What is Litecoin: Everything You Need To Know

Often referred to as the little brother of bitcoin, litecoin is a peer-to-peer cryptocurrency that has gained fairly widespread adoption since its inception in 2011. A form of digital money that utilizes a blockchain to easily maintain a public ledger of all transactions, litecoin is used to transfer funds directly between individuals or businesses without the need for an intermediary such as a bank or payment processing service.

History


Litecoin was released via an open-source client on GitHub on October 7, 2011 by Charlie Lee, a former Google employee. The Litecoin network went live on October 13, 2011. It was a fork of the Bitcoin Core client, differing primarily by having a decreased block generation time (2.5 minutes), increased maximum number of coins, different hashing algorithm (scrypt, instead of SHA-256), and a slightly modified GUI.

During the month of November 2013, the aggregate value of Litecoin experienced massive growth which included a 100% leap within 24 hours.

Litecoin reached a $1 billion market capitalization in November 2013. By late November 2017, its market capitalization was US $4,600,081,733 ($85.18 per coin). By mid-December 2017, the coin’s marketcap had reached US $20,000,000,000 and each litecoin was valued at approximately US$371.00.

In May 2017, Litecoin became the first of the top 5 (by market cap) cryptocurrencies to adopt Segregated Witness. Later in May of the same year, the first Lightning Network transaction was completed through Litecoin, transferring 0.00000001 LTC from Zürich to San Francisco in under one second.

What Makes Litecoin Different?


Three things make Litecoin different:

  • Speed
  • Number of Coins
  • Market Cap

Speed
Litecoin is based on the same open source code behind bitcoin, with some notable differences. Created by engineer Charlie Lee to be the silver to bitcoin’s gold, one of the main disparities between the two cryptocurrencies lies in their transaction speeds.

Because it generates blocks about four times faster than bitcoin, litecoin can confirm the legitimacy of transactions a lot quicker as well as process a much higher number of them over the same time frame.

For more information about how blocks are created and transactions are confirmed, be sure to read our primer on blockchain technology – which functions as the underpinning of litecoin and most other p2p virtual currencies.

Number of Coins
One of the reasons some cryptocurrencies hold intrinsic value is because of their limited supply. Once a certain number of bitcoin (btc) or litecoin (ltc) are created, that’s it.

There can be no more new coins at that point. While bitcoin has a limit of 21 million coins, litecoin will max out at the 84 million mark.

Market Cap
Although its market cap pales in comparison to bitcoin, litecoin still ranks among the top 5 cryptocurrencies at the time of publication. These rankings fluctuate based on price and number of coins in circulation.

Mining Litecoin


Another significant difference between bitcoin and litecoin is the hashing algorithm that each uses to solve a block, as well as how many coins are distributed each time a solution is found. When a transaction is made, it is then grouped with others that have been recently submitted within one of these cryptographically-protected blocks.

Computers known as miners utilize their GPU and/or CPU cycles to solve rather complex mathematical problems, passing the data within a block through the aforementioned algorithm until their collective power discovers a solution. It is at this point that all transactions within the respective block are fully verified and stamped as legitimate.

Miners also reap the fruits of their labor each time a block gets solved, as a predefined number of coins is distributed among those who helped out – with the more powerful hashers getting the lion’s share. People looking to mine cryptocurrency typically join pools, where their computing power is combined with others in the group to obtain these rewards.

As mentioned above, litecoin and bitcoin utilize contrasting algorithms when hashing. While bitcoin employs SHA-256 (short for Secure Hash Algorithm 2) which is considered to be relatively more complex, litecoin uses a memory-intensive algorithm referred to as scrypt.

Different proof-of-work algorithms means different hardware, and you need to be sure that your mining rig meets the proper specifications for producing litecoin.

Where can I buy and store Litecoin?


One of the major reasons why Litecoin’s value increased recently was its induction in Coinbase. As long as you can use them in your country it really is the best and fastest way to buy Litecoins.

Apart from that, you can buy Litecoins in the following exchanges:

  • BTC-e
  • Kraken
  • Cryptsy.

If you want a comprehensive list, then you can check this out. When it comes to storing litecoins, there are a ton of wallet options that you can use.

  • Option #1: Hardware Wallet

Hardware wallets are physical devices where you can store your cryptocurrency. They come in a few forms but the most common is the USB stick style typified by the Nano Ledger series. Although many swear by them, hardware wallets are still prone to compromise. Firstly, you’re trusting that the company who made your wallet hasn’t logged all the private keys with a plan to raid wallets in the future. This applies to those bought from the company themselves, but particularly if a hardware wallet has been acquired second hand. Under no circumstances should anyone ever use a pre-owned hardware wallet.

The following hardware wallets can be used to store litecoins:

  • Trezor.
  • Ledger Nano S

Option #2: Desktop Wallet

Desktop wallets are a form of hot wallets. Desktop wallets are downloaded and installed on a single PC or laptop and they are only accessible from that one device where it was downloaded. While it is a safer alternative than an online wallet, it can still be very inconvenient because you will not get access to your money unless you are on the device from which you downloaded the wallet.

Exodus is a great example of a desktop wallet which supports multiple cryptocurrencies like Litecoin.

  • Option #3: Mobile Wallet

Mobile wallets are a pretty good example of hot wallets. They are pretty convenient to use because all you need to do is to download an app into your phone.

  • Option #4: Paper Wallet

Paper wallets are an offline cold storage method of saving cryptocurrency. It includes printing out your public and private keys on a piece of paper which you then store and save in a secure place. The keys are printed in the form of QR codes which you can scan in the future for all your transactions. The reason why it is so safe is that it gives complete control to you, the user. You do not need to worry about the well-being of a piece of hardware, nor do you have to worry about hackers or any piece of malware. You just need to take care of a piece of paper.

You can create your own paper wallet from liteaddress.org.

Litecoin Block Explorer


As is the case with other public cryptocurrencies, all litecoin transactions within its blockchain are public and searchable. The easiest way to peruse these records or search for an individual block, transaction or even address balance is through a litecoin block explorer. There are many to select from, and a simple Google searchwill allow you to find one that suits your individual needs.

Bitcoin Vs. Litecoin: What’s The Difference?


On the surface, Bitcoin and Litecoin share a lot in common. At the most basic level, they are of course both cryptocurrencies. Whereas state currencies such as the U.S. dollar or the yen rely on political and legal mechanisms for value and legitimacy, cryptocurrencies rely only on the cryptographic integrity of the network itself. Yet Bitcoin and Litecoin also differ in important respects. In what follows, we will address four of their most important differences, progressing from the most straightforward differences to the more complex.

Market Capitalization and Popularity


At the time of writing, Bitcoin’s market capitalization sits at roughly $217 billion. Whether this figure strikes you as either high or low will depend largely on your historical perspective. When we consider that Bitcoin’s market capitalization was barely $42,000 in July 2010, its current figure seems staggering. While Bitcoin remains by far the most highly valued player in the cryptocurrency space, others such as Ethereum, Ripple and Litecoin are catching up.

We can now ask the question, what other characteristics set Bitcoin and Litecoin apart?

Total Amount of Coins


One of the main differences between Bitcoin and Litecoin concerns the total number of coins which each cryptocurrency can produce. The Bitcoin network can never exceed 21 million coins, whereas Litecoin can accommodate up to 84 million coins. Although in theory this sounds like a significant advantage in favor of Litecoin, its real-world effects may be negligible. This is due to the fact that both Bitcoin and Litecoin are divisible into nearly infinitesimal amounts. In fact, the minimum quantity of transferable bitcoin is one hundred millionth of a bitcoin (0.00000001 bitcoins) known colloquially as one “satoshi.” Users of either currency should therefore have no difficulty purchasing low-priced goods or services, regardless of how high the general price of an undivided single bitcoin or litecoin may become.

Despite this, Litecoin’s greater number of maximum coins might offer a psychological advantage over Bitcoin, due to its (so far) smaller price for a single unit. In a video interview posted by IBM’s banking division in November 2013, IBM executive Richard Brown raised the prospect that some users may prefer transacting in whole units rather than in fractions of a unit—a potential advantage for Litecoin.Yet even assuming that this is true, this problem may be solved through simple software changes introduced at the level of the digital wallets through which Bitcoin transactions are made. As Tristan Winters points out in a November 2013 Bitcoin Magazine article, “The Psychology of Decimals,” popular Bitcoin wallets such as Multibit and Electrum already offer users the option of displaying the value of their bitcoins in terms of official (or fiat) currencies such as the U.S. dollar. This can help circumvent the  psychological aversion to dealing in fractions when using bitcoin.

Transaction Processing Speed


Although technically transactions occur instantaneously on both the Bitcoin and Litecoin networks, time is required in order for those transactions to be confirmed by other network participants. According to data from Blockchain.info, the Bitcoin network’s long-term average transaction confirmation time is just over 9 minutes per transaction. The equivalent figure for Litecoin is roughly 2.5 minutes, according to data from BitInfoCharts.com. In principle, this difference in confirmation time could make Litecoin more attractive for merchants. For example, a merchant selling a product in exchange for Bitcoin would need to wait nearly four times as long to confirm payment as if that same product were sold in exchange for Litecoin. On the other hand, merchants can always opt to accept transactions without waiting for any confirmation at all. The security of such zero-confirmation transactions is the subject of some debate. However, recent innovations such as Bitpay’s proposed Inter-Channel Payments system (nicknamed “Impulse”) may make these kinds of instantaneous transactions significantly more secure, mitigating Litecoin’s faster confirmation time advantage.

Different Algorithms: Bitcoin’s SHA-256 vs. Litecoin’s Scrypt


By far the most fundamental technical difference between Bitcoin and Litecoin are the different cryptographic algorithms which they employ. Bitcoin makes use of the longstanding SHA-256 algorithm, whereas Litecoin makes use of a comparatively new algorithm known as Scrypt.

The main practical significance of these different algorithms is their impact on the process of “mining” new coins. In both Bitcoin and Litecoin, the process of confirming transactions requires substantial computing power. Some members of the currency network, known as miners, allocate their own computing resources toward the task of confirming the transactions of other users. In exchange for doing so, these miners are rewarded by earning units of the currency which they have mined. 

SHA-256 is generally considered to be a more complex algorithm than Scrypt, while at the same time allowing a greater degree of parallel processing. Consequently, Bitcoin miners in recent years have utilized increasingly sophisticated methods for mining bitcoins as efficiently as possible. Today, the most dominant method for Bitcoin mining consists of the use of Application-Specific Integrated Circuits (ASICs). These are hardware systems which, unlike the simple CPUs and GPUs which came before them, can be tailor-made for the sole purpose of mining bitcoins. The practical consequence of this innovation has been that Bitcoin mining has become increasingly out-of-reach for the everyday user.

Scrypt, by contrast, was deliberately designed to be less susceptible to the kinds of custom hardware solutions employed in ASIC-based mining. This has led many commentators to view Scrypt-based cryptocurrencies, such as Litecoinm as being more accessible for users who also wish to participate in the network as miners. In recent years, however, companies such as Zeus and Flower Technology have brought Scrypt AISCs to the market, suggesting that Litecoin’s vision of easily accessible mining may become a thing of the past.

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