Litecoin LTC: What It Is, How It Works, vs Bitcoin

The first coin covered in our series is Litecoin (LTC) one of the earliest cryptocurrencies created in 2011 by the developer Charlie Lee. Litecoin has often been called the ‘silver’ to bitcoin’s ‘gold’ over the years and is a popular cryptocurrency. The virtual currency LTC is a fork of the bitcoin codebase but has a few differences. Block times are 2.5 minutes which makes LTC transactions faster and the protocol uses a different consensus mechanism called ‘scrypt’ rather than the ‘SHA-256’ proof-of-work miners use in Bitcoin. At the moment there are 56 million LTC in circulation and there is a maximum cap of 84 million coins. Blockchain is based on a distributed database system for the transaction of cryptocurrency.

• This means that transactions can confirm faster compared to Bitcoin, and the network has a higher throughput.
• It keeps a decentralized, public ledger of all transactions using blockchain technology.
• Block rewards began with 50 LTC at launch and currently stand at 12.5 LTC.
• Litecoin more recently has developed a reputation as a less sophisticated copy of Bitcoin.
• Blockchain is so popular because it solves the problematic and time-consuming process of a centralized system.

It’s best to consult a professional advisor to see if Litecoin is a good investment for you. As of August 2023, there are just under 10.5 million Litecoins left to mine. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. Litecoin (LTC) hit an all-time high of $412.96 on May 10, 2021, and an all-time low of $1.15 on Jan. 14, 2015. As a global organisation we’re always looking for smart and enthusiastic people to join the Foundation.

What is Litecoin?

In May of 2017, LTC adopted the Segregated Witness protocol joining in on bitcoin’s upgrade process that year. That spring the cryptocurrency Litecoin performed its first Lightning Network transaction from Zürich, Germany to San Francisco. Litecoin’s developer Charlie Lee has returned to the development team last year after a brief hiatus working for Coinbase, and the coin has an ambitious roadmap ahead. Litecoin uses a hashing algorithm called Scrypt (pronounced es-crypt). But it found greater acceptance in the cryptocurrency community after the 2011 Tenebrix project modified Scrypt to work with regular CPUs for mining. Once a miner verifies it, the next block in the chain is created, and Litecoin is rewarded.

Litecoin’s transaction processing speed, on the other hand, is 54 per second—and new blocks on the Litecoin blockchain can be created about every 2.5 minutes. While Litecoin still requires a minimum of six confirmations from most exchanges to be considered irreversible, peer-to-peer (P2P) crypto payment networks can often settle Litecoin transactions almost immediately. Historically, only governments and central banks have been trusted to issue money. Like bitcoin and other cryptocurrencies, Litecoin is a decentralized, peer-to-peer (P2P) virtual currency on an open-source global payment network, which means that it is not issued by—or even regulated by—a government. Litecoin is a peer-to-peer (P2P) virtual currency, which means it is not governed by a central authority. Litecoin’s network offers instant, near-zero cost payments that can be conducted by individuals or institutions across the globe.

How Litecoin Is Mined

If a commodity or investment has a higher value for people, they will pay more for it. Bitcoin is currently perceived to be a more valuable asset, so it is worth more. Since Bitcoin was founded, hundreds of other cryptocurrencies have been forked from it or been created. Litecoin (LTC), a Bitcoin fork, is one of these altcoins—the term for cryptocurrencies that are not Bitcoin. While Litecoin is based on the same underlying blockchain and verification method as Bitcoin, several key differences might help you decide which is right for your interests and goals. Cryptocurrency and blockchain are current mainstream digital technologies applied in financial industries, actively impacting the information exchange system.

In fact, the lion’s share of Litecoin mining is performed by mining farms and pools of crypto miners using sophisticated hardware. Both are open-source projects that use proof of work to verify transactions. If you’re using a decentralized exchange like Kucoin or Crypto.com, you connect your wallet to the exchange and go through the “know your customer (or client)” registration process. Because exchanges are regulated and regulations are still being developed, the places you can buy and sell cryptocurrencies fluctuate. In April 2021, PayPal’s Venmo payment app listed Litecoin as one of the digital currencies users would be able to “buy, sell, and hold” in their personal Venmo profiles. Like many other developers eager to copy Bitcoin, Lee failed at his first cryptocurrency attempt.

The Future of Litecoin

Much like owning Bitcoin – if you lose the private keys to the wallets holding your Litecoin, it is lost permanently and it is unlikely that you will be able to retrieve them. As a decentralized, permissionless cryptocurrency, it is unlikely that you will be able to retrieve your Litecoin if you ever send it to an unintended address so do take note of that as well. The Litecoin Network targets a block time of 2.5 minutes, while the Bitcoin network targets a block time of 10 minutes. This means that transactions can confirm faster compared to Bitcoin, and the network has a higher throughput. Litecoin was created by Charlie Lee in October 2011 as a spinoff of Bitcoin, and is considered as one of the early alternative cryptocurrencies (altcoins).

As of 2023, the average Litecoin transaction fee stands at less than 2 cents, whereas Ethereum’s average transaction fee hovers between $2 and $28. This makes Litecoin a more financially viable option for frequent crypto buyers and sellers. Litecoin has a higher maximum number of coins, set at 84 million, of which 73 million have been mined as of May 2023. With over 19 million of its coins already mined, Bitcoin’s network will be made whole at its hard cap of 21 million coins. While Litecoin sought to bring more mining power to individuals, this win was short lived and encountered some challenges.

Litecoin was launched in 2011 by former Google engineer Charlie Lee, who announced the debut of the “lite version of Bitcoin” via a posted message on a popular Bitcoin forum. From its founding, Litecoin was seen as being created in reaction to Bitcoin’s tendency to gravitate towards centralization. The overall objective loss function of this federated learning framework is expressed in Eq. Xic and yic present the credit card transaction sample and its label, nc denotes the size of the dataset from bank c.

Litecoin was developed by Charlie Lee, a graduate of the Massachusetts Institute of Technology (MIT) and a former Google engineer who became interested in Bitcoin in 2011. According to Lee, “In October of 2011, I was playing around with the Bitcoin codebase, and I guess the short of it was that I was just trying to create … a fork of Bitcoin. It was mainly a fun side project.” Litecoin uses the proof-of-work Crypto cfd (PoW) technique to protect its networks. In essence, PoW requires that one party demonstrates to the other network participants that the necessary amount of computational effort has been made. If you want to see the price of Litecoin rise then watch out for the price of Bitcoin rising as well. There were 70.52 million on June 18, 2022, so as of that date, there were roughly 13.48 million left.

Is Litecoin Still a Good Investment?

Instead, the only way to release new LTCs into circulation is through a process known as mining. To “mint” new coins, miners in a mining pool download special software and compete with other miners to solve complex mathematic equations. The first miner with sufficient computing power to crack the code is rewarded with a block of litecoins, plus any transaction fees present in the block. Every time a new block is generated, it is validated by all the competing miners, a new mathematic equation is introduced, and another mining process begins. The Litecoin network essentially requires members to contribute computing power to solve arbitrary mathematical puzzles and prevent anyone from gaining control or manipulating the system.

The rate of user adoption matters, and, if more people buy Litecoin either to transfer funds or as a store of value, then its value is likely to increase. Litecoin’s availability on several major exchanges is a plus for the coin. Binance’s crypto exchange platform lets users buy, trade and sell over 350 different cryptocurrencies, including Litecoin. Users can create an account for free and buy and convert Litecoin from several options of fiat currency. Buyers can also buy and trade Litecoin directly from other Binance users and store earnings on the platform.

History

Blockchain uses a public ledger of the transaction, which is based on a distributed environment. When the system is based on a distributed database for the transaction, it is essential to achieve security. Cryptographic algorithms such as SHA 256 and 512 are the most usable concepts in the blockchain system and add new nodes through miners with the help of a consensus algorithm (proof of work, proof of stake). Blockchain is so popular because it solves the problematic and time-consuming process of a centralized system. Blockchain technology with a financial system is also usable in nonfinancial systems to improve the work environment with security. Blockchain uses the hash function and Merkle tree concept to provide the authenticated system (Fig. 4).

Charlie Lee announced in early 2019 that Litecoin would pursue MimbleWimble development, and as of 2021, development is underway. However, as the cryptocurrency market has become much more saturated and competitive in recent years with new offerings, Litecoin’s popularity has waned somewhat. Litecoin development pioneers technologies including Lightning for instant global settlement of funds and Atomic Swaps for cross blockchain trustless trading. Litecoin prides itself on being quicker and cheaper to use than Bitcoin, making it perfect for everyday payments. When you see Bitcoin going through a big pump, the likelihood is that Litecoin is going to follow. In a bear market, you can expect Litecoin to plummet once more to the depths below.

The equivalent figure for Litecoin is roughly two and a half minutes. In theory, this sounds like a significant advantage for Litecoin; however, supply and demand generally dictate prices for commodities and investments, along with consumer and investor sentiments. Both appear https://investmentsanalysis.info/ to believe that Bitcoin aligns with their interests, values, and financial goals, so its price reflects that. Litecoin uses the Scrypt algorithm, a memory-hard algorithm that was initially designed to be resistant to Application Specific Integrated Circuit miners (ASICs).

LTC started to utilize the Segregated Witness protocol in the first half of 2017, joining in on the upgrade process Bitcoin underwent earlier that year. Litecoin undertook its first Lightning Network transaction, too, from Zurich in Germany to San Francisco, California. Litecoin is highly liquid, which makes it a crypto for easier trades. In fact, Litecoin holders will find that merchants such as Newegg, SlingTV and even nonprofits like the American Red Cross are happy to accept their cryptocurrency. While you might not see Litecoin (LTC) in headlines nearly as often as Bitcoin (BTC), it’s still one of the most popular cryptocurrencies. IThe comments, opinions, and analyses expressed on Investopedia are for informational purposes online.