The Complete Introductory Guide to Litecoin
There are a lot of cryptocurrencies in the market besides bitcoin, but they are not talked about that much. Bitcoin is popular because it was the first cryptocurrency, but that doesn’t necessarily mean it’s the best. Several other cryptocurrencies were conceived to solve major problems with Bitcoin.
One such cryptocurrency is Litecoin; not a lot of people know what Litecoin is and how it works, which is why Finvesting.net has created this introductory guide so you can understand what Litecoin is and how it works.
What Is Litecoin?
Just like Bitcoin, LTC is an open-source, peer-to-peer, decentralized cryptocurrency. It was created in the year 2011 by a software engineer named Charlie Lee, an MIT graduate and former employee at Google at the time, and announced the launch on a popular message board platform BitcoinTalk. Litecoin is a software fork of Bitcoin, meaning Litecoin’s code is very similar to that of Bitcoin with minor changes to improve upon the existing technology.
As of February 2021, LTC has a market cap of $13.28 Billion at a per token value of $198, making it one of the 10 biggest cryptocurrencies in the world. Litecoin is often referred to as “silver to Bitcoin’s gold” and that is because the currency was created not to compete with Bitcoin, but to complement it, rectifying some flaws that existed in the Bitcoin ecosystem.
When compared to Bitcoin, LTC is considerably faster and a lot cheaper which makes it a practical choice for a lot of people. The creators of LTC call it the Lite version of Bitcoin. Someone in New York can send payments via LTC to someone in London, in a matter of seconds for a fraction of the cost. The same is not possible with traditional transaction methods, and other cryptocurrencies charge significant fees.
How Does Litecoin Work?
Fundamentally, Litecoin is based on blockchain technology which is a public ledger distributed on a network of computers that rely on a consensus protocol to verify transactions. Similar to Bitcoin, a block is added after a transaction is verified by a participant in the network.
How Is Litecoin Mined
Unlike other cryptocurrencies, the makers of Litecoin kept in mind the idea of a democratized mining system, and hence to mine Litecoin, one doesn’t need specific hardware. Instead, users can use everyday devices like consumer-grade laptops or computers to mine the coins.
The supply of LTC is fixed at 84 million, which is almost 4 times that of Bitcoin i.e. 21 million. Currently, as of February 2021, there are 67 million LTC in circulation. The miner who first verifies a transaction is incentivized with a reward of 50 LTC’s. This amount is reduced with time, and it is halved at fixed intervals — i.e. when 840,000 coins are mined.
Transaction Speed and Fees
While it takes 10 minutes to generate a block on Bitcoin, the time taken to do the same on Litecoin is approximately 1/4th of that on Bitcoin i.e. 2.5 minutes, this reduces transaction speeds considerably. The transaction fees are also very less i.e. 1/1000th of a Litecoin regardless of the size of a transaction, Bitcoin, on the other hand, charges a lot more, depending on the amount of data that makes up the transaction. Even Paypal charges a transaction fee of 3%.
At a time, more transactions can take place on Litecoin than Bitcoin due to the faster transaction processing speed, making it more scalable than Bitcoin. This was done by removing signature information to decrease the load on the system.
Litecoin uses the ‘scrypt’ proof-of-work algorithm to verify transactions, whereas Bitcoin uses the SHA-256 algorithm to carry out verification. Litecoin is stored similarly to other coins i.e. on digital wallets or hardware/cold wallets.
Litecoin is based mostly on C++ and uses similar protocols to that of Bitcoin. The SHA-256 algorithm is relatively more complex than Scrypt, as it allows a greater degree of parallel processing. Bitcoin uses Application-Specific Integrated Circuits (ASICs). Scrypt does not require that, in contrast, making Litecoin mining more accessible to the public.
Similarities and Differences between Bitcoin and Litecoin
As mentioned earlier, Litecoin is very similar to Bitcoin as they share almost the same code, the creators just modified bits of code to fill the cracks that lie in the bitcoin ecosystem. The major problem with Bitcoin is the scalability issues that it faces. The three most noticeable differences are Transaction speed, Transaction fees, and Market Capitalization. Bitcoin’s market capitalization is far more than LTC’s, as of January 2021, it’s more than $800 Billion, LTC is nowhere near that amount. It still isn’t universally accepted, but that is slowly changing, with an increasing number of people buying and using the currency, it may become mainstream faster than people expect it to.
How can I buy Litecoin?
One can easily buy Litecoin via an exchange, there are a variety of exchanges available on the market. All you have to do is make an account and provide all the necessary information and set up a digital wallet. This does not take a lot of time and can be done in a matter of minutes. You can then easily participate in the Litecoin ecosystem and make money.
What does the future hold for Litecoin?
It’s hard to predict the future even for seasoned economists, but the general outlook is positive for the whole cryptocurrency ecosystem, with industry giants like Tesla backing the movement and an increasing number of businesses and governments accepting cryptocurrencies, Litecoin is for sure to make progress. The user base for the currency is also increasing rapidly.
Some useful links
Understanding the difference between all the major cryptocurrencies:
Bitcoin vs Ether vs Litecoin vs Ripple: Differences between Cryptocurrencies – CNBC
Understand the difference between Litecoin and Bitcoin in detail:
Bitcoin vs. Litecoin: What’s the Difference? – Investopedia