In this article, we’ll be explaining a lot about Litecoin, how it works, how it can be bought, and also how the cryptocurrency differs from the leading Bitcoin. First, we have to explain what cryptocurrency means as Litecoin is one of the top cryptocurrencies in the world today.
What is cryptocurrency?
Now, to get an idea of what exactly cryptocurrency is, we first need to understand how money works. First, let’s start with physical money, which includes bills and coins. Then came eMoney, also known as electronic money, which is reflected in our electronic banking applications. Both forms of money are issued to us.
Subsequently, cryptocurrency emerged, a type of electronic money that was not issued by any government. We also call it “Math Money” because this form of money is developed and managed through blockchains, also known as computer networks, that are powered by advanced math.
Cryptocurrency is an online-only digital currency that acts as a direct financial exchange between users without the participation of third parties or banks, unlike the monetary system that we are generally more used to and that a central bank uses.
Several cryptocurrencies are decentralized, including Litecoin. The main purpose of this form of currency is to decentralize the banking system, mainly due to the inconvenience the public faces when sending or receiving money through financial institutions or to another country, which has only increased in recent years.
With cryptocurrencies currently becoming an intriguing solution for tech geeks and institutions involved in this type of transaction, it has to be taken into account that cryptocurrencies are not stored in the traditional way, i.e. in a scenario where the currency would be stored. The transaction data record is stored in the blockchain within a bank account.
What is Litecoin?
Litecoin is a cryptocurrency that was founded in 2011, two years after Bitcoin, by a former Google engineer named Charlie Lee. In terms of market capitalization, Litecoin is the ninth largest cryptocurrency. Initially, it was a strong competitor to Bitcoin.
As the cryptocurrency market has been saturated with new offerings in recent years, Litecoin has become less popular. Litecoin has always been seen as a reaction to Bitcoin.
When Lee announced the debut of Litecoin on a popular Bitcoin forum, he called it the “Bitcoin Lite Version ” because of this, Litecoin has many of the same characteristics as Bitcoin while tweaking and modifying some other aspects that the development team believes could be improved.
How was Litecoin created?
Until 2011, Bitcoin mining was largely done with GPUs, which raised concerns among some users that mining now had a high barrier to entry and that the CPU resources used for mining were becoming obsolete and worthless. With the code of Bitcoin, a new alternative currency was created.
Called Tenebrix (TBX). Tenebrix replaced the SHA256 rounds in the Bitcoin mining algorithm with the Scrypt function, which was specially developed in 2009 for acceleration with FPGA or ASIC chips. This would allow Tenebrix to be “GPU-resistant” and use available CPU resources from Bitcoin miners.
Tenebrix itself was a follow-up to an earlier cryptocurrency that replaced the Bitcoin issuing program with a constant block reward (creating an unlimited supply of money). However, the developers have included a clause in the code that allows them to claim 7.7 million TBX for free, which has been criticized by users.
To fix this, Charlie Lee, a Google employee who later became Director of Engineering at Coinbase, created an alternate version of Tenebrix called Fairbrix (FBX). Litecoin inherits the Scrypt mining algorithm from Fairbrix but uses Bitcoin’s limited money supply with other changes.
Lee launched Litecoin via an open-source client on GitHub on October 7, 2011. The Litecoin network went live on October 13, 2011. It was a source code fork of the Bitcoin Core client, which was mainly characterized by a reduced block generation time (2.5 minutes), a higher maximum number of coins, a different hashing algorithm (scrypt, instead of SHA256), and a slightly modified GUI.
In November 2013, Litecoin’s added value saw massive growth that included a jump of 100% in 24 hours. In May 2017, Litecoin became the first of the top 5 cryptocurrencies (by market capitalization) to introduce Segregated Witness.
Later, in May of that year, the first Lightning Network transaction was completed through Litecoin, which transferred 0.00000001 LTC from Zurich to San Francisco in less than a second.
In September 2021, a fake press release was posted on GlobeNewswire announcing a partnership between Litecoin and Walmart. This caused the price of Litecoin to soar about 30% before the press release was debunked as a hoax.
Difference between Litecoin and Bitcoin
Litecoin differs from Bitcoin in a few ways:
- Litecoin Network aims to process a block every 2.5 minutes instead of Bitcoin’s 10 minutes. This allows Litecoin to confirm transactions much faster than Bitcoin.
- Litecoin uses scrypt in its test algorithm, a sequential memory function that asymptotically requires more memory than an algorithm that has no memory. Due to Litecoin’s use of the Scrypt algorithm, FPGA and ASIC devices made to mine Litecoin are more complicated to build and more expensive to produce than Bitcoin, which uses SHA256.
When it comes to Litecoin as a payment method, in the early days, there was a correlation with Bitcoin in terms of expanded payment patterns.
Although Litecoin payment patterns could be assumed to converge with Bitcoin, it was found that there is little correlation between Litecoin and Bitcoin payment patterns today, and these patterns continue to differ over time.
How does Litecoin work?
Litecoin involves the creation and transmission of digital currencies using an open-source cryptographic protocol. It uses blockchain technology to record a decentralized public ledger of all transactions.
What is a blockchain? A blockchain tracks all Litecoin transactions. Current cryptocurrency transactions are grouped into “blocks” by miners. Blocks are cryptographically secured before being linked to the existing blockchain. Blockchain technology is similarly used for various cryptocurrencies, including Litecoin and Bitcoin.
Mining, on the other hand, is the process of attaching each block to the existing blockchain using mining software. Once a block is secured, new cryptocurrency units are launched and miners can bring these units directly into the market.
How to Trade Litecoin
When you buy Litecoin on an exchange, the price of a Litecoin is usually quoted against the US dollar (USD), meaning you are selling USD to buy Litecoin. If the price goes up, you can sell for a profit because it is now worth more USD than it was when you bought it.
If the price goes down and you decide to sell, you would be making a loss. You can trade Litecoin via a bet or spread-for-difference (CFD) contract. This allows you to speculate on their price movements without owning the actual cryptocurrency.
You do not take ownership of Litecoin. Instead, you open a position that will either go up or down in value depending on the Litecoin price. This means that you only need to deposit a percentage of the total value of a trade to open a position – you don’t have to tie up all of your capital at once by buying Litecoin directly, but can use an initial deposit to get exposure to larger amounts. While leveraged trading can increase your returns, losses also increase as they are based on the total value of the position.
What factors affect the Litecoin price?
Litecoin volatility is likely driven by similar factors as Bitcoin, for example:
Regulation: Cryptocurrencies are not currently regulated by governments and central banks. The question arises as to how this could change in the next few years and what effects this could have on the value of the offer
Supply: There are a finite number of Litecoins that can be mined (84 million). Availability can also fluctuate depending on the speed at which currencies come onto the market.
Press: Litecoin prices can be influenced by public perception, security, longevity, and prices of other cryptocurrencies like Bitcoin
Assumption: Companies or consumers have not currently adopted Litecoin as a payment method, but some see potential in blockchain technology and we think it could be more widespread in the future
Is Litecoin a good investment right now?
The consistent ranking in the top 15 cryptocurrencies by market capitalization makes Litecoin relatively stable compared to other altcoins created around the same time.
The larger-scale adoption will inevitably increase in value, which we have seen lately, noting that Litecoin has grown in value more than Bitcoin in percentage terms since last May.
If you are interested in investing in technology that enables fast and inexpensive borderless transactions, Litecoin is a great investment opportunity. Plus, the affordability and stability of Litecoin make it a great option for those looking to get wet with alternative cryptocurrencies.
By comparison, while Litecoin currently trades for less than $ 200, the price of a single bitcoin is over $ 36,000. However, others are less optimistic about altcoin. Some critics speculate that while Litecoin could be a good speculative trade, it is not a good investment.
Their argument is based on the fact that the developers and engineers at Litecoin are not robust. There are also no good cases where investors use it wisely.
Add to that the problem that the creator of Litecoin sold all but part of their coins to keep as collectables – a questionable sign. Although there is no credible investment base for Litecoin, it can be a good trade for someone who doesn’t care about these things and just look at price movements
How much value does Litecoin have?
Litecoin is programmed to only produce a limited amount (84 million) of its cryptocurrency LTC and regularly reduce the amount of new LTC it introduces into its economy.
Litecoin is popular with merchants who have relied on adding value due to supply reductions and keeping pace with Bitcoin’s growth in times of rising prices, and Litecoin can also be used to pay for goods and services with payment processors that Bitcoins and others accept.
It is also traded on most of the major cryptocurrency exchanges (including Kraken!), making it’s market one of the most liquid in the world.
Litecoin is one of the oldest cryptocurrencies and is therefore well established in the digital asset space. While it’s less of a market spotlight in 2021, the fact that it survived the 2018 crash and rebounded its value to all-time highs makes it look like it will stay in the industry for a long time to come.
If founder Charlie Lee’s recent plans, including his ambition for token fungibility, come to fruition, Litecoin could still be of interest. But, much like the way Bitcoin works, the project must be constantly innovating to survive in this increasingly competitive ecosystem.
2021 projects offer more advanced features and benefits for token holders than Litecoin. The project fights for innovation and the future of digital assets seem to be located in the blockchains of smart contracts.
Litecoin price is certainly only backed by speculation, so it’s not one of the stocks we recommend prioritizing at the lower end of a portfolio.