Scrypt is called a “memory hard problem” since the main limiting factor isn’t the raw processing power but the memory. This is precisely the reason why parallelization becomes an issue. Running five memory hard processes in parallel requires five times as much memory. Now, of course, there can be devices manufactured with tons of memory in it, but two factors mitigate this effect:

  • Normal people can compete by buying simple day-to-day memory cards instead of super-specialized ASICs.
  • Pound-for-pound, memory is way more expensive to produce than SHA-256 hashing chips.

Scrypt has been deliberately designed to make sure that mining is accessible and democratized as possible. However, recently companies like Zeus and Flower Technology have managed to create Scrypt ASICs. This would, unfortunately, mean the demise of their dream of democratized mining.

Ethereum Mining

Ethereum currently uses POW consensus mechanism for mining, however, they are looking to move onto Proof-of-stake (POS) mechanism using Casper Protocol.

Proof of stake will make the entire mining process virtual and replace miners with validators.

This is how the process will work:

  • The validators will have to lock up some of their coins at stake.
  • After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.
  • If the block gets appended, then the validators will get a reward proportionate to their bets.

Litecoin Vs Ethereum

As you can see, the POS protocol is a lot more resource-friendly than POW. In POW you NEED to waste a lot of resources to go along with the protocol, it is resource wastage for the sake of resource wastage.

Casper is the POS protocol that Ethereum has chosen to go with. While there has been an entire team busy creating it, Vlad Zamfir is often credited as being the “Face of Casper”.

Image Credit: Blocknomi.

So how is Casper different from other Proof of Stake protocols?

Casper has implemented a process by which they can punish all malicious elements. This is how POS under Casper would work:

  • The validators stake a portion of their Ethers as stake.
  • After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.
  • If the block gets appended, then the validators will get a reward proportionate to their bets.
  • However, if a validator acts maliciously and tries to do a “nothing at stake,” they will immediately be reprimanded, and their entire stake slashed.

As you can see, Casper is designed to work in a trustless system and be more Byzantine Fault Tolerant.

Anyone who acts in a malicious/Byzantine manner will get immediately punished by having their stake slashed off. This is where it differs from most other POS protocols. Malicious elements have something to lose so it is impossible for there to be nothing at stake.

Flawlessly implementing Casper and Proof Of Stake will be critical if Ethereum plans to scale up.

#3 Litecoin VS Ethereum – Transaction Fees vs Gas

Litecoin Transaction Fees

So, how does a transaction work in a POW system?

All the transactions line up in a mempool. The miners can pick up the transactions and put them inside the blocks that they have mined. The moment the transaction is put inside the block, it gets fulfilled. Since miners are performing such a critical task, it is important to incentivize them correctly. For each transaction they put in the block, they will be rewarded with a transaction fee.

Litecoin Vs Ethereum

On average, you spend $0.05 fees per transaction in Litecoin.

Ethereum Gas

Ethereum, on the other hand, doesn’t use transaction fees, but a gas system. Gas is a unit that measures the amount of computational effort that it will take to execute certain operations.

All the smart contracts that run in the EVM are coded using solidity (Ethereum is planning to move on to Vyper from Solidity in the future.)  Each line of code in solidity requires a certain amount of gas to get computed.

The image below has been taken from the Ethereum Yellowpage and can be used to gain a rough idea of how much specific instructions cost gas-wise.

Litecoin Vs Ethereum

Image Courtesy: