What is Litecoin Cryptocurrency?
You’ve heard of Bitcoin. But how about Litecoin? Litecoin is an open-source software, originally launched under the MIT/X11 licence and imposes limited re-use restrictions. This peer to peer cryptocurrency is considered to share similarities with Bitcoin, as it is a digital currency and offers a way to make payments digitally online. Furthermore, cutting-edge encryption technology is utilized to regulate Litecoin unit generation, and to ensure transactions or transfers are processed securely.
While Bitcoin is the more famous of the two cryptocurrencies, Litecoin has still been on the market for some time — actually dating back to 2011. If you’re asking “what is Litecoin?”, we’ll explore it in detail below.
Read on to explore such topics as how Litecoin works, how Litecoins can be created, Litecoin history, and more.
How Do Litecoin and Bitcoin Differ?
While it’s true that Bitcoin and Litecoin share similarities, some key differences set them apart. Some users have found a simple way to define the distinction: Bitcoin is gold, and Litecoin is silver. Funnily enough, Litecoin’s developers intended as much when building the cryptocurrency in the first place.
So, what are these differences between Litecoin and Bitcoin?
- Litecoin is known for quicker confirmation, as it’s designed to process one block each two-and-a-half minutes. Bitcoin, on the other hand, processes blocks at a rate of one per 10 minutes. This creates faster confirmation of transactions, though there’s more probability of orphaned blocks.
- Litecoin utilizes its own hashtag algorithm: it leverages scrypt in its PoW (proof of work) algorithm, which is a sequential memory-hard function that relies on asymptotically greater memory than other types of algorithm.
- The Litecoin Network is believed to generate a larger number of coins, specifically 84 million. This is four times the number of units that the Bitcoin Network will issue.
These differences combine to make Litecoin capable of processing and handling more transactions than Bitcoin. This decreases the potential bottlenecks that have been known to affect Bitcoin, while Litecoin offers higher resistance to double spending attacks across the same span of time as Bitcoin.
What About Litecoin Market Abbreviations?
You will typically see Litecoin abbreviated to LTC on cryptocurrency markets. This is standard for Bitcoin (BTC), United States Dollars (USD), and countless other currencies.
LTC can be paired with other currencies, creating such names as LTC/EUR.
Understanding How Litecoin Works
Users can take advantage of Litecoin to transfer payments to another individual. As it’s decentralized and peer to peer, Litecoin is free of any control by a government or other official entity.
Litecoin is not designed to handle Euros, Dollars, or other physical types of currency. Instead, it utilizes a unique account unit — the Litecoin (represented by LTC or Ł).
As a result, you might see that Litecoin is categorized as a digital currency, and it can be purchased or sold for traditional currencies at numerous online exchanges.
What is Litecoin Blockchain Technology?
As with Bitcoin, Litecoin is based on the ever-popular blockchain technology. Litecoin blockchain has the capability to handle a higher volume of transactions than Bitcoin, and has a greater block-generation frequency. This means the network can support a larger range of transactions with faster confirmation times.
Understanding Litecoin Mining
If you’re familiar with Bitcoin, the term “mining” won’t be new to you.
New LTC units are created on a regular basis, via a process known as Litecoin mining. This is, essentially, a method of keeping records.
Litecoin ensures just one blockchain exists by generating blocks which are difficult to produce. So, rather than simply creating blocks as and when they like, Litecoin miners need to build a cryptographic hash of the block that aligns with specific criteria.
The only way to discover one is to compute a large amount of them until you can pinpoint one that performs as required.
This “hashing” process sees any miners successfully creating a block receive 25 newly-minted Litecoins in exchange for their time. The hash criteria’s difficulty is altered once every few days, according to the regularity with which blocks appear. This creates more competition between miners to locate a Litecoin block successfully.
Litecoin History: Where is it From?
Litecoin’s impressive growth is guided by its protocol, designed to assign the generation of fresh coins to Litecoin’s users. A cap has been placed on Litecoin: 84 million units in total will be created, though not all of them have been yet. There were around 61m Litecoins in circulation in May 2019, accounting for just over 74 percent of the total amount. In August 2019, the reward for mining blocks dropped from 25 to just 12.5 coins.
Litecoin was launched on 7 October 2011, through a GitHub open-source client. The creator is believed to be one Charlie Lee, who once worked for Google.
Litecoin forked off from the Bitcoin Core client, and was mainly different due to the reduced time of block generation (two and a half minutes), the higher number of maximum coins to be created, the hashing algorithm, and the slightly-adjusted GUI.
When Did Litecoin’s Financial History Start?
While Litecoin was released in fall 2011, the financial aspect of Litecoin history actually dates back to November 2013.
The team behind the scenes issued the 0.8.5.1 version initially, and Litecoin’s aggregate value enjoyed substantial growth afterward. Specifically, it experienced a jump of 100 percent in a single day.
At the start of December that year, an updated version of Litecoin was released. This provided users with a twenty-times decrease in the cost of transaction fees, while improvements were made to security and general performance. These benefited both the network and the client alike.
Mining Litecoins: Should You Do It?
According to professional, expert traders, trading Litecoin can offer higher profits than Litecoin mining. For example, if you were to utilize the MetaTrader 4 and MetaTrader 5 platforms, with the MetaTrader Supreme Edition plugin, you could expect to incur far lower costs than if you chose to set up ASICs hardware. That’s regarded as expensive, and not an investment offering a real return.
Many risks are involved, including:
- Increased difficulty: The difficulty will continue to rise as extra miners continue to join the Litecoin network, which will push the profitability for users down. That’s why it’s critical to keep any predictions about future evolutions in its difficulty realistic.
- Resale value may drop: While ASIC hardware is capable of mining Litecoins with a high degree of efficiency, it can’t do anything else. You can’t refit it for alternative purposes, which means the resale value can be extremely low.
- Delays in delivery: Your hardware could only arrive at your home months after you actually order it. Numerous negative reviews written online have highlighted this issue, with people who pre-ordered mining hardware being grossly disappointed.
- The amount of power consumed: Let’s be honest — it wouldn’t be nice to see your electricity consumption increase and force you to pay more for power than you would earn in Litecoins, would it?
To put it simply: trading Litecoin rather than USD could incur less expense, bring higher profits, and be a more interesting experience overall.
Where can you Spend Your Litecoin?
You can spend Litecoin to purchase a variety of items at a number of different merchants. But the first part of this process is to download a Litecoin wallet — this will allow you to buy Litecoins at an online exchange.
Once you’ve done this, you can start to buy products and services with your own LTC.
Who Manages Litecoin?
As Litecoin functions independently of any single central bank (unlike other currencies, such as the Euro and USD), Litecoin has no central point of power or administrator. That’s why it’s decentralized.
Are There Any Risks When Trading Litecoin Online?
Before you start trading Litecoin online, consider the following potential risks:
- There is only a small amount of historical valuation range or comparative cryptos here, as with trading Bitcoin. That means assessing fair value can be incredibly hard.
- The cryptocurrency demand could drop following changes to international capital controls. Nations such as China maintain laws to protect outflows of capital, and so money is pushed into unregulated cryptos to avert capital controls. Capital outflow laws may reduce demand.
- Cryptocurrencies are unregulated, which may prompt some people to regard it as a high-risk investment. But this is subjective: remember, it’s only a currency like so many others.
- Litecoin is similar in nature to a commodity, and can be affected by changes in the market (e.g. supply and demand). However, for traders used to commodities, this should be considered a positive risk
The Legalities of Litecoin
Litecoin is legal. While regulations can differ from one country to the next, you’re likely to find national financial regulators demonstrating an interest in Litecoin (as well as other cryptocurrencies). Regional regulators may do the same.
Is it Safe to Trade Litecoin?
It’s as safe to trade LTC as it is to trade Bitcoin or other commodities. Its popularity has undergone major growth in the past few years, with an increase in transaction volume.
Such as? While the average volume hovered between one and 10m USD before April 2017, this changed to more than 400m by the middle of that same summer.
What’s in the Future for Litecoin?
2019 started off well for Litecoin investors, as costs were reduced substantially over 100 USD (a barrier which is psychologically relevant), though the crypto returned most of those gains during the latter half of 2019.
Still, it continued to hold in excess of 60 percent above its annual opening price as of November that year.
However, the subsequent lows and highs in 2020 saw a sustainable break beneath 46.50 USD. That dampened Litecoin’s technical outlook significantly, though a sustainable break lower keeps the lows-and-highs cycle running. As a result, Litecoin has been vulnerable to something as low as 22 USD in the later months of 2020.
It’s potentially even more likely that this bearish outlook will occur, as Litecoin is believed to account for a significant number of Dark Web transactions.
That brings our guide about Litecoin to a close! We hope this has helped you learn more about this cryptocurrency, and empowers you to make an informed choice about trading it.