Litecoins v Bitcoins?

Posted by Katie Olver on July 16th, 2013

Litecoin is colloquially known as the silver to Bitcoin’s gold, and a prominent emerging crypto-currency alternative. There are different opinions on the security aspects of Litecoin, compared to Bitcoin. Some say it is more secure, while some have a totally opposite view. Here is what Kate Craig-Wood, founder of CipherMine thinks.

Why are Litecoins safer?

Bitcoins (BTC_ are mined (discovered) by performing lots of SHA256 (a common password hashing function). Litecoins (LTC) are mined using an algorithm called scrypt, and it was deliberately designed to be more difficult to mine, including with custom hardware. Litecoin/scrypt mining requires a lot of RAM thanks to it “proof of work” system, whereas Bitcoins/SHA256 lends itself to processing with low-RAM, very cheap application specific integrated circuits (ASICs) which are now coming on the market. To mine Litecoins you currently need to buy expensive, high-performance Graphics processors costing at least 200 EUR each. Two ASICs can do the equivalent amount of SHA256 mining as one GPU and cost just 6 EUR each.

This means that bitcoin is susceptible to what’s called “51% attacks”. If one party is able to mine more than 50% of the new blocks the they can perform an attack where they dupe the system resulting in “orphaned blocked” which appear to have value but do not. ASICminer, the first cryptocurrency-quoted mining company (on BTC Trading Co) already has about 30% of total network hashrate, demonstrating this vulnerability.

In the early days of Litecoin it was vulnerable to a 51% attack also, however today the network hashrate is ~30 Gigahashes/sec (as an aside, 1 scrypt Megahash/s ~= 1 SHA256 Gigahash/s in terms of mining rate). A typical scrypt-mining GPU costing EUR 200 would do about 0.6 MH/sec, so to get 50% of the network hashrate (30 GHs – you’d need to double it) you would need to spend around EUR 10 million. It is generally considered that this renders it unattractive given the relatively small size of the total litecoin market (about EUR 40m). By contrast, to purchase enough ASICs to double the current network hashrate for BTC would only need to spend about EUR 3.5m. The current value of the BTC market is around 750m EUR.

There are other reasons why Litecoins are more secure, beyond their resilience to cheap, high-performance ASICs. Thanks to its architecture even the transactions are more secure, with it being posible to have very high confidence in a transaction’s authenticity after about 20 minutes, versus 60 minutes with bitcoin. There is more information here:

http://www.reddit.com/r/litecoin/comments/1cssqr/the_math_why_litecoin_is_more_secure_than_bitcoin/

Can you buy Bitcoin on the LTC Exchange? Or do they have separate exchange?

Do not conflate cryptocurrency exchanges (such as Mt Gox, BTC-E and Cryptsy) with cryptocurrency-quoted securities exchanges (such as BTC Trading Co and Litecoin Global. In the case of the former you can buy and sell cryptocoin and fiat currencies. Mt Gox’s markets are only between fiat (USD, EUR, GBP etc) and BTC. BTC-E offers markets between USD/BTC, EUR/BTC, EUR/LTC, and a bunch of alt-coins paired with BTC. Cryptsy does not handle any fiat at this stage so most of its market are against BTC with some LTC markets – their niche is the long-tail of alt-cryptocurrencies (over 30 there at last count).

BTC Trading Co does not allow you to buy or sell currencies (fiat or crypto), it merely allows you to buy and sell shares in virtual securities (company stocks, bonds, etc) quoted in BTC. The volumes there are nonetheless impressive, and the star is the aforementioned ASICminer with volumes in the 2,000-5,000 BTC/day (EUR 100k – EUR 0.5m/day) – indeed they are who we at CipherMine are trying to emulate and ultimately beat. Litecoin Global is run by the same guys as BTC Trading Co and it uses the same software, except that the securities there are quoted in LTC.

What is the Bitcoin exchange?

Mt. Gox. However, they are having problems since it is not practical to get money out in a meaningful timescale. BTC-E is number two, and last time I checked was doing about 30-40% of the volumes seen on Gox – they have the advantage of more diverse markets (most people don’t care about having BTC vs their local fiat since BTC/USD is sufficient thanks to the comparably very slow rate of change in fiat exchange rates)

If Litecoin is 2.76 per Dollar does this work the same with BitCoin?

No. They are separate cryptocurrencies with their own exchange rates (see above). BTC is currently USD $77 each on my favourite UK exchange, BitStamp (I like them because you can move lots of real money in and out quickly, unlike Gox). However, historically LTC’s value has risen and fallen in proportion to BTC, with BTC clearly being the “master” cryptocoin. What is exciting about recent events is that LTC’s value has been moving independently from BTC for the first time.

How many Litecoins can you mine v Bitcoins?

There can only ever be a maximum of 21 million Bitcoins, and 84 million Litecoins. It is because of this larger number than Litecoin is often billed as “silver” compared to Bitcoin’s “gold”.

How is Litecoins different?

Litecoin is that the blocks (chunks of data containing coins – what the miners are looking for) are found on average every 2.5 minutes, 4 times faster than BTC (which is also sort-of why there can be 4x as many).

This means that Litecoins have a faster first comfirmation. If I send you some LTC you know I have done so within 2.5 minutes whereas with BTC it can take up to 10 minutes. They still need the same number of confirmations (usual 6) to validate the transaction however.

It is also mined differently, as described above. Its main distinguishing feature though is that it costs a lot less than BTC at the moment (~EUR 2 vs ~EUR 60). The question is, for how much longer.

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