What is Litecoin?
Bitcoin constantly hogs the headlines, but could its lesser-known cousin Litecoin be the cryptocurrency of choice? We take a closer look
This new, decentralised digital currency showed us a world that didn’t need banks; instead people could send payments to each other across the world quickly and safely. What’s more, without exchange rates and bank charges to worry about, payments would cost next to nothing to send too.
Alternatives to Bitcoin
Bitcoin works as a global electronic ledger system, where individual transactions must be cryptographically signed off and then verified before being added to the blockchain. However, this process can be slow, with transaction speeds to create a new block taking on anything from 10 minutes to an hour, dependent on network traffic.
Many developers believed they could improve upon Bitcoin’s efficiency for everyday transactions, including American computer scientist Charlie Lee.
Further reading: Litecoin vs Bitcoin
What is Litecoin?
The main reason Bitcoin is slow to mine is due to the memory-intensive SHA-256 algorithm it uses that requires a greater degree of parallel processing. Google employee Lee realised that using an alternative algorithm known as the “scrypt” proof of work, could make mining four times faster and thus require much less electricity.
On November 7, 2011, a “hard fork” was made in the Bitcoin blockchain and a brand new digital currency known as Litecoin (LTC) was created.
Unlike Bitcoin, Litecoin splits every transaction into two segments, removing the signature from the original data. This makes transaction processing much faster: increasing the rate at which transactions are verified on the block and reducing the time for confirmation of payment from 10 minutes to just 2.5 minutes. Faster processing time can also help prevent hackers from “double-spending”, making the Litecoin system more secure.
What is Litecoin mining?
In the same way Bitcoin is mined, so too is Litecoin. However, while in the early days anyone could use their home computer to mine Bitcoin, things are different today.
Successful miners now typically require an application-specific integrated circuit (ASIC) miner; effectively a purpose-built rig customised to perform the calculations required by the specific cryptographic hash algorithm used by the cryptocurrency you’re mining for – SHA-256 for Bitcoin and scrypt for Litecoin.
Mining is of course only worthwhile if you make more money from the coins you earn than you pay in hardware and electricity costs, so some careful consideration is required.
What’s more, while there will only ever be 21 million Bitcoin in circulation, Litecoin will mine four times as many, 84 million coins.
What is LTC mining reward?
The first Litecoin miner to verify a block was rewarded with 50 Litecoin. However, it was agreed that this number would halve with every 840,000 blocks until all of the coins are mined.
October 2015 saw the first “halving”, with the reward dropping to 25 coins. We have recently seen it halve again, to 12.5 coins per block on August 5, 2019.
There are currently nearly 64 million Litecoin in circulation with around 7,200 Litecoin generated each day. The next halving is predicted to take place on August 6, 2023.
How to use Litecoin
Litecoin can be used as an online payment system in exactly the same way as Bitcoin. Buyers can purchase Litecoins directly from an exchange and increasing numbers of retailers, restaurants and service providers now accept direct payment in Litecoin.
Security and Privacy
While many complain that crypto coin transactions are anonymous and could potentially fuel criminal activity, this is actually becoming far from the case. More countries are introducing “know-your-customer” and anti-money laundering regulations, requiring users to
verify their identity and address to ensure services are not misused.
Confidential transactions, however, remain important to Charlie Lee, who tweeted on January 28, 2019:
Like all cryptocurrencies, Litecoin stock value is determined by the demand on currency trading sites and it has certainly seen some huge swings over the years.
While January 2017 saw the price at just $4.40, just 11 months later it had surged to an all-time high of $360.93; an astonishing 8,100 per cent rise.
June 2019 saw the price rally to slightly less impressive high of $146.43, believed to have occurred as the cryptocurrency reward prepared to halve on August 5, to 12.5 LTC per block. But since then, prices have again declined sharply with the current Litecoin price down 60 per cent to $58.28 (£44.97) on November 18.
Many are wondering: is Litecoin a good investment?
While Bitcoin dominates the cryptocurrencies with a market cap of $154bn, Litecoin stands at $3.71bn with a market cap rank of 6 and a circulating supply of 63.7 million coins. While it saw huge market growth in 2017, and a spike in June 2019, prices have fallen since. But will Litecoin go up again?
It’s clear that digital currencies are going to be hugely important in the future. What’s more, some believe Litecoin’s technology, with its simpler algorithm and faster transaction speeds, could make it a better currency for spending.
Indeed, May 2017 saw a change was made to the blockchain that made it capable of processing “lightning fast payments”, demonstrated by money being sent from Zurich to San Francisco in under a second. Payments can be sent as easily and quickly as sending an email.
Cryptocurrencies are always going to provide the volatility that you either love or hate. If you have the stomach for it, devoting a small part of a well-diversified portfolio could provide just the right level of exposure to all that excitement.
Trade Litecoin to US Dollar - LTC/USD chart
FURTHER READING: How to trade Litecoin: the ultimate guide