What is Litecoin?
Litecoin is often affectionately referred to as bitcoin’s baby brother. This is not that strange since the cryptocurrency has characteristics quite similar to bitcoin, but how accurate is the nickname ‘baby brother’? You will find out more on one of the oldest cryptocurrencies in this article.
Everything about litecoin
- What is Litecoin?
- How does Litecoin work?
- What can you do with litecoin?
- How can you acquire litecoin?
- What’s the difference between litecoin and bitcoin?
What is Litecoin?
Litecoin is the first altcoin in the world. We call all cryptocurrencies that aren’t bitcoin altcoins. The coin was developed in 2011 by Charlie Lee, a former Google employee.
He wanted to develop a faster and cheaper version of bitcoin. Just like bitcoin, litecoin functions as a digital payment system that's fully peer-to-peer, with no trusted third party needed.
How does Litecoin work?
Litecoin shares many similarities to bitcoin. Using litecoin you’re able to rapidly transfer a certain value from one person to another. All transactions are logged into the blockchain. The blockchain functions as a decentralised ledger in which all transaction data is chronologically stored. There are thousands of computers worldwide that all store a copy of that ledger. This makes it impossible to ‘fool’ the system. The transactions are collected and put in a so called block. That block is then added to the already existing chain of blocks: the blockchain.
This payment system is maintained by nodes and miners. You could compare a node to an accountant. Every node in the network owns a copy of the entire transaction data, so we can speak of a decentralised network.
Miners are computers in the network that collect transactions, put them in a block and then add that block to the already existing blockchain. These computers are specially designed to solve all kinds of mathematical ‘puzzles’. The miner that solves it first, gets to add its block to the chain and collect the reward that comes with it. Fun fact: every miner is a node, but not every node has to be a miner.
What can you do with litecoin?
Litecoin was developed as a decentralised digital payment method. With litecoin you can transfer value directly without the need for a third party like a bank for instance. There are already several places where litecoin is accepted as a payment method. Currently, bitcoin is more popular as a payment method but litecoin has a strong presence too.
Want to transfer money to your family abroad? If it’s up to your bank you’ll be paying twenty to thirty percent commission and the recipient will have to wait a couple of days before they receive the funds. When you use litecoin for the same transaction it takes just a few minutes and will set you back approximately a mere 20 cents in fees. Regardless where you send the coins to in the world, the transaction cost and timeframe will always be the same.
Hodl and investment
Many people speculate on litecoin’s price. They see litecoin as the currency of the future and hope its value increases. Contrary to euros, the amount of litecoins that will be created has already been predetermined. The supply is limited- if the demand increases the price will subsequently increase. One litecoin consists of one hundred million units, making it possible to transfer just a fraction of a litecoin to someone else. How else would you pay for your coffee if the price keeps increasing?
Note, an increasing in price is not a given. To limit the risks, only invest an amount you’re comfortable with.
How can you acquire litecoin?
There are four ways that we are familiar with for acquiring litecoin:
- Purchase them through a broker or an exchange
- Accept litecoin as a payment for your goods or services
- Receive (part of) your salary in litecoin
- Start mining litecoin
- Buying litecoin
The easiest way to acquire litecoins is to buy them. You can do this at BTC Direct, all you need is an account and a litecoin wallet. Both can be arranged in a matter of minutes. You can pay with a bank transfer or a payment card, after which the litecoin are sent to your wallet.
Litecoin is designed as a payment system. This means it’s possible to accept litecoin when you provide goods or services. The speed of a transaction is a great advantage. If someone pays in litecoin, you will receive it in your digital wallet instantly.
There are also charities that have stumbled upon litecoin as an option to donate. On their website you’ll see a litecoin address to which you can send a donation.
Since June 2018, BTC Direct employees receive part of their salary in bitcoin. The employees choose how much of their salary they want to receive in bitcoin. At the end of the month, BTC Direct buys the coins at the current rate and sends them to the employees’ digital wallets. Of course, this service could also be applicable to litecoin.
A more technical way to obtain litecoin is to mine it. If you mine litecoin, your computer verifies new transactions and collects them in a transaction block. As a reward you get paid in newly created litecoins.
Mining litecoin takes time and effort. It requires extensive knowledge about how the network works and you will have to invest with the adequate technical equipment. However, it’s very satisfying work since you help maintain the decentralised network together with thousands of of other miners.
What’s the difference between litecoin and bitcoin?
The biggest difference between bitcoin and litecoin is the speed of transactions. Transaction blocks are created four times as fast, resulting in faster processing of litecoin transactions. In addition, litecoin uses a different algorithmic function to mine coins, making it impossible to mine litecoins with a bitcoin miner.
Four times more litecoin than bitcoin
It’s predetermined that 84 million litecoin will be created, four times as many as bitcoin. This makes litecoin less scarce. It’s plausible that because of this, litecoin’s price will stay lower than bitcoin’s. But of course, you can never be certain!
Speed is the most important characteristic of the altcoin litecoin. In theory, litecoin is four times as fast as bitcoin. This is due to the fact that transaction blocks are created four times as fast. Litecoin has the same goal as bitcoin: becoming a widely accepted decentral digital currency. Would you like to buy litecoin?
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