What is Litecoin, and how does It work?
Often referred to as Bitcoin's little brother, Litecoin is a peer-to-peer cryptocurrency that became very popular in 2011. It's used to transfer funds directly from individuals or businesses without needing an intermediary, such as a bank or a payment processing service. Mathematics ensures the network and empowers people to control their own finances. Litecoin offers faster transaction confirmation times and better storage efficiency than Bitcoin.
Litecoin vs Bitcoin: What's the Difference?
Litecoin is based on the same open-source code behind Bitcoin but has some notable differences. Created in October 2011 by former Google engineer Charlie Lee, one of the main disparities between the two cryptocurrencies lies in their transaction speed.
Because it generates blocks approximately four times faster than Bitcoin, Litecoin can confirm the legitimacy of transactions much faster and process a much larger number of them simultaneously without the need to modify the software in the future.
Number of Coins
One of the reasons why some cryptocurrencies have an intrinsic value is due to their limited supply. Once a certain amount of Bitcoin (BTC) or Litecoin (LTC) was created, that was it. There can't be more new coins after that point.
While Bitcoin has a limit of 21 million coins, Litecoin will reach a maximum of 84 million.
Although its market capitalisation is negligible compared to Bitcoin, Litecoin is still among the top 5 cryptocurrencies at the time of this publication.
These classifications fluctuate according to the price and the number of coins in circulation.
Wallet encryption allows you to protect your investments and see transactions and your account balance. That said, you need to enter your password before spending Litecoin. This protects against viruses and Trojans that aim to steal from wallets. It also provides a security control before sending payments.
What Can You Use Litecoin for?
Cryptocurrencies, which function similarly to traditional currencies, can be used to pay for goods and services. Although cryptocurrencies are reputed to be used in the darknet for purchasing drugs and performing other transactions, an increasing number of legitimate and legal stores accept Litecoin as legal tender. So whether you're looking for jewellery, clothing or even luxury cars, there are many places where Litecoin can be accepted.
Litecoin is also a great cryptocurrency to give 'money' to friends and family. Due to its shorter blocking time, quick confirmations and rates rarely exceeding a fraction of a dollar, Litecoin can be transferred to anyone quickly and cheaply if you have your wallet address.
Like some of the other alternative cryptocurrencies, interest in Litecoin as a transaction medium has increased in recent months thanks to the peak value of Bitcoin and its rising transaction fees.
Although cryptocurrencies such as Litecoin were originally intended to carry out transactions online, their value increases and decreases based on a series of market factors, just like traditional currencies do.
However, with their lack of government backing, cryptocurrencies tend to fluctuate much more, which is why Bitcoin and other coins have seen great interest from major investors in recent months.
Litecoin has also been quite torn and has made many people very rich in a relatively short period. Like many other cryptocurrencies, its value has increased exponentially in the last year. On 18 December 2017, Litecoin reached its historic high, $360.93, which, compared to the previous year's price ($4.40), was an incredible 8,200% increase.
It's a huge leap that shows that Litecoin can also be a great store of value.
Another significant difference between Bitcoin and Litecoin is the hash algorithm each uses to solve a block and the number of coins distributed each time a solution is found. When a transaction is made, it's grouped with others recently sent within one of these cryptographically protected blocks.
The computers known as miners use their GPU and/or CPU cycles to solve quite complex mathematical problems, passing the data within a block through the aforementioned algorithm until their collective power discovers a solution. At this point, all transactions within the respective block are completely verified and sealed as legitimate.
Miners also get the reward every time a block is solved since a predefined number of coins are distributed among those who helped, with the most powerful hashers getting the most. People who look at the cryptocurrency usually join groups to combine their computing power with others' in the group to obtain these rewards.
As mentioned above, Litecoin and Bitcoin use contrasting algorithms when doing hashing. While Bitcoin employs SHA-256 (Secure Hash Algorithm), which is considered relatively more complex, Litecoin uses an intensive memory algorithm called Scrypt.
Different work test algorithms mean different hardware, and you need to be sure that your mining platform meets the proper specifications to mine Litecoin.
Today, the extraction of Litecoin has become much more complicated and requires expensive equipment to generate tangible income.
How to Buy and Store Litecoin
If you want to own Litecoin but aren't interested in mining it, you can purchase it with another cryptocurrency, such as Bitcoin, on websites known as exchanges. Some of these exchanges and services allow you to buy LTC with real fiat currency.
As we mentioned before, buying a cryptocurrency in the exchange can involve a series of difficulties, such as confirming your accounts, commissions, etc. In addition, to earn by buying and selling Litecoin directly, you have to buy it for the total cost, which won't allow you to earn a decent income if you currently have capital restrictions.
You'll need a wallet if you still plan to buy this cryptocurrency. A wallet is a special program or device designed to store your cryptographic currency and perform transactions. Remember that no wallet (even hardware located on a separate USB device) is reliable. There are cases of massive piracy of wallets. In this case, you risk losing all your investments without the possibility of returning them (don't forget that the system is decentralised, and no bank will help you).
In other words, the physical possession of Litecoin and other cryptocurrencies carries certain complexities and risks, and we don't recommend buying any amount of crypto money if you're not sure exactly why you're doing it.
If you want topotentially profit from the fluctuations in Litecoin's value, then Libertex offers you an accessible way to participate in the crypto market: trade with CFDs. CFD is a contract for difference.But please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital.
Disclaimer: The information in this article is not intended to be and does not constitute investment advice or any other form of advice or recommendation of any sort offered or endorsed by Libertex. Past performance does not guarantee future results.
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