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What is Litecoin (LTC)?
Luis Clark
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Luis Clark
What is Litecoin (LTC)?
In 2011, former Google engineer Charlie Lee launched the digital asset Litecoin.
Litecoin blockchain is adapted from the Bitcoin network, as it comes with many similar components. For instance, Litecoin also operates on a peer-to-peer framework, allowing value to be directly transferred from the sender to the recipient while eliminating intermediaries like banks. Litecoin is also decentralized, with no fixed central authority.
However, Litecoin differs from Bitcoin in several areas. Litecoin LTC has a larger currency supply cap of 84 million than Bitcoin’s 21 million coins. Also, it uses a different proof-of-work (PoW) mining algorithm called Scrypt, which produces blocks faster than Bitcoin.
Overall, the Bitcoin fork aims to improve in three key areas: speed, scalability, and centralization.
How Does Litecoin Work?
Litecoin founder Charlie Lee was reported to have said that the digital asset is the ‘silver to Bitcoin’s gold.’ This is likely because it offers a larger amount of coins than the foremost crypto asset.
Litecoin is geared towards faster transaction resolution for users. As a result, the Litecoin blockchain produces four times more blocks than the Bitcoin network. Litecoin LTC is a far more suitable payment alternative for everyday needs because of its higher throughput.
How does Litecoin work? The blockchain operates using the same open-source base code as the Bitcoin network. It focuses on decentralization and P2P transfer of value. Litecoin also uses cryptography, which makes the transfer of value highly secure from third-party interference.
The blockchain network relies on crypto mining to issue new LTC assets. This process is similar to the Bitcoin process, but it enables the validation of Litecoin transactions by Litecoin miners. Instead of relying on the SHA-256 mining algorithm popularized by the Bitcoin network, the Litecoin network uses the Scrypt mining algorithm. This offers faster block production times, as each new block takes about two and a half minutes (2.5 minutes) to produce instead of Bitcoin’s 10 minutes.
Litecoin crypto mining is also energy intensive; Litecoin miners have to compete to solve complex cryptographic puzzles. The first to solve the puzzle adds a new block to the network and is rewarded with the LTC asset. Much like BTC, Litecoin’s supply has a fixed cap limit of 84 million, which is four times the figure of the older crypto protocol. In addition, Litecoin also undergoes a Litecoin halving event every 840,000 blocks or four years, which reduces the amount of Litecoin rewards miners earn for their services.
Besides the above-stated features, Litecoin also has Segregated Witness (SegWit) functionality. This allows the network to digitally sign data on each block outside the underlying blockchain network. This reduces the transaction weight required for each block by separating each transaction into two sections. This way, Litecoin miners can input more transactions into a block with a constant low size instead of it increasing exponentially with the transaction volume.
SegWit was integrated into Litecoin in 2017; the functionality was initially intended to be deployed on the Bitcoin network. This helped Litecoin retain its strong position as one of the best forks of the Bitcoin network.
Another prominent feature of the Litecoin protocol is the Lightning Network. This network operates as a layer-2 scaling solution that takes transactions off-chain for verification before adding them back. The Lightning Network enables faster transaction output for the least amount in network fees.
A final feature of the Litecoin protocol is the MimbleWimble functionality, which aims to enhance user privacy and make it hard for transactions to be traced. This feature tumbles transactions together, making it hard for an onlooker to trace transactions between a sender and the recipient.
Even though Litecoin was one of the first adaptations of the Bitcoin code, it has since fallen off the pecking order and been replaced by another hardfork called Bitcoin Cash. The blockchain protocol is a carbon copy of the older protocol but with a larger block size intended to increase transaction speed.
How is Litecoin Created?
Litecoin LTC is the network token that powers all network operations on the Litecoin blockchain. This digital asset is created through a mining process, just like Bitcoin.
Mining involves the validation of Litecoin transactions to create chains of blocks. The Litecoin mining process is similar to the Bitcoin network’s process for validating Bitcoin transactions. Transfers made from one Litecoin wallet to another are first stored on the mempool to be picked by Litecoin miners.
Once picked, these Litecoin mining nodes have to solve very complex mathematical puzzles to decrypt and verify transactions. This mining process requires immense computing power due to the hyper-competitiveness needed to solve the puzzle. The first mining node to solve the puzzle is rewarded with a newly created Litecoin LTC asset. As of 2023, this block reward is 12.5 LTC and is expected to be cut down to 6.25 LTC in the next Litecoin halving event.
In the event that two miners solve the puzzle at nearly the same time, the Litecoin network first accepts the blocks. These blocks are then termed orphaned blocks, but after further investigation by the decentralized network, one is rejected, and another is accepted as the true and verifiable transaction.
Which Blockchain Does Litecoin Use?
Litecoin operates on its own blockchain but is based on Bitcoin’s original source code. The Litecoin developer had to copy Bitcoin’s code to create the alternative blockchain. Litecoin, created by former Google employee and Massachusetts Institute of Technology (MIT) alumnus Charlie Lee, aims to correct the low scalability and high network fees of the Bitcoin network. Litecoin provides a higher block confirmation period of 2.5 minutes, which is significantly faster than Bitcoin’s 10 minutes. The network also charges lower transaction fees.
According to developer Charlie Lee, Litecoin is the lite version of Bitcoin, which means it offers more user-centric software. Given that it is quite similar to the older blockchain, it operates using a variant of the PoW consensus mechanism. This is a hashing algorithm called Scrypt. Scrypt is faster and eliminates pre-mining, which enables the creation of cryptocurrencies before the network launches to reward the development team.
Litecoin operates using mining software like the Bitcoin network. These include application-specific integrated circuit (ASIC) miners, graphic processing units (GPU-based miners), and other miners specialized in creating LTCs.
How to Use Litecoin
Since breaking into the spotlight in 2011, Litecoin remains one of the most successful alternative spin-offs from the Bitcoin network. It has continued to gain traction largely due to its faster block times, lower transaction fees, and ease of use. Another crucial feat is that it has never suffered a 51% attack despite using a different hash function for mining its coins.
Litecoin supply cap is fixed, and the Litecoin halves event occurring every four years have also made LTC a high-value asset due to its increasingly reduced supply in the market. These factors have led investors to trade Litecoin speculatively on cryptocurrency exchanges.
And there are more use cases for Litecoin LTC. The digital asset is used to pay for goods and services in outlets accepting Bitcoin. This gives it a real-world use case.
Litecoin holders looking to spend their digital assets can easily use a Litecoin wallet to send and receive the asset and spend in outlets that support the asset.
How to Buy Litecoin
The LTC asset is still a high-performing crypto asset with a high trading volume. For investors keen on adding Litecoin to their portfolio, the easiest and most popular means is to buy Litecoin from a cryptocurrency exchange like Binance.
To get started on Binance, investors must open a Binance exchange account and verify their details. Verification often entails supplying personal details, taking selfie photos for facial recognition, and uploading a driver’s license or government-issued ID card. Once this is completed, investors can deposit using a bank wire transfer, credit/debit card, or e-wallet payment option, like PayPal.
After depositing, investors can type LTC into the search bar and select a preferred trading pair. Tap the ‘Buy’ icon and follow the on-screen prompt to conclude the process.
How to Store Litecoin
Litecoin is a virtual asset, so it cannot be physically handled. To safeguard LTC tokens from theft, Litecoin holders require a Litecoin wallet. Investors can download a software wallet for mobile and desktop on the Litecoin website or use a hardware wallet like Ledger Nano X.
However, most new-generation crypto wallets support the storage of LTC since they support multiple cryptocurrencies. Crypto wallets are broadly divided into three different categories.
Hardware
Hardware wallets are also called offline wallets or cold wallets. They can be physically handled, as they typically appear as USB-like dongles that can be plugged into a user’s personal computer (PC). Hardware wallets are generally offline as they do not need to be connected to the internet to provide details on asset balance, transaction history, and other details. They are considered more secure as cybercriminals cannot hack them using malicious software.
However, hardware wallets are not convenient for use in everyday transactions due to the tedious process of sending and receiving assets through another medium. They are also quite pricey and are in the range of $100 to $250 per wallet.
Software
Software wallets appear in the form of mobile and desktop applications. They require a constant internet connection to execute transactions and view balances. Software wallets are quite convenient, especially their mobile versions, which can be used to pay for goods and services in crypto-supported outlets. Also, they can be used to buy and sell Litecoin instead of using a crypto exchange. This adds to their convenience.
Nonetheless, they are considered less secure than their hardware counterpart, given their online status, as malware can enable a hacker to drain a user’s wallet. On the flip side, software wallets are free as they are typically apps.
Paper
The last option for storing Litecoin is the paper wallet style. This wallet is made of paper—A4 paper. Users can directly print out their public and private keys and keep them in a safe place. Also, a few paper wallets offer a QR code component that allows users to scan them to access their balances on the network.
However, paper wallets are becoming less trusted due to the chances of damage by fire or water.
Best Place to Stake Litecoin
Although Litecoin is a PoW consensus mechanism, Litecoin holders can stake them to earn more LTCs. Staking functions as a high-yield savings account and allows users to lock up their funds for a fixed period. This is usually meant to secure the network. However, several crypto exchanges allow users to stake and earn from their LTC assets.
Popular places to stake Litecoin include Binance, OKX, Huobi Global, and Nexo, amongst others. Each platform offers a different annual percent yield (APY) and also charges applicable fees.
What You Need to Know About The Future Of Litecoin
The Litecoin development team has been focused on making the blockchain network efficient and more accessible to the everyday user. As a result, the Bitcoin hardfork is available in most outlets where Bitcoin is accepted. So users can pay for goods and services with either Bitcoin or Litecoin.
And there’s more the Litecoin team intends to achieve. The blockchain protocol has begun expanding its utility base following the launch of OmniLite. Launched by the Litecoin Foundation in Singapore, OmniLite heralds the era of smart contracts, decentralized autonomous organizations (DAOs), tokenized assets, and non-fungible tokens (NFTs). This puts it on the same playing field as the Ethereum network. The team may pursue Litecoin development in this area, with a focus on attracting smart contract-powered protocols to its network.
Given the growing interest in the tokenization economy, Litecoin could easily be a player in the coming years.
Should You Put Your Money In Litecoin?
Litecoin is still volatile like other crypto assets despite being deflationary and should be interfaced with proper risk management practices. However, it provides a good diversification strategy for investors looking for a more economically-viable alternative to Bitcoin.
Its growth into the smart contract space also means it can be a top Ethereum competitor in the coming years.
Our extensive analysis of the different Cryptocurrencies doesn’t stop here. You can also check out our guide where we explained what is PancakeSwap in details.
FAQ
Most frequent questions and answers
Litecoin LTC is a top investment for crypto investors. The digital asset has grown in bounds and leaps in the past decade in line with the broader crypto market. Given its fixed market cap and Litecoin halves, it is a suitable alternative to Bitcoin.
Even though LTC was introduced earlier than ETH, the latter is light years ahead of it. This is because the Ethereum network expanded the use case of blockchain from value transfer to value creation through smart contracts. Given its first-mover advantage in this space, Ethereum hosts the most decentralized protocols, making it a hotbed for the new tokenization economy.
This is quite difficult to predict because digital assets are known to be highly unpredictable. However, given its halving events, the cryptocurrency could easily hit this price peg; however, this would be subject to an extensive bullish run in the general market.
It is hard to determine the real-world identity of the individual since users can be identified by only their wallet address. However, the wallet address with the most Litecoin has over 2.7 million, accounting for 3.86% of the total assets in circulation.
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