Created in 2011, Litecoin (LTC) emerged as an offshoot of Bitcoin (BTC)'s technology. While sharing a similar codebase, Litecoin carves its own niche by targeting faster transaction times and a greater supply of coins compared to Bitcoin. This focus positions LTC as a potentially viable option for everyday purchases, compared to BTC's main role as a store of value. Let's take a closer look at what Litecoin is and how it works:
TL;DR
- Litecoin was created in 2011 as a fork of the Bitcoin network.
- It represents one of the first altcoins (alternative cryptocurrencies) derived from Bitcoin.
- Litecoin is often referred to as 'the Silver to Bitcoin's Gold'.
- Charlie Lee, Litecoin's creator, called Litecoin 'a lite version of Bitcoin'.
- The token LTC has been designed to be faster and cheaper than Bitcoin to replace it in everyday spending.
- Just like Bitcoin, the Litecoin blockchain needs miners to validate the transactions on its network and secure the blockchain.
- As of the beginning of June 2024, Litecoin is the 20st largest coin by market cap.
What Is Litecoin?
Litecoin (LTC) is an altcoin, a cryptocurrency alternative to Bitcoin. Both use blockchain technology to facilitate secure, peer-to-peer transactions. However, Litecoin aims to be a faster, more scalable payment network compared to Bitcoin, which translates to potentially lower transaction fees and quicker confirmation times for LTC transactions.
A Brief History of Litecoin
- 9th of October 2011: Announcement of the creation of Litecoin by Charlie Lee on bitcointalk.org.
- 12th of October 2011: Genesis Litecoin block created.
- 25th of August 2015: First Litecoin halving with a reduction of the miner's reward from 50 LTC to 25 LTC.
- 2017: Litecoin adopts the scaling solution SegWit. The latter divides transaction data into two halves for efficiency, which makes transactions smaller, enabling more to fit in a blockchain block.
- December 2017: New all-time high for Litecoin, beyond $370.
- 2018: Litecoin launches the 2nd layer solution; Lightning Network.
- 5th of August 2019: Second Litecoin's halving, with mining rewards going from 25 LTC to 12.5 LTC.
- October 2020: PayPal (PYPL) announces the launch of its cryptocurrency service featuring Bitcoin, Ethereum (ETHUSD), Bitcoin Cash (BCHUSD), and Litecoin.
- May 2021: A new all-time high for Litecoin above $415.
- 2nd of August 2023: Third Litecoin's halving with a reward reduction from 12.5 LTC to 6.25 LTC.
- May 2022: Activation of Mimblewimble Extension Blocks (MWEB) to provide a privacy-focused decentralised protocol to its users and improve the fungibility and privacy of the Litecoin blockchain.
How to Mine Litecoin (LTC)
If you're familiar with how Bitcoin works and what Bitcoin mining is, then it will be easier to understand Litecoin mining, as it shares some similarities. Both rely on the Proof-of-Work (PoW) protocol to secure their networks through mining.
Miners contribute computing power to solve complex mathematical problems, verifying transactions and earning rewards in newly minted LTC coins. As of 2024, the reward is 6.25 LTC, but this halves every 4 years, similar to Bitcoins halving events.
Mining Litecoin requires specific hardware and software, which often means upfront investment and ongoing costs, so your decision to get into Litecoin mining should be carefully considered based on several factors, such as the following:
- Hardware: While it is possible to use CPU/GPU for mining, it's less efficient for Litecoin compared to ASICs (Application-Specific Integrated Circuits) designed specifically for mining. But while these offer the best performance, they come with a higher initial cost and significant power consumption.
- Software: Litecoin mining software acts as a bridge between your mining hardware (computer or ASIC) and the Litecoin network, which allows you to receive information about new transactions and participate in the mining process. If you choose to join a mining pool, the software facilitates communication and workload distribution within the pool. Additionally, the software monitors and manages your mining hardware. It also provides valuable data about your mining activity, such as hashrate (computing power), accepted/rejected shares (indication of successful mining attempts), and estimated earnings.Selecting the most suitable mining software for your needs usually depends on your technical expertise, your hardware type, and the desired features.
- Electricity Costs: Mining consumes a lot of electricity, so factor in your electricity costs to determine Litecoin mining profitability.
- Your Mining Approach: Solo Mining vs Mining Pools: With solo mining, you compete directly with other miners for block rewards, usually requiring significant computing power to be profitable. With mining pools, processing power of multiple miners are combined to increase chances of earning rewards. But the rewards are then split among pool participants based on their contribution.
- One last thing to remember: Mining profitability is not fixed. It can be impacted by several factors, including the cost of your hardware, your hashrate, how much electricity you use, the cost of your Internet, and the current price of Litecoin (LTC) among others.
Litecoin vs Bitcoin: What Are the Differences?
Litecoin emerged as a response to address some limitations seen in Bitcoin at the beginning of the 2010’s. These shortcomings included slow transaction processing times, scalability concerns, high transaction fees, and overall transaction speed.
The main points that sets Litecoin apart from Bitcoin are the following:
- Transaction confirmation time: 2.5 minutes for Litecoin vs 10 minutes for Bitcoin.
- Total coin supply: 84 million vs 21 million.
- Proof-of-Work algorithm: Scrypt vs SHA-256.
- Halvings: Every 840,000 blocks vs every 240,000 blocks.
Litecoin vs Other Altcoins
Litecoin (LTC) emerged as a digital currency designed for everyday transactions. Inspired by Bitcoin, it boasts faster transaction times and lower fees by requiring fewer resources for miners.
However, the cryptocurrency landscape has evolved significantly since Litecoin's debut. A wider variety of altcoins with unique functionalities have now emerged since 2011. For example, Ethereum provides a platform for building decentralised applications (dApps), while Cardano positions itself as a third-generation blockchain for smart contracts, emphasising evidence-based protocols.
As of June 2024, there are more than 2.4M cryptocurrencies with different user cases and goals. Some altcoins act as payment tokens, security tokens, utility tokens or governance tokens, while others are considered stablecoins or meme coins.
The Future of Litecoin
The future of Litecoin (LTC) is a topic with mixed predictions and it's impossible to anticipate where the price of Litecoin will go next. Still, there are some points you might consider in your analysis.
Firstly, Litecoin is one of the first altcoins to have been created, making it a veteran in the cryptocurrency space. This established technology offers a certain degree of stability and trust. Secondly, Litecoin prioritises fast, secure transactions at a lower cost than traditional methods, which could be appealing for everyday use as digital cash.
However, newer cryptocurrencies offer functionalities beyond simple transactions, potentially impacting Litecoin's growth. Additionally, the inherent volatility of the young cryptocurrency market makes price predictions challenging and increases investment risk.
As of June 2024, there are no projects on the Litecoin's roadmap on the official website.
Investing in Litecoin vs Trading Litecoin
There are two main approaches to Litecoin: buying and holding LTC for the long term or actively trading LTC to capitalise on short-term price movements. So, what's the main difference between investing and trading?
Investing in Litecoin involves buying and holding LTC tokens with the expectation that their value will increase over time (position trading). This strategy is suitable for individuals with a long-term investment horizon and a higher tolerance for risk due to the uncertainty of how Litecoin will perform. Investors typically focus on factors like market trends, adoption rate, and potential use cases for Litecoin before deciding to buy LTC tokens.
Trading Litecoin involves actively buying and selling LTC coins in an attempt to profit from short-term price movements, which can be done through Contracts For Difference (CFD). Traders employ various technical analysis tools and popular trading strategies to identify potential entry and exit points in the market. This approach requires a significant amount of time, effort, and knowledge, and carries a higher degree of risk compared to long-term investing.
How to trade Litecoin with CFDs
There are various approaches to capitalise on Litecoin's price fluctuations, depending on your timeframe, risk tolerance, trading strategy, and overall goals. If you're interested in speculating short-term price movements without directly owning any Litecoin tokens, Plus500 Contracts for Difference (CFDs) on cryptocurrency can offer an alternative.
With CFD trading, you don't need to worry about buying and securing LTC tokens themselves. Additionally, CFDs allow you to speculate on both rising (bullish) and falling (bearish) markets. However, there is a significant risk of loss due to a key feature of CFDs: leverage. While leverage can amplify your potential profits, it can also significantly magnify your potential losses.
Conclusion
Designed for speed and efficiency, Litecoin transactions aim to be faster and potentially cheaper than traditional money transfers. While Litecoin once held the third-largest cryptocurrency market cap position after Bitcoin and Ethereum, the market has evolved since its creation in 2011. Newer cryptocurrencies such as Polkadot and Polygon have emerged with functionalities beyond simple payments, propelling them to higher market caps.
What Is Litecoin - Frequently Asked Questions (FAQs):
When was the Litecoin network created?
Litecoin (LTC) was created in 2011 by a former Google engineer named Charlie Lee.
What is Litecoin?
Litecoin is a type of digital money, similar to cash you can send electronically instantly for almost no cost. Instead of a bank controlling it, it's run by a massive network of computers around the world in a decentralised manner (the blockchain), which potentially makes it secure and allows for fast transactions.
What are the uses of LTC?
Litecoin (LTC) is a digital currency designed for fast, secure online and in-store transactions. Similar to digital cash, you can use Litecoin tokens to pay for goods and services at any merchant that accepts it. Beyond its use for everyday spending, Litecoin can also function as an investment. Like other cryptocurrencies, LTC can be bought and held in the hopes that its value will appreciate over time. Traders using day trading and swing trading can also speculate on the short-term variations of the LTC price.
What are the differences between Litecoin and Bitcoin?
Litecoin (LTC) is a digital currency inspired by Bitcoin that shares some underlying technology, but with key differences. Like Bitcoin, Litecoin uses blockchain technology to facilitate secure, fast and decentralised transactions at almost no cost. However, compared to Bitcoin, Litecoin aims for faster transaction processing times (2.5 min vs 10 min), cheaper transactions, and also has a large max token supply (84 million vs 21 million).
