With cryptocurrency prices increasing once again, investors in the industry are keen to spot digital assets with the highest upside potential. There’s a lot to consider in this regard.
In the article, we’ll be looking at the investment case for two of the largest assets by market capitalization — Litecoin (LTC) and the native currency of Ethereum, Ether (ETH).
Two Very Different Uses
When considering investing in either ETH or LTC at an exchange, it’s first important to realize that these two networks have very different features. They each lend themselves to different use cases. The existing use cases play a large part in determining the upside potential of a cryptocurrency.
After Bitcoin (BTC), Litecoin is one of the industry’s most established cryptocurrency projects. In fact, the digital currency has a lot in common with BTC. Most of the code is the same but Litecoin uses a different mining algorithm, has a different total supply, faster block times, and often moves quickly to incorporate scaling and privacy technologies. LTC incorporated Segwit before the Bitcoin network and has also added the privacy upgrade, Mimblewimble.
LTC is often touted as being more like cash than BTC is. Users can transfer it faster and the fees are usually lower. The niche LTC is going after is payments.
Meanwhile, Ethereum is completely different. It is a Turing-complete, decentralized computing network. Developers can build applications directly onto the Ethereum blockchain. This creates all kinds of possibilities — from decentralized finance (DeFi) to automatic machine-to-machine micropayments.
Given its flexibility, Ethereum has attracted a huge network of developers. Together they’ve pioneered a new form of fundraising – the ICO – and now, they have their sights set on decentralizing the financial industry.
Top of its Field Versus Fierce Competition
Another important consideration is competition in their relative niches. While both networks certainly face competition, one is clearly at the top of its sector and the other is among many.
If you ask someone with at least a little knowledge of the cryptocurrency industry which network most smart contracts are deployed on, they’ll almost universally say Ethereum. Now, ask the same person which digital currency is best for payments and you’ll get a range of answers. They might mention Litecoin, Bitcoin Cash, XRP, USDT, DASH, or some other project.
Ethereum has network effects that make it better positioned to succeed in its niche than Litecoin. The growing number of developers means more applications are deployed on Ethereum. This, in turn, attracts even more developers, because everyone wants to build on the most popular platform. This positive feedback loop means that other smart contract-enabled platforms fight an uphill battle.
LTC vs ETH: Which Has More Upside Potential?
On paper, Ethereum, with its much loftier goals, probably has greater upside potential for investors. And we suppose that those developing Ethereum are able to achieve said goals and scale the network to potentially millions of users.
However, due to its technical complexity, Ethereum presents a greater risk of catastrophic failure. The network was forced to roll back the blockchain early in its existence thanks to the infamous DAO hack. Meanwhile, the applications it supports are prone to various hacks and exploits. A significant enough vulnerability could render Ethereum’s enhanced network effects irrelevant and force the community to converge on another smart contract platform.
Comparatively, Litecoin doesn’t have anywhere near the same potential attack surface. Its current lack of functionality might limit its upside potential. Yet, by the same logic, it also reduces the likelihood of a critical vulnerability wiping out its price. Being an older network, LTC trumps ETH in terms of its history of compromise-free operation.
But the simple truth of the cryptocurrency industry is that there’s nothing certain about its future trends. Both networks, Litecoin and Ethereum, see regular updates that improve their functioning. And theoretically, both of them have upside potential. Still, the opposite scenario is also possible for the two. So, the best advice here would be to study the market and make informed decisions.