What is Litecoin & How Does it Work?- (Step by Step)

Litecoin is a cryptocurrency created in 2011 by Charlie Lee. Who was a former Google engineer? Litecoin was one of the first cryptocurrencies or alternatives to bitcoin.

Though launched from Bitcoin’s source code and with similar features. Litecoin was designed to improve upon the original cryptocurrency in many different ways. Both have not been hacked and are quick, safe alternatives to older coins.

Though Litecoin started as a popular, volatile entry into the crypto realm, it has gained significant attention and a significant number of users, despite the roller coaster of ups and downs. As of October 25, 2021, Litecoin was worth roughly $195.13, with a market capitalization of $13.42 billion.

If you’re wondering what Litecoin is, how it works, and whether it makes sense to trade it, continue reading.

What Is Litecoin?

Litecoin is similar to many other decentralized, P2P cryptocurrencies. It is a “fork” in the Bitcoin blockchain, which means that Litecoin shares some similarities with Bitcoin.

Litecoin’s goal was to let people make secure and near-zero cost payments. That can be exchanged among people or institutions.

All cryptocurrencies rely on a proof-of-work system. Where new coins are created by miners through complex mathematical equations. Litecoin uses a PoW system that is easier to understand than Bitcoin’s.

One of the main differences between Litecoin and Bitcoin is that Litecoin uses script mining. Which means it has faster transactions.

Litecoin generates a new block every 2.5 minutes, which is about four times faster than Bitcoin’s 10 minutes. Litecoin has a four-times greater supply than Bitcoin.

With a cap of 84 million coins. Bitcoin has a cap of 21 million coins, while the Litecoin community overall has a total of around 4 billion coins.

The bitcoin supply is capped at 84 million, so it’ll never be inflated away like conventional currencies. As of October 2021, 67 million Litecoins have been mined.

How Does Litecoin Work?

Mining Litecoin is similar to Bitcoin and other blockchain-based cryptocurrencies. It can be a long process and there are many different ways of verifying transactions, but it’s ultimately worth it.

The blockchain can only be confirmed to the extent. That it’s based on accurate calculations and verified in true blockchains. People specialize in the cryptography aspects of this process.

Cryptocurrencies have been around for a while, but blockchain technology has been in development for decades. Blockchain transactions are pseudonymous. because you have a public address and it is already assumed that you aren’t anonymous.

Those who find unspent coins in a block are rewarded with 12.5 Litecoins, depending on their level of success. In bitcoin, the number of rewards is halved every 210,000 blocks-so there will only be half as many rewards after 210,000 blocks have passed.

When was the Last Litecoin Halving?

When Litecoin was launched in 2011, the reward was 50 LTC. The first halving took place in August 2015, when it became 25 LTC.

In August 2019, the reward for mining the currency is 12.5 LTC and the process of halving will continue at regular intervals until 210 million coins are mined—every 840,000 blocks—and so on.

If a Litecoin block is mine about every 2.5 minutes. Then the halving occurs roughly every four years. This cadence is built into the Litecoin algorithm.

What Is Litecoin Used For?

One of Litecoin’s key features is that it’s “a medium for transacting payments without a bank or other third-party financial institution between them”.

Litecoin was designed to be used for cheaper transactions and to be more efficient for everyday use. While bitcoin can often be used as a store of value for long-term purposes.

How Is Litecoin Different From Bitcoin?

Litecoin, like many cryptocurrencies, has a limited supply of coins. Unlike bitcoin, however, inflationary pressure is not applied to the litecoin network. Three more distinctions to bear in mind:

1. Cryptography

To add new Litecoin or bitcoin blocks to the blockchain, miners must solve hash functions. A big difference between the two is their different cryptographic algorithms. Bitcoin uses the SHA-256 algorithm, whereas Litecoin uses a newer one called Scrypt.

The script offers a degree of ASIC resistance, which gives GPU and CPU miners a fair playing field in mining. ASIC-based miners have to be more script-capable over time and usually produce more hashes. Scrypt was also quickly becoming less vulnerable to cyber attacks.

2. Speed

Charlie Lee prioritized transaction speed when he created the face of digital currency, Litecoin. This remains the primary reason for Litecoin’s popularity, as well as its support from crypto-thriving communities. Litecoin’s transactions are processe more quickly. Because its blocks take much less time to generate.

3. Market capitalization

Due to bitcoin’s more popular use, its market cap is significantly higher than bitcoin. Bitcoin has a total circulation of $1.1 trillion, while the market capitalization of all bitcoins is $5 billion.

How to Invest in Litecoin

There are currently only a few brokers in the US. Who offers to trade for Litecoin, Bitcoin, Ethereum, and other popular cryptocurrencies? You’ll want to try options like online brokerage firms first if that’s more convenient for you.

You need to store your cryptocurrencies securely, so you should use a cryptocurrency wallet or software program. But even if you have your software, you must remember and secure it.

The password or key is stored on the devices only you have access to. If you forget your password, it is easier for others to access your funds.

To get crypto into a wallet, investors first need to use exchanges. The process is that once their account is verified and funded, they can then buy the crypto they want. Traders can buy and sell crypto on a platform without having to leave the web — whether that’s for exchanging one type of crypto for another or to receive fiat money for the crypto they’re selling.

What Is the Price of Litecoin?

Litecoin, similar to other cryptocurrencies, has experienced wide fluctuations in price. A popular site is CoinMarketCap which provides live market information on the coin and its historical price.

Litecoin made a significant surge in December, but this month has marked a less-than-significant change in value. The cryptocurrency is currently worth $195 – and only a few cents more than the last value it had.

What Factors Affect LTC Price?

If you invest in Litecoin, you are investing in the future of digital currency. The more exposure it has, the more people want to invest in and use cryptocurrency, which has a potential impact on its price. But what are some of the key factors that can impact demand?

Litecoin was created in 2011 and quickly became one of the most popular “altcoins” due to its speed and efficiency. It’s often compared to Bitcoin because of that.

There are many different cryptocurrencies now. They offer fast transactions, smart contracts, and decentralized apps along with a lot of other revolutionary capabilities.

The popularity of cryptocurrencies has seen the mining difficulty increase significantly. As a result, the LTC price has seen a significant drop over recent months. It will likely cause an increase in interest and profits for miners and focus on more people wanting to join.

On October 25, 2021, Litecoin had a market cap of only about $3.2 billion and received little to no attention from the mainstream media.

What Are the Risks of Litecoin?

Although the risks associated with cryptocurrencies are legitimate, they’re not nearly as high as many people think. Most cryptocurrencies have only been around for a couple of years.

While Bitcoin was founded in 2009, and like any growing industry. There are opportunities for growth rather than drawbacks. Here’s why:

High volatility

The crypto markets have seen a lot of growth over the past year. This is expected to continue moving forward. There are a few downsides to cryptocurrencies, but volatility is one of the main benefits that make them so exciting.

When considering Bitcoin as a possible investment. It should be kept in mind that things are always changing and the future is uncertain. It’s a speculative play vs. a store of value.

Uncertain future

As noted earlier, when LTC first launched in 2011. Traders were intrigued by its innovative use of the bitcoin source code to provide transactional efficiencies.

Due to the emergence of numerous new crypto contenders, it is unclear whether LTC has the staying power to keep investors loyal.

Regulatory holdups

Although Litecoin can make online transactions quicker in theory. The reality is that most people are still unsure if they’re used to cryptocurrency and its legal implications.

Litecoin is a profitable investment, with the currency providing excellent liquidity and staying power for at least a decade. The currency does have some downsides, though; for instance, historically it has been quite volatile.

The Takeaway

Litecoin’s ten-year career has been an interesting one, from its beginnings as a scorned offshoot of Bitcoin, to the rise in popularity and development of cryptocurrencies in general. It remains among the top 20 cryptocurrencies today.

Litecoin currently is valued for its faster transaction speeds. But it’s facing some headwinds this year. At the moment. These include possible regulatory hurdles and a possible loss of popularity among investors.