A recent surge in Litecoin price shows that investors are beginning to catch on this digital currency as an alternative to Bitcoin. While it has remained the dominant player and continues to be largest digital currency by share of market cap but Bitcoin is losing some ground to other digital currencies on questions of mining efficiencies as well as how expensive it is now to buy.
Here are some reasons why Litecoin may prove to be a better investment than Bitcoin in the future.
Like Bitcoin, But Improved
Litecoin is often compared to Bitcoin, and for good reason: the two digital currencies are closely related, with Litecoin having been heavily influenced by its older peer when it was developed in 2011. Both share a deflationary nature, with the supply set to taper in the next few years.
However, there are important differences that separate the two. First, Litecoin has a lifetime cap of 84 million coins, which is four times higher than the total number of Bitcoins that can be mined. This means that as demand increases, there will be a larger supply of Litecoins to meet it, at least initially.
Quicker Block Generation
Another way that Litecoin may have improved upon Bitcoin is in regard to its block generation time. Litecoin has a time of 2.5 minutes, compared with 10 minutes for Bitcoin. In practical terms, this means that transactions involving Litecoin will be confirmed four times faster than those for Bitcoin, according to Seeking Alpha's Melwin Phillip.
Phillip believes that Litecoin could be a useful medium of exchange for small transactions in particular, as the fees will likely be substantially lower than those for Bitcoin. For investment purposes, this means that users will spend less money paying to buy or sell Litecoin than they would Bitcoin.
Mining Is Easier
While Litecoin and Bitcoin share the proof of work concept when it comes to their mining operations, the algorithms that the two blockchain systems use are quite different.
Litecoin's mining algorithms are significantly simpler than those of Bitcoin, meaning it can be mined on computers which are less powerful and that it will take less energy. Considering that 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, this could prove to be a major advantage for Litecoin miners going forward.
All of these key differences between Bitcoin and Litecoin point toward certain advantages that Litecoin might have over its bigger peer when it comes to investments.