Hey, welcome to my “What is Litecoin?” guide!
Since the launch of Bitcoin in 2009, many other cryptocurrencies have gained entrance into the blockchain space. Each coin thinks they bring something better onboard, which is significantly related to scalability, fees, and speed.
One of these cryptos is Litecoin, which was developed in 2011. Its purpose is to be a lighter version of Bitcoin. Did you know that transactions in Litecoin are four times faster than in Bitcoin? Yes, that’s true! And not only that, but they are also cheaper!
If you are following this guide, then you must still be trying to figure out ‘what is Litecoin?‘. Well, I’m going to share everything you need to know!
To begin with, I will share some background information about the Litecoin blockchain and why it was developed. After that, we will discuss its purpose.
This guide will also cover how the technology supporting Litecoin operates and some information on its safety – both the bad and the good. When you are done reading this guide, you will be able to figure out how to buy and keep Litecoin securely and safely.
Therefore, when you are done with this guide, you will almost be an expert! Let’s now find out how the Litecoin blockchain began!
How Litecoin Began
Litecoin was first developed in 2011 by Charlie Lee, an ex-Google employee. As it is with many blockchain enthusiasts, Charlie Lee believed that the Bitcoin code had too many flaws.
These flaws were linked to:
- The failure of Bitcoin to improve its transaction speed
- The way it was mined (discussed later)
- It’s capacity to do more transactions per second – scalability
Charlie Lee needed something known as a hard fork to achieve his goal of a lighter version of Bitcoin. This is where things get exciting!
A fork is when alterations are made to an original blockchain to enhance it. There are two types of forks: A hard fork and a soft fork.
A soft fork is when an enhancement is made to a blockchain, but the older version still recognizes the new block guidelines. Many soft forks have been created for the Bitcoin blockchain.
Nonetheless, since Bitcoin is decentralized, it implies that no single individual has control over it. If new alterations are to be effected, it goes to a voting system, and the changes can only be made if enough people vote in favor of a new change. If not, then it won’t!
On the other hand, a hard fork is when considerably significant changes are needed, and the only option to achieve it is by creating a separate blockchain! This is the path that Charlie Lee chose in coming up with Litecoin!
We will cover more on this later, but first, let’s attempt to address the critical question – “what is Litecoin?“
What is Litecoin
The similarities between Bitcoin and Litecoin are quite a number, which is why it is known as the silver to Bitcoin’s gold! Its primary role is to grow to be a global payment system. This implies that people can receive and send money locally or internationally without a third-party intermediary like banks.
To be in a position to respond to “what is Litecoin?” it is critical to know the real-world challenge it is attempting to solve.
For instance, picture Steve (who lives in Australia) wanted to send Edwin (who lives in South Africa) some money. If using a bank, it would:
- Take days to arrive
- Be expensive
- Require Steve to fill out lots of forms.
Nonetheless, if Steve resolves to use Litecoin to send the funds, he can avert all of these issues.
To begin with, the cost of sending a Litecoin is meager, and it costs just a few cents to send funds!
Secondly, Litecoin transactions only take 2.5 minutes to complete, which is faster than a bank transfer. Whether you want to send coins to a person on your street or someone on the other side of the globe – it typically takes minutes for the transaction to be complete!
Thirdly, since Litecoin is decentralized, you have complete control over your coins. This implies that you do not need to fill out any forms to send your funds!
These merits make Litecoin an excellent alternative for receiving and sending funds. So, now that you can confidently address the question “what is Litecoin?” let’s now dig into how the technology works!
The Technology Behind Litecoin
Attempting to understand how blockchain technology operates can be pretty confounding. The reason being most of the things we mention when discussing cryptocurrencies are entirely new!
That’s why I think it is critical to expound things in the most basic ways, using real-time examples. So, let’s explore a bit more Litecoin blockchain technology.
In the example mentioned previously, we expounded on how Steve (from Australia) wanted to send Edwin (from South Africa) some money. Steve has just heard that it would be easier, cheaper, and quicker to send Litecoin instead of fiat money. Let’s get to know how he can do this.
- To receive money, you need a Litecoin wallet address. Anybody can create a Litecoin wallet for free, and there are no caps to the number you can make. Picture it like a bank account.
- Steve logs in to his Litecoin wallet and sends Litecoin to Edwin’s Litecoin wallet address. Steve decides to send Edwin 20 Litecoins.
- Once Steve sends the money, they are then sent to the Litecoin blockchain.
- There will be tens of thousands of other transactions that are also being processed through the Litecoin blockchain. A new block is created every 2.5 minutes and pictures a block as a transaction container.
- The container or block carries many different transactions, including Steve’s. Before the money arrives in Edwin’s wallet, the transaction has to be confirmed as legitimate.
- Since Litecoin is decentralized, there is no one authority to verify a transaction. Instead, a group of miners uses their computing power to figure out any complicated puzzles. This is how transaction blocks are verified.
- It only takes the miners 2.5 minutes to solve the puzzle, verify all the transactions in that block, and Edwin now has his money. It’s as uncomplicated as that!
Since you now know the foundational process of how a Litecoin transaction operates, let’s have a look at how good the technology is!
So, after all, the purpose why Litecoin was created was to improve the flaws of Bitcoin. Well, then – how do they measure up against each other? Well, as far as speed is concerned, Litecoin block is four times faster than Bitcoin block. This is critical if Litecoin is to earn its reputation as a global payment system.
After 2.5 minutes, the Litecoin block receives one confirmation, implying that it can’t be reversed. As an extra security measure, some merchants request additional verifications before they process a transaction. Nonetheless, in the time it would take one block confirmation with Bitcoin, Litecoin would have 4!
Another critical thing to look at is how scalable the Litecoin blockchain is. As discussed earlier, scaling is the capacity to handle more transactions. Nonetheless, there is always a cap to what is possible.
Bitcoin can process a maximum of 7 transactions per second, and Ethereum, the second most popular blockchain, has a limit of 15 transactions per second. What’s your guess on the numbers that Litecoin can handle?
Well, Litecoin can process a maximum of 56 transactions per second! This positions it as being faster than both Ethereum and Bitcoin put together! As Litecoin gains more traction in the future, it will be able to handle the extra demand.
Mining is one of the most critical sections of blockchain technology. It wouldn’t be possible to respond to “what is Litecoin” without discussing it!
Mining is one of the essential parts of blockchain technology, so we wouldn’t be able to answer “what is Litecoin?” without talking about it!
Essentially, mining is the process through which people receive and send money without needing a third party! There are several different types of mining, though, but they are each a type of consensus model.
Litecoin utilizes a consensus model known as Proof-of-Work (PoW). While Bitcoin uses PoW, there are a few differences between the two.
Bitcoin utilizes something known as SHA-256 hashing.
Simply put, this implies that as more transactions are processed, the difficulty of each puzzle gets harder. In such circumstances, miners have to use more electricity to verify a block!
Currently, Bitcoin miners need to use ASICs (Application-specific integrated circuits) hardware. ASICs are expensive, making it unjust for individuals who don’t have a lot of cash yet want to start mining.
Nonetheless, the Litecoin blockchain is different since it utilizes something known as a script algorithm. Again, simply put, as an alternative to using expensive ASIC hardware, individuals can mine Litecoin using GPUs (graphics processing units). Graphic processing units are much cheaper, implying that it is more affordable to more people!
This is an excellent opportunity for miners with fewer funds. Nonetheless, in the coming days, it might be possible that ASIC hardware will be used to mine Litecoin. So, when this time comes, it implies that those who can buy expensive equipment will have the upper hand of receiving rewards from mining Litecoin.
So, if you have ever thought of mining Litecoin, begin now before the field is crowded!
If you have followed this guide to this point, by now, you have understood why the Litecoin blockchain was developed, and you are in a position to explain the use of Litecoin.
Now, let us talk about the security features of Litecoin.
Nearly every application you have ever used operates on a centralized server (like Twitter, Instagram, Facebook, etc.). This implies that you are putting your confidence in a third-party company to safeguard your data from hackers.
Another example of a centralized company is your bank. If a robber could hack their central servers, they could likely access your bank account and empty your money! Regrettably, centralized hacks take place all the time, and there is little you can do about it!
That was before the launch of decentralized payment systems like Litecoin! The only means that Litecoin could be attacked is if one individual controls 51% or more of the network. For an attacker to do this, they would have to develop more than 51% of the mining computing power across the whole blockchain network.
The probability of this is almost impossible since the network is far too enormous for one individual to gain that much control. It will cost billions, if not trillions of dollars in Litecoin for it to be a success. And they would only gain control for a short period so, the efforts are not worth it, anyway.
The most critical thing is how safe your Litecoins are. This is determined by where and how you choose to keep them. There are several Litecoin wallets that you may choose from, each offering different levels of security.
Picture how you would keep your money in the real world. Keeping some USD in a leather wallet is excellent for convenience since you can spend them quickly, but you wouldn’t want to keep your life savings in there, would you? You would likely feel more assured keeping them in a vast vault or safe – or in the bank.
Well, this is similar to how you would keep Litecoin. You might make use of an online wallet for convenience when trading, but you wouldn’t use it to keep the majority of your holdings.
So, let us explore how to balance security with convenience.
Mobile or Desktop Wallet
Software wallets, namely mobile and desktop wallets, are a good pick for you if you have a small number of coins and would like to easily and quickly access them. They are good since they do not take up much space on your mobile or computer, and they are pretty secure.
With the software wallets, you are the only one who has access to your private keys, and not even the team that developed the wallet can see them.
You can also create recovery options on your software wallet. Hence, if your computer breaks or you forget your password, you can still access your Litecoins.
Public Key: Picture this as the username to your bank account – this is used to receive/send coins in your wallet
Private Key: Picture this as the password to your bank account – this is used to access your wallet.
There are some different other software wallets to select from.
Usually, you wouldn’t want to keep your life savings in your physical leather wallet, would you? This is similar to keeping your Litecoin!
The most secure way to keep your coins is to use a hardware wallet. This is the cryptocurrency equivalent of a vault!
Hardware wallets allow you to keep your coins offline, implying that they are never connected to the internet. While it is less convenient to receive or send your coins quickly, it is the most secure option.
Even though hardware wallets come with a price, you have to look at the importance of safety, particularly if you hold many coins.
If you have followed our guide so far, you should now know what Litecoin is, how its blockchain technology works and how to keep it safe!
Now we are going to discuss some of the ways that criminals use cryptocurrency.
How Can It be Abused?
Like most new technologies, there will always be flawed individuals who attempt to abuse them for personal gain. Regrettably, cryptocurrencies are not exempted from this abuse.
One of the matters that governments are concerned about is that blockchain technology can be used for money laundering. This is the act of criminals attempting to keep their illegal money from the government so that the government doesn’t take it.
Since Litecoin permits people to receive and send money anonymously, it is perfect for those looking to launder their illegal earnings.
While every transaction can be viewed on the blockchain, the only piece of information displayed is wallet addresses – which are not tagged to the real-world identities of the receiver and sender.
This is almost the same as tax havens, where criminals stash their funds, so tax authorities don’t know how much they have.
Another worry is that cryptocurrencies are usually used to transact on the dark web. The dark web is an online market where illegal goods such as stolen credit cards, weapons, and drugs are sold and bought.
Silk Road is an example of one of these dark websites. This site was well known for all types of illegal activities, which were all conducted using Bitcoin. By The time the FBI shut the site down in 2013, it had transacted worth more than $1 Billion worth of Bitcoin.
It is critical to remember that although criminals have used Litecoin and other cryptocurrencies, these abusers of crypto only account for a minute number of users. Most people use cryptocurrency because it’s quick, cheap, and easy to receive and send funds.
And that marks the end of our guide on Litecoin. But before we check out, here is a quick summary of some of the features:
- Litecoin Total Supply: 84 million coins
- Litecoin Transaction Time: 5 minutes
- Maximum Transactions Per Second: 56
- First-Ever Transaction: 13 October 2011
- Mining: Proof-of-Work (Scrypt)
It is difficult to fully exhaust such an excellent cryptocurrency in such a small number of words. Nonetheless, it would help if you now had a good grasp of what it is and why it was created. You should also have a good awareness of how the technology operates and how it is different from Bitcoin!
Simply because Litecoin transactions are cheaper and quicker than Bitcoin’s, you should not assume that it is the better alternative. If you are searching for an investment option between the two cryptos, I recommend that you thoroughly research both before settling for one.
So, what do you think about this guide on Litecoin? Do you now have a better understanding of how the Litecoin blockchain works and the benefits it has over regular fiat currency?
Do you think it is a better alternative to Bitcoin? Let us know your thoughts!