Many cryptocurrencies have come and gone since the debut of Bitcoin in 2009. Yet, one project, Litecoin, has stood the test of time.
Litecoin has become a major competitor to bitcoin because it offers similar features such as low transaction fees and decentralization. In this guide we’ll take a look at Litecoin, what it is, how it works and its advantages and disadvantages when compared with Bitcoin.
What Is Litecoin?
Created by former Google engineer Charlie Lee, Litecoin is one of the oldest altcoins out there. It was forked off the Bitcoin protocol in 2011.
The goal in launching Litecoin, according to Lee, was to improve on Bitcoin. He wanted to make sure that Litecoin had faster transaction times, better security, and lower fees.
Lee designed a new hashing algorithm for the coin called Scrypt (pronounced s-crypt), which supports Litecoin’s faster transaction speeds.
Bitcoin has a slower transaction processing speed of around 5 transactions per second.
How Does Litecoin Work?
Litecoin shares many similarities with Bitcoin. They both use proof of work to process transactions. And while Litecoin uses a new hashing algorithm to secure its network, it doesn’t use SHA256 hashing like Bitcoin does. Instead, Litecoin uses scrypt, which is similar to bcrypt.
But there are some key differences between the two cryptocurrencies. For one thing, Litecoin has a much smaller cap on how many coins will ever exist. Currently, there are about 84 million Litecoins in circulation. In contrast, Bitcoin has a hard limit of 21 million coins.
Another difference is that Litecoin has no block size limits. This allows the coin to scale better than Bitcoin, which has been struggling with congestion problems.
While Bitcoin is capped at a fixed number of blocks per day, Litecoin has no such restriction. So far, the Litecoin network has produced roughly 4,500 blocks each day.
How Litecoin Is Mined
Litecoin mining is different from Bitcoin mining because it uses a hashing algorithm that is much faster. This makes Litecoin mining much less resource intensive than Bitcoin mining. However, Litecoin mining still requires a lot of electricity and space.
The process begins with solving a hash problem. A hash function takes data and converts it into a string of letters and numbers. For example, the word “Hello” might become “xvj8zmqkpwf4cg7yb3n2h1u9oasd6h”. To find the solution to the hash, miners use specialized computers known as ASICs. These machines are designed to perform one task very quickly. They’re optimized to run the same hash over and over again. Once the hash is solved, the miner gets rewarded with 12.5 LTC, which is worth about $0.16 at press time.
How Litecoin Halves
Litecoin’s supply is capped at 84 million coins. When miners record a new block to the Litecoin blockchain, they are awarded with newly generated LTC. However, because the amount of Litecoins mined per block decreases over time, the total number of Litecoins in circulation will eventually decrease.
This could potentially lead to an inflationary environment where the value of each coin increases over time. But there’s one thing that keeps Litecoin from becoming worthless: halving.
Through halving, the miner rewards for successfully recording new blocks are decreased (halved) every 840,000 transactions on the network. This helps keep the price of Litecoin stable while still maintaining a limited supply.
How Is Litecoin Used?
Litecoin is one of the most popular cryptocurrencies out there. Its name refers to the lightweight nature of transactions performed with the coin. While Bitcoin is known for being slow and expensive, Litecoin offers fast transaction times and low fees. This makes it perfect for everyday purchases.
In addition to being used for day-to-day purchases, Litecoin is often traded on the top crypto exchanges. Users can buy and sell Litecoins directly on exchanges like Coinbase, Gemini, Kraken, Poloniex and others. Some people prefer to hold onto their coins rather than trade them. For those individuals, holding Litecoins is easy because they can easily store their coins in online wallets.
You can also use digital currency applications like BitPay or Crypto Pay to make a payment using Litecoin. These apps allow you to send money to anyone around the world instantly and cheaply. There are no hidden fees or limits on how much you can send.
If you want to use Litecoin for peer-to-peer payments, you can use apps like Binance to pay someone with Litecoin. With Binance, you don’t need to worry about exchange rates or volatility. All you need to do is enter the amount you wish to transfer and the recipient’s wallet address. Once both parties agree to the deal, the funds are transferred immediately.
Bitcoin transactions are slow, expensive, and limited in capacity. But Litecoin is fast, cheap, and scalable. In fact, it’s one of the most popular cryptocurrencies out there. And now, thanks to the Lightning Network, it’s even cheaper to use than Bitcoin.
The Lightning Network is a second layer solution built onto the Litecoin network. It allows you to make instant payments off-chain, which means no waiting for confirmations. This makes it much easier to send money across the globe, and it’s what gives Litecoin such a competitive advantage over Bitcoin.
In 2017, Litecoin creator Charlie Lee dived himself of almost all of his Litecoin holdings. He cited a conflict of interest, saying he wanted to focus on building out Ethereum Classic. But the move sparked a lot of concern among investors.
“Something that caught the investor’s eye and had an effect on the investor’s confidence was that in 2017, Charles Lee, Litecoin’s founder, sold his stake in LiteCoin,” says Claudius Minea, CEO and Co-Founder of Seedon, a blockchain based crowdfunding platform .
While designed to have a faster transaction speed than Bitcoin, Layer 2 solutions on top of Bitcoin such as the Lightning Network have sped up Bitcoin transactions and possibly diminished the need for Litecoins use case as a faster payments network.
There are also newer cryptocurrencies with even faster transaction speeds. These include EOS at 4000 TPS, XRP 1 500 TPS and Cardano with a TPS of 257. To name just a few.
Future Plans for Litecoin (LTC)
The cryptocurrency market is growing rapidly. In fact, it’s one of the fastest growing markets in recent history. This growth has led to increased competition among cryptocurrencies, especially those that are trying to become mainstream. One such project is Litecoin (LTC). Founded in 2011, LTC is a peer-to-peer digital currency that aims to provide faster transactions and lower fees.
In addition to being fast, Litecoin offers some unique features that set it apart from other coins. These include:
• Anonymous Transactions – Users do not need to reveal their identities while sending funds.
• Scrypt Mining – Instead of SHA256 mining, LTC uses scrypt hashing algorithm. This allows miners to use less computing power and energy.
• SegWit Support – Litecoin supports Segregated Witness technology, which is designed to increase scalability.
• Lightning Network – A second layer payment system built into the blockchain.
• Masternodes – Miners are rewarded for providing additional security and stability to the network.
Is Litecoin a Good Investment Right Now?
Litecoin is considered by some to be an excellent investment due to its high potential and low barrier to entry as it currently trades at about $79 as opposed to Bitcoin at over $16,000. Litecoin is similar to Bitcoin in many ways, but it is less expensive and faster. This makes it an appealing option for investors looking to enter the cryptocurrency market without spending a lot of money.
Cryptocurrency markets are volatile. As always, do your own research and never put at risk more money than you can afford to lose.
Jay Speakman is a technology writer based in San Francisco, California. He writes on the topics of blockchain, cryptocurrency, DeFi and other disruptive technologies. Clients include Avalanche, Be[in]Crypto, Trust Machines and several blogs devoted to blockchain gaming. He will not rest until fiat currency is defeated.
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