What is Litecoin?
Litecoin Guide & Review
Bitcoin is the inspiration behind many cryptocurrency networks. In 2009, Satoshi Nakamoto launched Bitcoin as an open source code. Developers could review Satoshi’s code and even imitate it to build other cryptocurrency networks.
Some blockchains, however, are designed from the ground up, for scalability and efficiency reasons. Ethereum and Cardano are good examples.
Ethereum built their blockchain because they wanted a programmable blockchain. Their aim was to offer a platform where other developers could build decentralized applications and host them on their platform. Cardano is an Ethereum competitor with several unique features.
Litecoin, on the other hand, simply wanted to be a better Bitcoin. Litecoin’s developer was a big fan of Bitcoin but found it less scalable and slow. He came up with his payment protocol that distributes a block-size of transactions within 2.5 minutes instead of Bitcoin’s 10 minutes.
The Litecoin crypto soon attracted adoption and shot up in prices. But before you invest in the coin, read on to learn what Litecoin entails, how it was developed and its functions.
What is Litecoin?
Litecoin is a decentralized cryptocurrency distributed through mining. It was founded in 2011 by Charlie Lee, a former Google employee. Like Bitcoin, Litecoin is an open source project, and its code was published on Github in October 2011.
Litecoin was forked from Bitcoin core and coded to decrease Bitcoin’s block time from 10 minutes to 2.5 minutes. Litecoin’s maximum supply would be 84 million, four times higher than Bitcoin’s 21 million.
By increasing the maximum supply of Litecoins, Charlie Lee wanted to make his cryptocurrency more available to users. A higher supply in the market would also keep Litecoin price low and affordable. Thanks to the affordable price and what seemed to be a better version of Bitcoin, Litecoin gained value quickly.
In 2013, when the cryptocurrency started featuring on exchanges, its value surged from $4 in April to $35 by November 2013. In the one week between November 25th and November 29th, Litecoin’s value spiked from $10 to $35, a growth rate of 350% in just four days.
By December the same year, Litecoin was making as many headlines as Bitcoin did. The cryptocurrency hit a market cap of above $1 billion and lowered Bitcoin's dominance which was nearly 99% at the time.
At a time when Bitcoin mining was becoming popular, Litecoin offered an alternative way to make money with cryptocurrencies. Litecoin’s mining algorithm is unique, however, and has often given ASIC manufacturers challenges.
Litecoin’s mining algorithm is known as Scrypt. The algorithm also has a modified GUI but can be mined with GPUs and ASICs nonetheless. Learn more about Litecoin mining as the paragraphs unfold.
Litecoin VS Bitcoin
Charlie Lee considers Litecoin to be silver to Bitcoin’s gold. That means Litecoin will always stay in the shadow of Bitcoin no matter how superior their payment protocol advances. However, Litecoin accepts its place as a coin that improves Bitcoin’s performance rather than competes with it.
Here is a glance at the differences between Litecoin and Bitcoin.
Halved after 840,000 blocks
Halved after 210,000 blocks
Litecoin was developed to handle a higher number of transactions per minute. Its scripting code distributed one block of Litecoin transactions every 2.5 minutes. A block can have thousands or hundreds of thousands of transactions, which in turn makes Litecoin four times more scalable than Bitcoin.
On the downside, the high number of transactions increases Litecoin’s blockchain. A huge blockchain with so many blocks attracts orphaned blocks. An orphaned block occurs when two miners complete a block at the same time and only one block is added to the blockchain.
Eventually, orphaned blocks can be recovered and added to the main chain, but they lead to delays in making settlements.
Litecoin’s faster speed is advantageous to merchants as it makes people realistically pay for goods and services without wasting a lot of time on confirmations. With Bitcoin, a business that waits for one confirmation before releasing goods has to wait for 10. When using Litecoin, a single confirmation takes 2.5 minutes, which is just enough time to pack the customer their goods.
Litecoin transactions cost a fraction of Bitcoin payments, which make the cryptocurrency a more rational payment method. Where you have to pay up to $5 to complete a Bitcoin transaction, it costs $1 or less.
Bitcoin’s high transactions fees are largely a result of the coin’s higher demand and lower maximum supply. More people trade with Bitcoins than with Litecoin, which makes Bitcoin mining more in demand than Litecoin mining.
When applied to trading, however, most traders would rather go with the cheaper payment method.
Compare Litecoin VS Bitcoin transaction fees in the table below, and you will realize that Bitcoin’s fees are unrealistic at times.
Jan 2013-Jan 2017
Feb 2017-Dec 2017
Jan 2018-Jun 2018
Buying a $10 pizza with Bitcoin in late December 2017 would have cost you $44. That’s right. You couldn't spend less than $100 worth of BTC in December 2017 unless you were okay with parting with half your Bitcoins in fees.
Litecoin, on the other hand, had retained low fees even when its prices went up. Litecoin’s highest price point ever was in November 2017, and its transaction fees stood at $1.5 or lower.
Both Bitcoin and Litecoin transaction fees are much lower in June 2018 compared to earlier in the year. However, Bitcoin’s prices are still high to the average micropayment trader. Sending $10 worth of Bitcoins costs a third of your coins. With Litecoin, however, payments averaged at just $0.1, which is realistic.
Bitcoin uses SHA256 mining algorithm whereas Litecoin uses a Scrypt. Bitcoin's algorithm depends on solving complex mathematical algorithms to identify a Bitcoin transaction. When there is a demand to mine Bitcoins, the mining difficulty increases.
Litecoin favors RAM size and processing power as opposed to the ability to solve complex algorithms. On the other hand, Bitcoin’s mining method is a lot more energy consuming compared to Litecoin mining which saves energy by serializing its algorithm.
You can mine both Bitcoin and Litecoin using CPU computers, but it is slow. GPU miners are also unable to mine Bitcoins profitably. High powered ASICs with hash rates of above 10 TH/s are used to mine Bitcoins. Meanwhile, Litecoin’s miners have a hash rate of Mega Hashes per second.
Litecoin Mining in Details
Like its relative, Bitcoin, Litecoin charges traders a small fee to send funds through its payment protocol. The fees are used to reward miners. Litecoin fees are very small, however, as aforementioned.
To attract professional miners, Litecoin’s founder decided that the LTC distributed after every block mined would go to miners. Like Bitcoin, miners would get 50 Litecoins for every block mined. This would go on until 840,000 blocks were mined after which the reward would be halved to 25 LTC. The halving process would be repeated after every 840,000 blocks.
Currently, Litecoin’s block reward is 25 LTC. With LTC’s $98 price, mining one Litecoin block will get you $2,450.
While it looks simple, Litecoin has a technical mining algorithm. It follows a Proof of Work algorithm, but its consensus is so complicated that most Litecoin ASIC miners only have a hash rate of Mega Hashes. By contrast, there are Bitcoin miners with Tera hashes of mining power.
Litecoin was designed to make mining equitable and spread out to many miners instead of being dominated by a few mining pools. A GPU computer is all you need to mine Litecoins profitably. If you want to maximize your profits, you can purchase an ASIC LTC miner.
The GPU or ASIC miner works in conjunction with a software program that communicates with the LTC blockchain to activate the mining process. After you set it up, the miner runs calculations to identify a genuine Litecoin transaction from a series of data. The machine then compares the transaction with transactions previously recorded on the blockchain to ensure it has never been sent before.
The process fulfills two purposes: to ensure a transaction is genuine and to confirm the transaction’s details to prevent double spending. After a transaction is approved, a miner’s fee is deducted and forwarded to a specified address. The remaining amount is sent to the destination address as specified by the trader.
Does Litecoin have a mining difficulty? Yes, mining Litecoins becomes more difficult as more miners compete to verify transactions. However, Litecoin has a schedule for adjusting its mining difficulty. After every 2016 blocks are mined, roughly 3.5 days, a code self-adjusts the difficulty to increase or decrease.
Litecoin Price Growth - Where it all started and where it is now
Litecoin was launched at a time when cryptocurrencies were still a new thing. Bitcoin was worth less than $5 (Oct 2011), and you could mine the coin with CPUs.
As such, Litecoin price remained lower than $1 for over a year. The coin got a breakthrough in 2013 when its price suddenly surged. Getting listed on a few exchanges and growth in popularity for LTC mining drew the attention of traders.
In April 2013, Litecoin was valued at $3. Eight months later in December 2013, Litecoin investors were recording profits of more than 1000% as the coin's value had shot up and was now valued at $42. Had you invested $1000 worth of LTC in early 2013, you’d get back your money and earned more than $10,000 within one year.
Litecoin’s bullish run did come to a halt though. In fact, after hitting a price of $42 in December 2013, the coin spent the whole of 2014 losing value. Investors who lost hope in the coins and dumped them lost all their money. The coin ended 2014 at a low $2.7, up from $42.
In 2015, Litecoin didn’t gain a lot of value either. After starting the year at a price of $1.4 in early 2015, the coin only gained value significantly in July where it hit $7.6. It then continued to lose value up to March 2017. The coin never went above $7 again for another 20 months.
A lot of investors lost hope in the coin and accepted losses. But those who held onto their coins were the real winners. When Litecoin started gaining value in March 2017, it grew in value and reached a peak of $46 in July 2017. It was a relief for many who believed in Litecoin.
From that point forward, Litecoin price rose steadily. By December 19th, 2017, the coin was valued at $366, yielding the profitability of nearly 10,000% in one year. Had you invested $10,000 in LTC when it was valued at $3.5 in January 2017, a one-year investment turned into $1.04 million.
In 2018, LTC suffered the same fate as most cryptocurrencies. A market correction occurred in January and crashed the prices of nearly all cryptocurrencies. However, there have been a few opportunities to earn from price fluctuations.
After the January price correction, for example, LTC’s price went down to $108 on February 6th. The coin assumed a positive growth curve immediately and hit $245 by February 20th. Had you invested after the crash, you had the chance to double your profits in less than three weeks. The coin fluctuated and a few more times before June 2018, opening investment gaps for investors.
Litecoin’s future, like that of many coins, is not defined. But based on its past trends, it still has potential to continue growing in value.
Thank you for reading our comprehensive Litecoin guide. Always feel welcomed to go through our website for more reviews and cryptocurrency guides.