Bitcoin (BTC) seems to get all the attention when it comes to cryptocurrency. But that fact alone isn’t enough to justify investment for everyone. With cryptos growing in popularity, there’s no shortage of other options available today. And between all the exciting crypto projects on the go, certain altcoins may even prove to be better choices thanks to differences in scalability, accessibility, the potential for future growth, and supported features.
So, what altcoins are worth looking at today? Two popular and comparable BTC alternatives include Bitcoin Cash (BCH) and Litecoin (LTC). But how exactly do these currencies work? What makes them unique? And Is it better to invest in Bitcoin, Bitcoin Cash, or Litecoin?
This article will answer these questions by taking a deep dive into BTC, BCH, and LTC. Read on to learn more about the histories of each of these coins, their attributes, and how they compare in terms of investment potential.
Bitcoin vs. Bitcoin Cash
BTC Cash began in August of 2017 as a derivative of BTC. The goal was to address some of BTC’s most significant drawbacks.
The Mechanics of Bitcoin
Bitcoin works by processing and storing its currency in a digital ledger known as the blockchain. This technology, which uses a peer-to-peer architecture, is incredibly decentralized, as it requires a majority rule to verify transactions rather than an individual authenticator.
The result is that the currency is impervious to manipulation. There is also a 21 million coin hard cap on the maximum number of coins that one can mine.
However, a major concern amongst investors is the currency’s transaction speed, and consequently, its ability to scale. Compared to the system used by credit cards, which can complete 1,700 transactions a second on average, early BTC only managed to achieve a rate of only 4.6 a second.
Solving the Scalability Issue: is it better to invest in Bitcoin, Bitcoin Cash, or Litecoin?
This low number of transactions has prompted developers to seek alternatives to speed up the confirmation of transactions. For instance, one can reduce the amount of data that needs verification or make the data blocks larger so that one can do more work at the same time. New technologies known as the segregated witness, like Segwit3 or Segwit2x, have come up as a result.
But a new solution gaining noticeable traction is Bitcoin Cash. Its developers attempted to amend the scalability issues of Bitcoin but did not agree with the design philosophy of segregated witness. Namely, the implementation was not transparent enough, resulting in concerns over what was supposed to be a decentralized currency.
Where Bitcoin Cash Fits In
BCH was made as a hard fork of BTC. But contrasted with Bitcoin, Bitcoin Cash is its own unique blockchain with an increased block size of 8 MB (later increased to 32 MB) compared to Bitcoin’s only 1 MB. The BCH cash network, compared to BTC, can therefore achieve:
- A higher rate of transactions
- Shorter wait times
- Fewer transaction fees
It’s clear that scalability is the advantage of the BCH network. At the same time, investors should still look to standard Bitcoin in some instances. BCH’s larger block size has become a point of concern regarding security. BTC is also still the most popular cryptocurrency on the market, meaning a higher market cap and a greater potential for real-world usability.
It’s also worth noting that Bitcoin Cash itself experienced a hard fork in November of 2018, resulting in the new currency known as Bitcoin SV. Its design was intended to follow the original intentions of BTC while still addressing some of its scalability drawbacks.
Bitcoin maximalists argue that the positives of Bcash are debatable, especially considering its negatives. In short, some crypto investors see BCH as a much riskier project with three times fewer transactions than the BTC blockchain. Additionally, Bitcoin doesn’t have smart contract functionality. While Bitcoin Cash’s freshly developed side chain is supposed to have smart contracts, saying that it does it, at the moment, is an overstatement.
Bitcoin vs. Litecoin
While not nearly as famous as Bitcoin, Litecoin’s market capitalization is nothing to scoff at, as it’s still one of the world’s largest digital currencies. When deciding between BTC and LTC, we need to compare both of them in context.
An engineer from Google named Charlie Lee launched Litecoin in 2011, and, as its name suggests, it functions as a “lite” version of Bitcoin. many consider LTC to be one of the “original” cryptocurrencies due to its longevity and staying power.
How They Compare
Both currencies function similarly; they are both decentralized and are both “mined” into existence (i.e., created into a public ledger known as a blockchain). Just like Bitcoin, you need a wallet to store the currency. A drawback that Litecoin inherits from Bitcoin is its immense volatility. One coin can change value dramatically within a short period.
How LTC and BTC Differ
If you’re deciding between LTC and BTC, you need to know about the major differences between the two cryptocurrencies.
It should come as no surprise that BTC has LTC beaten out in terms of market capitalization. There is simply more value in the collective BTC coins out there than for LTC.
Processing Speed: is it better to invest in Bitcoin, Bitcoin Cash, or Litecoin?
Both currencies depend on the network to verify transactions, and it takes time in both cases for the processing to finish. Litecoin was designed with this figure in mind and can boost transaction speeds of sometimes up to 4 times faster than Bitcoin.
Compared to Bitcoin’s maximum of 21 million coins, Litecoin can accommodate up to 84 million. Of course, one can split both coins into smaller amounts for smaller purchases, so the difference isn’t all that significant.
Use of Algorithms
This figure dives a little into the technical aspect of the currencies. Bitcoin uses SHA-256, while Litecoin uses Scrypt. What does that mean for the investor? Both algorithms impact how one can mine the coins. SHA-256 might be more complex but allows for better parallel processing. At the same time, Scrypt is more accessible since you don’t necessarily need hardware tailor-made for mining BTC. It’s worth noting that this benefit may change as specialized equipment may soon be required to mine profitably.
Now, that doesn’t mean you are stuck with just one option. You have the option of converting between Litecoin and Bitcoin if you want, just as you would with any international currencies today. Market volatility has ensured that you won’t be waiting long if you decide to switch. But keep in mind that, for instance, sending LTC to a BTC address is not an option.
What’s Next For BTC and LTC?
Many investors ask whether Litecoin will eventually overtake Bitcoin as the leading currency. The answer is challenging to pinpoint, considering how quickly the market changes. Litecoin has some advantages, like faster transaction time, while Bitcoin has the market share and mindshare right now.
Bitcoin Cash vs. Litecoin
What if your decision is between Bitcoin Cash (BCH) and Litecoin (LTC)? Both options have essential differences that significantly change their viability as an investment.
The Differences Between BCH and LTC
The simplest metric to compare is the market cap, which has LTC in the lead. But market volatility will ensure that these figures will continue to change, even at the time of this writing. Some more specific differences follow:
- Blocks: BCH supports up to 32 MB of block size, while LTC is still only 1 MB. Actual values are typically a small fraction of these figures. However, Litecoin is also significantly faster than Bitcoin Cash when it comes to block time.
- Algorithms: Just like Bitcoin, Bitcoin Cash uses the SHA-256 algorithm, while Litecoin uses Scrypt, as mentioned before. We’ve talked about the differences between these algorithms and the implications for the investor earlier in this article. In general, we can consider Scrypt simpler and faster than SHA-256.
- Transaction Fees: This figure can greatly impact the usability of a cryptocurrency as a payment method. On average, we can consider Bitcoin Cash to have lower fees than Litecoin. Double-check with online reference sites for the exact figures right now.
We should also touch on some related topics regarding both currencies, as they both have interesting histories and events that led to their placements on the market today.
Ups and Downs
The first few years were rather rocky for Litecoin, with a value of barely above $4. But when the end of 2017 kicked in, it enjoyed an explosion to $298 until crashing back to around $28 to $150 later.
BCH likewise started low at around $384 when it first launched until it reached over $3,200. Since then, the coin has crashed back down to lows of about $77, and investors often doubt whether it will ever return to its former glory in the long term.
Mining Methods: Is it better to invest in Bitcoin, Bitcoin Cash or Litecoin?
BCH and Bitcoin both run on the same blockchain, so you need the same starting supplies to mine BCH, including an SHA-256 ASIC miner, a BCH wallet, and a sufficient Internet connection. Expert miners can cost thousands of dollars to obtain, so it’s not exactly an accessible option for everyone unless you’re really dedicated to the prospect. Of course, you can always join a mining pool to share computing power and raise the return.
While it’s still possible to mine Litecoin with any regular CPU and GPU combination, the market is changing today. Such specialized equipment will soon be needed to mine profitably, just like Bitcoin Cash. Once again, joining a mining pool can raise your chance of finding a profit.
You receive the return on investment from mining both coins halves every four years, with the next iteration occurring in 2024. Considering the price, we can conclude that mining Bitcoin Cash should be more profitable than mining Litecoin.
Zero Confirmation Transactions: is it better to invest in Bitcoin, Bitcoin Cash, or Litecoin?
Litecoin has yet to implement zero-confirmation transactions, whereas Bitcoin Cash has embraced the technology.
Zero confirmation refers to transactions that occur in the network but are not yet recorded on the blockchain. Traders perform these trades to speed up processing time, but many are concerned about the security implications.
Without verification from the rest of the network, there is potential for double-spending of the coins. Bitcoin founder Satoshi Nakamoto, however, has retorted that the risk of double-spending isn’t as large as many believe. When a transaction and a double-spend hit the network at the same time, the “winner” is the one with the most nodes propagated. Since the initial transaction has a head start in that regard, there’s a low risk of the double-spend passing verification first.
Bitcoin has and will continue to be the most popular cryptocurrency on the market. Like its contenders, it aims to be a decentralized currency system where transactions are verified by the network rather than by an individual authenticator. This results in a verifiable ledger of more resistant transactions to manipulation.
New cryptocurrencies have risen in response to BTC, many of which aim to fix its biggest drawbacks: its low scalability potential. Bitcoin Cash is a hard fork derivative that, among other things, offers a larger block size and thus better scalability, while Litecoin was introduced as a “lighter” version of Bitcoin, as it delivers faster processing times.
When it comes to making a decision, investors have a lot of factors to work with. You should monitor each currency you’re considering, the nature of blocks, the algorithms, processing times, transaction fees, market caps, and specific features supported by each currency like smart contracts and zero-confirmation transactions.
On top of all that, the market is volatile, and figures will continue to change daily. Market research and staying on top of all cryptocurrency types will be important tasks for investors in the future.
Bitcoin Cash is available for our private banking customers through OTC trades. Private Banking is a free service for all users who invest more than 10,000 euros on Coinmotion. To learn more about what Private Banking can do for you, click here.
The following piece does not include any investment advice. It is worth noting that investing in any digital asset includes risks, which should be carefully assessed before making important decisions.
The views presented in the piece are the author’s own and do not represent Coinmotion’s opinions.