The year 2017 has been the year of cryptocurrencies and the three most prominent cryptocurrencies that got the most traction are Bitcoin, Ethereum, and Litecoin. There are literally uncountable cryptocurrencies that came up after the success of Bitcoin but they are quite different from one another. There is no denying the fact that cryptocurrencies especially Bitcoin, Ethereum, and Litecoin have made investors millionaire over weeks continuously. People have also made money by mining these cryptocurrencies and some have ever developed their own cryptocurrencies. Before you can invest, mine, or develop cryptocurrencies, you need to understand the differences among these three most popular cryptocurrencies so that you can put your time and effort in the right direction.
Bitcoin Vs Ethereum –
Even though they seem to fall into the category of cryptocurrencies, the differences lie in their execution and goals.
Bitcoin – Bitcoin was developed by an unknown figure named Satoshi Nakamoto in 2008 and it introduced a completely different technology and technique to process the transactions with digital currencies in the most secure way. Bitcoin was developed with the intention to introduce a new payment system that is free from government regulation. Technically speaking, it works on blockchain technology whereby a public ledger is maintained where all the transactions regarding Bitcoins are recorded chronologically in blocks. These blocks are interlinked so that the transaction history can be viewed and it was so secured that not a single entry in the public ledger can be falsified. Since it is a public ledger, anyone can see all the transactions but no one can link the transactions to specific persons and hence, individual privacy is completely maintained.
Apart from privacy, it is immune from inflation and there are only 21 million Bitcoins to be mined. Coming to the mining part, Bitcoin miners are those who process the bitcoin transactions happening and put them in the public ledger. Since there is no regulatory body, it is the miners who help to keep track of the transactions. By transaction, it means transferring the Bitcoins from one wallet to another(peer-to-peer). For any transaction, a miner has to solve a complicated puzzle so that the sender, the receiver and the Bitcoin are verified and then the transaction gets registered in the public ledger. The miner who gets to solve the puzzle first for any particular transaction, he gets a new Bitcoin from the system as a reward. This is how new Bitcoins comes in the system. You can post freelancer jobs to hire miners to understand the process and mine it yourself. Therefore, in a nutshell, Bitcoin is a completely secured peer-to-peer decentralized payment system. Now let us understand its differences with Ethereum and Litecoin.
Ethereum – Ethereum is just like Bitcoin as a digital cryptocurrency which is based on blockchain technology and free from government regulation. But it is more than just a payment system. It was launched in 2015 by Vitalik Buterin and there are 60 million Ethereum to be mined which is nearly three times than that of Bitcoins and hence, it is more sustainable. Unlike Bitcoins, Ethereum introduced certain new features like smart contracts and crowdsourcing that made it more flexible and break free of the boundaries set by Bitcoins. Ethereum is an infrastructure where any company can raise funds for a project by creating smart contracts.
The company has to mention the amount and the date by which the amount is needed. The funding companies or contributors will give their funds and it will be locked until the goal is achieved which is getting the full fund by the deadline. In case the goal is not achieved, the funds are restored back to the contributors’ accounts. Therefore, its infrastructure is allowing companies across the world to raise funds for projects without paying any fee as it was the case previously with sites like Kickstarter. Furthermore, if the full fund is collected, you can seek proposals for the contributors and there is a voting system to come to a conclusion as to which proposal is the best. This infrastructure is completely automated and it is considered to be the most efficient fundraising and project management system without any outside influences.
Bottom Line – Bitcoin is a payment system, Ethereum is not only a payment system but also a platform for fundraising and project management. On the technical front, Bitcoin’s average block time is 10 minutes while that of Ethereum is 12 seconds only. Two-thirds of Bitcoins are already mined whereas the half of Ethereum is expected to have been mined by 2020. The reward for mining Bitcoins halves every four years whereas, for Ethereum, it is constant. The coding techniques and cryptographic algorithms are also different.
Litecoin – The Differences
Litecoin was introduced in 2011 by Charlie Lee with the intention of using it to buy goods as Bitcoin was becoming expensive for people to own when as a whole unit. Furthermore, for paying for any goods, it was becoming difficult to pay a very low fraction of a Bitcoin which is where Litecoin replaced Bitcoin. Litecoin is nothing but a different variant of Bitcoin with similar technology, goal, approach but a different hashing algorithm. The only reason why Litecoins became popular is that it had a smaller value and it has lower processing speed than Bitcoins. That is why Litecoin called the Silver Bitcoin due to its low price per coin. But now the scenario has changed and it has lost its purpose due to the rise in value. From an investment perspective, it is very risky as it has no future plans for its popularity and utilization, unlike Ethereum. While Bitcoins can never exceed 21 million coins, the limit for Litecoins is 84 million which is 4 times and nearly 24 million more than Ethereum.
You can hire freelancers to mine cryptocurrencies which are now considered to be more profitable than investing in them as they are highly volatile. Since Bitcoin is the face of cryptocurrencies, it is going to be the trending thing. Litecoin may fizzle out if it cannot discover a purpose for its regular utilization. But it is Ethereum that has high potentials as its goals are different and advanced to take blockchain technology to a new level with various applications.