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What is Litecoin (LTC)?

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What if there was another alternative to Bitcoin? What if there was a cryptocurrency that did the same thing as Bitcoin, yet it was cheap and super fast?

If you thought “Ethereum”, then you guessed correct right? Wrong. The coin we will be talking about is Litecoin. Founded in 2011, Litecoin is one of the oldest cryptocurrencies. Litecoin has become incredibly successful. Litecoin has a market cap of over $3 billion. Apart from the name, there are many similarities between Litecoin and Bitcoin. Its use case is almost the same as Bitcoin.

So, what is Litecoin? How does it work? What are the use cases of Litecoin? How can you buy Litecoin?

What is Litecoin (LTC)?

Litecoin is a proof of work blockchain that focuses on being a medium of exchange just like the first ever cryptocurrency, Bitcoin. Litecoin is one of the first altcoins ever. It was created as a fork of Bitcoin.

Litecoin is supposed to be the silver to Bitcoin’s gold. Or so the developer of Litecoin claimed in October 2011.

Litecoin’s developer wanted to create a cryptocurrency that would be safe from centralized control, unlike Bitcoin.

Centralized control simply means that most of the mining is done by a few big corporations.

Now, I know what you are thinking. Isn’t Bitcoin and cryptocurrencies in general supposed to be decentralized?

Well, yes. They are supposed to be decentralized. And they were at the start. However, somewhere along the line, they became centralized.

You see, at first, anyone could mine bitcoin. But as the cryyptocurrency’s users increased, demand for its network services got larger. Soon Bitcoin required mega computers and tons of energy for mining.

Mining bitcoin became too expensive for regular people and so, only large tech companies were left in the Bitcoin mining space.

This was the problem that Charlie Lee, a former Google engineer wanted to solve with his creation of Litecoin.

He wanted a cryptocurrency that would always be available to small scale miners. Just the way Bitcoin was at the start.

Was he able to pull off this goal with Litecoin? Keep watching to find out.

How does Litecoin work?

Let’s take a moment to understand the inner workings of Litecoin. For a great start, let’s look at how Litecoin reaches consensus.

Litecoin uses a proof of work consensus protocol just like Bitcoin. A consensus protocol is a method used by a blockchain to verify which transactions are valid.

As we said, Bitcoin and Litecoin both use the Proof-Of-Work consensus protocol. Proof of work involves solving a hashing algorithm for new blocks to be approved.

Bitcoin uses SHA-256, and Litecoin wanted to stand out so its developers went with another mining algorithm called Scrypt.

Scrypt was chosen because the developers didn’t want ASIC-based miners to dominate Litecoin mining. It also wanted to promote healthy competition between CPU and GPU-based miners. Unfortunately, this plan failed as the first Litecoin ASIC miner was launched in 2016.

This meant that the plan of preventing large corporations from controlling Litecoin mining failed. Today, Litecoin is a cheaper, and faster version of Bitcoin but its mining is controlled by a handful of tech companies.

Although Litecoin is very similar to bitcoin, there are still major differences between both networks. Litecoin uses open-source software just like Bitcoin. This allows anyone to view the transaction history on Litecoin.

Some major differences between Litecoin and Bitcoin include transaction speed, hashing algorithm, and coin supply.

First off, Litecoin can process transactions faster than Bitcoin. Bitcoin can only process four to six transactions per second. Litecoin, on the other hand, can process 56 transactions per second.

It takes Bitcoin 10 minutes to generate a new block while Litecoin generates a new block every 2.5 minutes. This means Litecoin generates 4 blocks per every one block generated by Bitcoin. It also makes Litecoin a better alternative for making peer-to-peer transactions.

The next major difference between Bitcoin and Litecoin is coin supply. Just like Bitcoin, Litecoin is a deflationary token. A deflationary token refers a token that reduces supply over time. Litecoin has a total supply of 84 million coins.

Litecoin also uses halving to increase the value of its token. Halving is the act of cutting down a token’s supply in half to increase demand and reduce supply, thereby increasing the value of the token. Litecoin’s halving takes place every four years just like Bitcoin.

So now that we know how Litecoin works, what are the actual use cases of the token?

Litecoin use cases

Litecoin has one primary use: to be a quick form of peer-to-peer transactions. Thanks to its network strength, Litecoin has cheaper gas fees than Bitcoin or Ethereum. Gas fees refers to the money a person pays for using a blockchain’s network.

Litecoin is also a very trusted cryptocurrency and that’s one of the reasons why Litecoin is listed on almost all exchanges. It was launched in 2011 making it one of the oldest cryptocurrencies. Litecoin’s mining algorithm allows it to process transactions and create new blocks faster than many networks.

Litecoin is very similar to bitcoin. This makes it a great option to test out upgrades, improvements, and new features before moving them over to Bitcoin.

This has led to many programmers contributing to the development of Litecoin’s source code over the years.

Right now, Litecoin has a market cap of over $3 billion, making it the 18th largest cryptocurrency in terms of market capitalization.

Litecoin also has a daily trading volume of $0.7 billion. There are also several marketplaces that accept Litecoin as a form of payment showing the institutional adoption of Litecoin.

Litecoin is also a very difficult project to hack. Many cryptocurrency projects are vulnerable to a kind of attack called a 51% hack.

51% hacks are carried out by a group of miners, or stakers that control more than 50% of the network’s nodes. This allows them to alter transaction history and carry out double spends.

Bitcoin is the hardest network to attack. You would need approximately $550 thousand per hour to successfully perform a 51% hack on Bitcoin.

Litecoin comes in a decent 4th position of the hardest networks to successfully carry out 51% attacks. You would need almost $70 thousand per hour to hack Litecoin.

Just like Bitcoin, Litecoin lacks a formal governance system. Its consensus system operates off-chain. And most decisions are taken by the Litecoin foundation.

The Litecoin Foundation is responsible for providing funds for projects and updates.

So now we understand the use cases of Litecoin. Now if you wanted to buy Litecoin, how would you go about it. You’ll need a few things.

How to buy Litecoin

Buying Litecoin is straightforward when you have a wallet. If you don’t have one, sign up for one at Kucoin or Coinbase.The wallet is where you’ll keep your LTC after purchase

Next up is to sign up at a crypto exchange. There are generally two types; centralized and decentralized exchanges.

Centralized exchanges will ask you to submit your personal information for verification. This is in line with the Know Your Customer(KYC) policy that centralized exchanges follow.

Using a centralized exchange means less privacy. But it also means more safety thanks to the Know Your Customer policy and the regulations that centralized exchanges must follow. Examples of centralized exchanges are KuCoin, Coinbase, Binance, etc.

You can also buy Litecoin from a decentralized exchange. E.g MinSwap, SushiSwap, etc. Decentralized exchanges usually don’t follow any Know Your Customer policy.

You can stay entirely anonymous when using a decentralized exchange. However, this puts you at more risk of frauds. Once you set up your wallet and link it to the crypto exchange you choose, you can start trading.

Mind you, it’s always a great idea to talk to a financial expert before making any investments. Litecoin looks like a great project, and indeed it is. But there are few valid concerns. The first is that Litecoin has become centralized.

One of the project’s main selling points was that it couldn’t be mined by ASIC miners. This was supposed to encourage competition between small-scale miners.

Sadly, that selling point died when the first Litecoin ASIC miner was introduced. Today, most Litecoin mining is done by a few companies just like Bitcoin. Also, more than 40% of all Litecoins are held in about 100 wallets. This puts Litecoin above Bitcoin in terms of wealth centralization.

Litecoin uses the Proof-of-Work consensus protocol to validate transactions. Proof of work involves using huge amounts of energy to solve complex equations which then give nodes the right to validate transactions and create new blocks of transactions. Nodes are then rewarded with a fraction of Bitcoin for the computing resources spent on mining.

Proof of Work is the same consensus protocol used by Bitcoin. Proof-of-Work is generally considered the safest consensus protocol. However, it’s also the most expensive because of the tons of energy required.

Some have claimed that blockchains will soon move into cheaper methods of achieving consensus. This could make Bitcoin and Litecoin obsolete. Litecoin could reinvent itself by making the switch to Proof Of Stake consensus protocol just like Ethereum 2.0.

Proof of stake uses less energy than Proof of work. Proof of stake only requires people to stake their coins in return for the opportunity to validate transactions and get rewarded.

Another concern people have with Litecoin is that it was created to solve Bitcoin’s scaling issues. People are concerned that once Bitcoin solves its scaling issues, Litecoin might become obsolete.

So far, that’s the major value Litecoin offers: being a cheaper and faster medium of exchange than Bitcoin.

But as development continues on the Bitcoin Lightning network, many people believe that Bitcoin would soon fix its present scaling issues, thus making Litecoin obsolete.

Another concern people have for Litecoin is the influx of Stable coins into the crypto market. Since Litecoin aims to be a medium of exchange, it faces significant threats from the high-end stable coin projects out there.

Most of these stable coins have already received more development than Litecoin, and the rapid adoption of stable coins poses a huge threat to the long-term value proposition of Litecoin.

The final major concern people have about Litecoin is the founder’s decision to sell all his tokens. Many people believe that the founder now has no financial reason to go all out and make sure the project succeeds.

Despite these concerns, Litecoin still looks like a great project with a huge community backing. Litecoin has close to 250 thousand users on Reddit while the founder, Charlie Lee has almost a million followers on Twitter.

The network is also very user-friendly. It features hard wallets, web wallets, and simple exchange accounts.

The project has an exciting roadmap that includes plans to increase on-chain privacy through the implementation of the MimbleWimble protocol.It also has plans for atomic swaps, fungibility, and increased adoption.

Litecoin’s present transaction speed is also very impressive. Overall the project is a great one. But whether it will be able to overshadow Bitcoin, or whether it’ll gain mass adoption remains to be seen.

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