What is Litecoin?

Revolut Contributor

 · 03/19/2020  · 03/19/2020

What is Litecoin and how does it work? Is Litecoin a good investment? Is Litecoin better than Bitcoin?

If you’re on the hunt for answers to these and other Litecoin-related questions, read on.

What is Litecoin and how does it work?

Litecoin is a peer-to-peer digital cryptocurrency for internet-based financial transactions. Litecoin is:

  • Open source: Anyone can modify, distribute and run the software.
  • Decentralised: Based on blockchain technology
  • Global: Not issued by any one government and available anywhere in the world
  • Limited: Only 84 million Litecoins will ever be in circulation.

The currency is generated through a process called mining – but to be a miner in this world, it is not necessary to don a hard hat and go underground. Instead, mining in this context means identifying “blocks” and then processing the Litecoin transactions that make them up.

The mining process is founded on Proof-of-Work consensus, and goes a little something like this:

  1. Generation: A block – essentially a compilation of recent Litecoin transactions around the world – is generated by the Litecoin Network.
  2. Corroboration: The block is corroborated by specialised mining software and then made detectable to miners.
  3. Verification: The miners find and verify the block through solving relevant cryptographic puzzles.
  4. Recording: The block becomes part of an ever-growing historical chain that includes every Litecoin transaction.

So, what is the difference between Litecoin and the more widely known Bitcoin – and why is it important to care?

Is Litecoin better than Bitcoin?

Bitcoin and Litecoin are both peer-to-peer cryptocurrencies. As things currently stand, Litecoin is the third largest cryptocurrency by market capitalisation. Bitcoin, of course, is number one, both in terms of chronology and overall value.

Why then is understanding Litecoin important for those in search of the most superior cryptocurrency out there? The answer may lie in our ability to not think of cryptocurrencies in a hierarchical way, but rather as unique entities fulfilling different functions.

Think of Litecoin as “Bitcoin’s little brother”. It is the silver to Bitcoin’s gold, the family restaurant to Bitcoin’s fine dining. You need both and they are not necessarily in competition with one another.

Why was Litecoin created in the first place?

Litecoin is part of the ever-growing landscape of cryptocurrency technology and was conceived with a few notable plus points.

Litecoin’s specific advantages include the following:

  • Speed: The Litecoin network generates a block every 2.5 minutes, substantially quicker than Bitcoin’s every 10 minutes. This makes it a more favourable option for merchants looking to do multiple quick transactions on a daily basis.
  • Increased democratisation: Because Litecoin makes use of the Scrypt algorithm rather than Bitcoin’s SHA 256, it requires less processing power and insider knowledge. That means, more and more people can get involved in the mining process.
  • More protected: Learning from Bitcoin’s flood attack in 2015, a simple adjustment was made to protect the Litecoin network from a tsunami of spam transactions. This was done through the implementation of a simple sender’s fee making it unattractive to hackers and ultimately, not worth their while.

Is Litecoin a good investment?

We cannot guarantee that Litecoin is a good investment, but we can say that it is currently a popular choice for investors and it has been trading in high volumes. There is risk involved in any investment, and Litecoin is no different. Bear this in mind when evaluating whether to invest in Litecoin.

Here are some quick answers to your Litecoin investment questions:

Where can you buy Litecoin?

Which countries use Litecoin?

Litecoin is not issued by any one government and is available globally for online transactions.

What is the future of Litecoin?

While unlikely to surpass Bitcoin in the near future, Litecoin’s prospects are favourable with the predictions pointing towards growth.

Now that you’re a Litecoin expert, you may want to expand your knowledge about the blockchain universe. This is where to start: