The authors, TM Lee and Bobby Ong, are the founders of CoinGecko, a site that ranks the potential of altcoin.
If you are new towards cryptocurrency, you might just have heard about Bitcoin. However, you might be surprised to know that there are actually many more cryptocurrencies around the world. Known as alternative cryptocurrencies, or simply altcoins, they are less developed compared to Bitcoin. With each altcoin claiming to change the financial industry in the coming years, it is hard to evaluate which of those is worthy of an investment. One of the stronger altcoins in the market currently is Litecoin.
Bitcoin emerged as the world’s first cryptocurrency after its launch by Satoshi Nakamoto in 2009. The code is open source, allowing anyone to freely modify and use it for other projects. Due to the popularity and success of Bitcoin, many other cryptocurrencies were launched with a modified version of the code.
Litecoin was a fork off the Bitcoin source code by ex-Googler, Charlie Lee. Lee, who now works at Coinbase, tweaked Bitcoin’s code by changing the hashing algorithm from SHA-256 to Scrypt. Charlie also gave Litecoin 84 million coins, four times more than Bitcoin’s 21 million. He also made some changes by giving Litecoin a mining reward of 50 coins per block, a block time of 2.5 minutes and halved the reward every 840,000 blocks.
Litecoin’s potential
Using Scrypt instead of SHA-256 allowed for fairer mining as the Scrypt algorithm is more memory intensive and allowed for lower barrier to entry for the hobbyist miner. Litecoin was initially created to be ASIC-resistant. ASIC, which stands for Application-Specific Integrated Circuit, is a customized integrated circuit that serves only one purpose – cryptocurrency mining. This requires intensive investment in purchasing and upgrading of the ASIC miners over time. It was not long before Scrypt ASICs became profitable to be produced and these ASIC miners started hitting the market in May 2014.
The shorter transaction time of Litecoin allows for transactions to be confirmed much faster than Bitcoin’s. Litecoin was launched in 2011 and differentiates itself by claiming to be the “silver” to bitcoin’s “gold”. Litecoin has proved its capability with the third-largest market capitalization of approximately $128 million, placing it just behind Ripple and Bitcoin.
Quick facts
| Bitcoin | Litecoin | |
|---|---|---|
| Creator | Satoshi Nakamoto | Charlie Lee |
| Created date | 3rd January 2009 | 7th October 2011 |
| Market Capitalisation | $4,766,262,638 | $128,488,411 |
| Algorithm | SHA-256 | Scrypt |
| Coin Limit | 21 Million | 84 Million |
| Mean block time | 10 minutes | 2.5 minutes |
| Block Reward | 50 BTC/blockHalves every 210,000 blocks. | 50 LTC/blockHalves every 840,000 blocks. |
| Current Reward | 25 BTC/block | 50 LTC/block |
Buying and trading Litecoin
The best way to buy litecoin is to exchange bitcoin for litecoin from any of the exchanges such as BTC-e, Cryptsy, Bitfinex, Kraken, ShapeShift and so on.
An easy way to acquire litecoin would be through ShapeShift. Shapeshift allows instant exchange of bitcoin for litecoin without the need to sign up for an account. Traditional exchanges like BTC-e allows for more full-featured trading and is preferred by traders.
Currently, litecoin is still not as widely accepted as bitcoin as there are far fewer merchants accepting the currency as well as far fewer consumers utilizing it. For investors, litecoin is mainly used as an alternative instrument to bitcoin.
Litecoin wallets
Similar to bitcoin, litecoin is stored in a digital wallet that is available on the web, desktop, and mobile devices. The wallet allows you to send and receive litecoin, and it records the transactions and total value of your holdings. For web wallets, always be careful if the private keys are passed over to the wallet operator’s servers. If it is, then your coins may be lost if the servers are hacked into.
Desktop wallets such as Litecoin-QT and Electrum-LTC are considered safer since you do not need to rely on a third party for security. The downside of desktop wallets is that you will only be able to send litecoin from that specific device and you are solely responsible for security.
Securing your wallet
By using a desktop wallet, you are essentially your own bank. What this means is that the security of your litecoin is entirely your responsibility.
Firstly, you will need to ensure that your computer is free from any malwares, viruses and trojans that may steal your wallet files or passwords.
Next, you will need to encrypt your wallet with a strong password. This is to make sure nobody can spend your funds when they have access to your wallet.
Your Litecoin wallet contains the private keys which will grant you the right to spend your coins. Losing these private keys will lead you to losing your litecoin forever. A good practice would be to create backups of your wallet and spread them across multiple locations. A regular routine of backing up your wallet should be developed as a decent habit to ensure that all recent addresses are included in the backup.
Further detail regarding securing your wallet can be found here.
Do also consider using cold storage or paper wallets if you have a significant holding of litecoin.
Closing thoughts
Litecoin was created as an alternative to Bitcoin with a higher coin supply, different hashing algorithm, and faster block generation time.
Just like any cryptocurrencies on the market, Litecoin is highly speculative and may not be the coin for everyone. For many, the current price reflects the future expectation of Litecoin’s potential in the future and the price may rise or fall based on changes in expectation. Litecoin is still facing the chicken and egg problem where if it is not widely used, it is less likely to be adopted by merchants and vice versa.
Litecoin founder Charlie Lee envisions that in the future, bitcoin will be used for purchases involving luxury goods while litecoin will be more widely used for day-to-day transactions. However, since this is a decentralized movement, no single person can change the course of a cryptocurrency. Remember to always conduct your research before spending any money on this virtual currency.
Disclaimer: This article is only for informational purposes and is not an endorsement of Litecoin nor should it be taken as financial advice. The author will not be responsible for any inaccuracy in information provided nor any trading activity that resulted from reading this article.
Beginner’s guide to buying and storing Litecoin
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