Litecoin (LTC) is a peer-to-peer cryptocurrency created through Charlie Lee, a former Google employee, in 2011. This cryptocurrency shares many characteristics with bitcoin and is based on its original code. Below, we explain how it works, the differences between this cryptocurrency and bitcoin, as well as how you can invest in Litecoin and its advantages.
What is Litecoin?
Litecoin was designed to be used for lower-value transactions and to be more efficient in everyday life. Comparatively speaking, bitcoin was being used more as a long-term store of value in the cryptocurrency market. The unit limit of Litecoin is much higher than that of bitcoin, and the process of mining Litecoin is much faster. This means that transactions are faster and cheaper, although they are usually smaller in size and the price of Litecoin is lower.
Like bitcoin, litecoin is a digital currency. Litecoin also uses blockchain technology and can be used to transfer funds directly between individuals or companies. This ensures that all transactions are recorded in a ledger and makes it easier for the currency to operate as a decentralized payment system without government controls or censorship.
How does Litecoin work?
Litecoin is involved in both the creation and transfer of virtual currencies through an open-source and cryptographic protocol. It uses blockchain technology to record a public, decentralized ledger of all transactions.
What is blockchain?
The blockchain is a shared digital ledger that contains the record of all transactions made with cryptocurrency. Miners group recent cryptocurrency transactions into “blocks.” The blocks are then securely cryptographically encoded before being added to the existing blockchain. Blockchain technology is also used in many cryptocurrencies, such as litecoin and bitcoin.
What mining?
Mining is the process of attaching each block to the existing blockchain using specific mining software. When a block is appended, new units of cryptocurrency are generated. Miners can inject these units directly into the market when carrying out the litecoin mining process, for example.
Litecoin vs. bitcoin: the differences
Although there are many similarities between bitcoin and litecoin, there are subtle differences, which we list below:
Transaction speed
Despite the fact that Litecoin calls for a more sophisticated era for mining than bitcoin, its blocks are generated four instances quicker. Litecoin also processes financial transactions much faster and can also process larger amounts in the same period of time.
Number of coins
Each bitcoin and litecoin has a finite number of coins to move. Bitcoin has 21 million cash to be had, while Litecoin has eighty-four million, four times more than bitcoin.
Market capitalization
Litecoin has a much smaller capitalization than bitcoin, but this does not mean that it is one of the most traded cryptocurrencies.
Algorithms
Miners must successfully solve hash functions to add new cryptocurrency blocks to the blockchain. Litecoin and bitcoin use different algorithms: Scrypt is the hash function of Litecoin, while SHA-256 is the hash function of bitcoin.
The Litecoin development team originally chose Scrypt to prevent mining from being dominated by ASIC-based miners. In this way, CPU- or GPU-based miners are encouraged to compete. The Scrypt mining algorithm is more memory-intensive, which in principle was less suitable for ASIC miners and gave more opportunities to others. However, ASIC miners capable of running Scrypt have been advancing over time. This means that CPU- and GPU-based miners no longer have valid mining tools due to their more limited computing power, and ASIC miners are capable of completing more hash functions per second.
How to invest in Litecoin
When you buy Litecoin directly, the price is usually displayed in dollars (USD). In other words, you sell dollars to buy units of Litecoin. If the price of Litecoin rises, you will be able to sell your position to withdraw your profits because it is now worth more than the USD compared to the time you bought it. If the price falls and you decide to sell, then you will realize your loss.
With CMC Markets, you can invest in Litecoin through CFD trading. In this way, you can speculate on price fluctuations without acquiring the cryptocurrency. That is, you do not assume ownership of Litecoins. What you do is open a position whose value will increase or decrease depending on the price movement of Litecoin against the dollar.