What is Litecoin?

Dec 18, 2020 07:41 PM ET
What is Litecoin?

What is Litecoin, and why does it have so much resemblance to Bitcoin? Litecoin aims to be a ‘lite’ decentralized peer-to-peer cryptocurrency with faster confirmation times and a bigger supply.

LITECOIN

Original author

Charlie Lee

Date released

13 October 2011

Ticker symbol

LTC

Algorithm

Scrypt

Consensus mechanism

Proof-of-work

Halving

Yes, every four years (next halving in 2023)

Block reward

12.5 LTC

Block time

2.5 minutes

Supply limit

84 million

Want to know about the ‘lite’ version of Bitcoin? No other cryptocurrency is more deserving of that title than the aptly-named Litecoin. Dubbed the ‘cryptocurrency for payments,’ developers designed Litecoin to overcome the shortcomings of Bitcoin by being faster and lighter.

Consequently, Litecoin has certainly stood the test of time, being one of the oldest cryptocurrencies in the market, consistently ranking in the top 10 most traded digital currencies. Currently (as of 02 December 2020), Litecoin is the seventh most traded digital currency with a market capitalization of around $7.9 billion and a per token value of $89.93.

Litecoin saw its highest peak in value during the dying stages of 2017, reaching close to $420, roughly a 42,000% increase since the coin’s inception. Although most people cannot speak about Litecoin without referencing Bitcoin, we should learn more about Litecoin individually, how it started, how it works, and what makes it a unique & valuable coin.

Beginnings

The first notable aspect about Litecoin is the currency is a hard fork from Bitcoin. Like all hard forks, there usually is a good reason that encouraged the split from the original cryptocurrency due to the need to instill a fundamental change.

Charlie Lee

The man responsible for instigating the change was the Chinese-American computer scientist and former Google employee, Charlie Lee. Along with his fellow developers, Lee intended for Litecoin to be the ‘lite version of Bitcoin’ (hence the name), primarily differentiating itself by a faster confirmation speed and greater supply.

The prime motivation for these additions was improving the scalability issues of Bitcoin. Litecoin successfully went live on the 13th of October, 2011.

How does Litecoin work?

Like most cryptocurrencies, Litecoin is a decentralized, peer-to-peer digital currency created using blockchain technology. To control inflation, Litecoin has a finite supply of 84 million coins, of which approximately 78% is in circulation at the time of writing.

At least 33,000 merchants globally accept Litecoin for numerous products, services, and currency exchanges. Owning Litecoin can be through purchasing from the many available cryptocurrency exchanges which securely store the coins in a crypto wallet.

Litecoin’s ledger

One of the distinct features of Litecoin is through using the memory-intensive proof-of-work mining algorithm known as Scrypt. Initially, one of the reasons Lee adopted this specific algorithm was to accommodate more consumer-grade hardware, namely CPUs (central processing units), to mine Litecoin. 

During the inception, Bitcoin had already moved towards more demanding equipment with an increased number of users on the network. Litecoin was initially ‘ASIC-resistant,’ meaning that ASIC (application-specific integrated circuit) machines were not compatible. 

However, over time, manufacturers found methods to develop ASICs that could mine Litecoin. Nonetheless, by virtue of the blockchain design, Litecoin can handle a higher transaction volume mainly due to the frequent block generation. This feature means the network can support this many transactions without having to modify the software regularly.

Miners verify Litecoin’s transactions on the blockchain where they are rewarded 12.5 LTC for solving a block, with this figure halved quadrennially. Each block forms roughly every 2.5 minutes.

What makes Litecoin valuable?

There are many ways Litecoin and Bitcoin are compared, to the point that the former is known as ‘the silver to Bitcoin’s gold.’ We can expand on the ‘gold vs. silver’ analogy in deciphering what makes Litecoin an interesting proposition amongst the ‘landfill’ of altcoins that already exist.

Although gold will always be more valuable, silver does offer notable perks that the former cannot. Similarly, although Bitcoin holds a monopolistic position in the markets, Litecoin is prized for these reasons. 

Faster transaction processing times and lower transaction fees

Unlike its predecessor, faster transaction times enable a cryptocurrency to be more transactable as an everyday medium of exchange, even for purchasing cheaper items. 

The main knock-on effect with faster processing times is lower transaction fees. Litecoin is a better cryptocurrency for retail or merchant use due to this fact. 

Less scarcity

We could argue there are positives and negatives for the rarity of a coin. The finite supply of Litecoin is four times greater than Bitcoin, meaning there will be more LTC that will be in circulation, cheaper costs of mining, and easier transactions. 

Future of Litecoin

Most investors are bullish on Litecoin based on its future, which is true for many other cryptocurrencies. We should expect Litecoin to firmly feature in the top 10 most traded digital coins, or perhaps even higher.

Litecoin Foundation desires to create a unique selling point not associated with Bitcoin. One of the methods they plan to achieve this is through further testnet upgrades to their MimbleWimble, a protocol meant to ensure Litecoin senders and receivers’ privacy while also refining the scalability of the coin.

Another of several developments that could positively affect the future is the recently-launched RPG (role-playing game) called LiteBringer, which runs using Litecoin’s blockchain. Overall, Litecoin is looking to make further improvements to ensure more people use the currency, all actions that, if successful, would inevitably drive the price of the coin higher.

Conclusion

Litecoin has proven to be more than just another Bitcoin spinoff, boasting substantial staying power amidst the countless number of altcoins that have come and gone. The Litecoin Foundation have their sights set on adding more features to distinguish the currency from others like it.

Nonetheless, Litecoin offers several benefits for everyday transactional use and potential astronomical investment returns in the future.


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