What is Litecoin? [A Comprehensive Guide to Understanding Litecoin]

By Mr.CryptoWiki | cryptocurrency | 5 days ago

$5.99 tipped


The cryptocurrency market is flooded with varying types of cryptocurrencies with different unique use cases. Some cryptos intend to be transparent and trackable currencies (electronic cash), while others implement privacy features to feature complete anonymity. Some cryptos have programmable capabilities with smart contract functionality, while others are application-specific utility coins. There are also cryptos with the sole purpose of netting investors positive returns, and others are used to represent real-world physical assets. 

All in all, there are literally thousands of cryptocurrencies today with varying, complicated, and unique use cases. However, it wasn’t always this way. 

When Bitcoin (BTC) first launched in 2009, it was the only cryptocurrency available and had one sole purpose, to be a peer-to-peer electronic cash system. Bitcoin remained as the sole noteworthy cryptocurrency for 2 years up until 2011, when cryptocurrencies Namecoin (NMC) and Litecoin (LTC) first came into existence. While Namecoin has kind of fallen off the map, Litecoin remains as one of the leading cryptocurrencies today and is the same type of crypto as Bitcoin, a digital coin intended to be P2P electronic cash.

History

Litecoin (LTC) was created by Charlie Lee, a Google employee and former Engineering Director at Coinbase. Lee first announced Litecoin on a Bitcoin Talk forum while working at Google and later released it as an open-source client on GitHub on October 2011. Soon after, the Litecoin network went live on October 13, 2011, and has been active with no downtime ever since.

Lee launched Litecoin with code that was forked from the Bitcoin Core client and implemented only four key differences that aimed to increase the transaction speed and make it more scalable. The differences were:

  • A decreased block generation time (2.5 minutes opposed to Bitcoin’s 10 minutes)
  • Increased maximum number of coins (84,000,000 LTC opposed to 21,000,000 BTC)
  • A different hashing algorithm (scrypt, instead of SHA-256)
  • A slightly modified graphical user interface (GUI)

With these differences, Lee intended Litecoin to serve as “silver to Bitcoin’s gold”, rather than to compete with it. He did this by designing the coin to always be more affordable to consumers by increasing the maximum number of coins. He also aimed to make it more accessible to the average consumer by making it possible to mine Litecoin with consumer-grade hardware as opposed to the specialized mining hardware that Bitcoin utilizes. Lastly, he sought to make transactions faster and cheaper so that consumers could use Litecoin for smaller day-to-day transactions.

Launch, Issuance, and Distribution

Litecoin uses a proof-of-work algorithm which rewards miners for processing each block. The first block (the genesis block) was mined on October 8, 2011, and the first 150 coins were pre-mined by the team behind Litecoin. 

In Litecoin’s early days, each block rewarded miners 50 LTC for every block mined. This was the reward up until block number 840,000, then the reward was cut in half to 25 LTC for every block mined. The Litecoin block reward gets cut in half every 840,000 blocks, a process that occurs every four years. Since Litecoin’s block speed is roughly 2.5 minutes, around 576 blocks are generated per day. 

Litecoin’s current block reward is just 12.5 LTC per block and the next block reward halving is expected to occur in August 2023, where the reward will then be 6.25 LTC per block. As of September 2019, 75% of Litecoin’s total supply has been mined and a total of 20.7 million LTC are left to be mined.

Like Bitcoin, Litecoin had a very fair launch and continues to have a fair distribution model. Unlike many of the cryptocurrencies out there today, Litecoin did not have an initial coin offering (ICO) where the founders raised a bunch of capital and reserved a significant number of coins for themselves. Therefore, it can be said that Litecoin had one of the fairest launches and one of the fairest coin distribution models in crypto. 

The Purpose / Value Proposition of Litecoin

As previously mentioned, Lee created Litecoin to serve as “silver to Bitcoin’s gold”. He envisioned Litecoin to be used as a cheaper and faster alternative to Bitcoin. Therefore, Litecoin’s intended purpose is to be a cryptocurrency for payments and it’s aiming to achieve this purpose by offering instant, near-zero cost payments to anyone in the world.

Like Bitcoin, Litecoin is an open-source, global payment network that is fully decentralized without the need of central authorities. It is beyond government control, secured by mathematics, and empowers individuals everywhere to control their own finances. Litecoin has substantial industry support and serves as a complementary cryptocurrency to Bitcoin by offering faster and cheaper transactions. 

Therefore, Litecoin’s purpose is to function as frictionless, borderless, peer-to-peer electronic cash. However, while this is Litecoin’s intended purpose, it’s also inadvertently used as a sort of testnet for Bitcoin. 

Let me explain, Litecoin’s code is derived from the Bitcoin protocol and therefore the two cryptocurrencies are very similar down to their core. Therefore, when there’s a new upgrade that could be implemented on Bitcoin to make it faster, more scalable, private, etc., it can first be adopted and tested by Litecoin to ensure its viability before implementation on the king. An example of this is when Litecoin became the first cryptocurrency to adopt Segregated Witness or SegWit to improve transaction speeds. After Litecoin’s successful SegWit integration in 2017, Bitcoin slowly began to adopt the technology. Another such example is when Litecoin completed the first Lightning Network transaction, which also took place in 2017. 

To this day, Litecoin continues to be used as testing grounds for potential upgrades to Bitcoin. Litecoin’s latest endeavor is to implement confidential transactions by integrating the MimbleWimble protocol into Litecoin. Perhaps Bitcoin will one day do the same if all goes well for Litecoin.

Litecoin Adoption: Consumers, Merchants and Payment Processors

It’s been said that adoption is the best metric to judge a cryptocurrency and its value proposition. For if nobody is using or accepting it, why should it be worth anything at all?

That being said, Litecoin is one of the most established and successful cryptocurrencies of all time. It is the silver to Bitcoin’s gold and has remained a top 10 cryptocurrency throughout its entire 8-year history. It benefits from tried and tested security, speedy transactions, and low fees, making it an attractive cryptocurrency among consumers, merchants, and payment processors. 

Therefore, Litecoin is actually being adopted at an incredible rate and is already accepted at over 200 diverse online businesses across the globe. These businesses offer products and services ranging from luxury travel and yachts rentals to gold, silver, and jewelry, to professional and educational services, as well as books, clothing, food, and so much more.

Additionally, Litecoin is available to trade, buy and sell at over 40 major cryptocurrency exchanges and over 13 major over-the-counter (OTC) desks. Litecoin users also benefit from a wide selection of over 17 quality Litecoin wallets including hardware, software, and online wallets. 

As for payment gateways, Litecoin is integrated into 12 different payment gateways and can be utilized to pay various bills through 5 different bill payment services. Additionally, users can spend their Litecoin via 4 different crypto debit cards at thousands of merchants across the globe.

Helping to drive Litecoin’s adoption is the Litecoin Foundation – ‘A non-profit organization with members around the globe who share the mission of advancing Litecoin for the good of society by developing and promoting state-of-the-art blockchain technologies.’ 

Official partners of the Litecoin foundation include:

  • Travala.com – enables consumers to book 567,928 hotels in 210 countries across 82,311 destinations with Litecoin.
  • Travelbybit.com – enables consumers to book flights and hotels with crypto.
  • LuxuryTravelDiary.com – a luxury vacation service accepting Litecoin. 
  • Aliant Payments – an accredited Litecoin payment processor.
  • Coingate – an Accredited Litecoin payment partner.

All in all, Litecoin is one of the most widely adopted cryptocurrencies among consumers, merchants, and payment processors, and shows no signs of slowing down.

Biggest Issues Litecoin Faces

Thus far, this article has described Litecoin in a positive light. But like anything, Litecoin is not perfect and suffers from drawbacks and issues. 

For instance, while Litecoin is touted as being a fast and scalable alternative to Bitcoin, it still doesn’t live up to the standards set by traditional payment methods like Visa. Litecoin boasts a maximum of 56 transactions per second while Visa averages around 1,736 transactions per second. Therefore, Litecoin suffers from the same scalability issues as Bitcoin and will therefore require upgrades such as second-layer scaling solutions if it hopes to become a mainstream payment option. 

This brings me to another big issue facing Litecoin. If Litecoin’s strong suite in comparison with Bitcoin is its ability to scale and have faster transactions, but yet it’s still to slow compared with traditional payment methods, what makes it better than Bitcoin? After all, Bitcoin has multiple advantages over Litecoin including dominance in the crypto space, a much larger market cap, massive network effects, and greater security due to more mining hash power. Therefore, some people might ask why Litecoin has any value at all? It’s even been argued that Litecoin is nothing more than a glorified testnet for Bitcoin. While this may be true in a sense, it’s up for interpretation as Litecoin still does offer many advantages over many other cryptocurrencies.

Yet another challenge in which Litecoin and nearly every other cryptocurrency currently face is market volatility. If Litecoin ever hopes to become a widely adopted payment method, it will have to become more stable. This is a challenge all cryptocurrencies must overcome and can only be solved through time.

Conclusion

As far as cryptocurrencies go, Litecoin (LTC) is one to keep on your radar. Despite its issues and challenges it faces, Litecoin has remained a leading cryptocurrency along with Bitcoin for its entire existence. There is no other cryptocurrency quite like Litecoin and it benefits from substantial support from the industry. 

Thus far, the cryptocurrency market has fared well to the idea of Litecoin being the silver to Bitcoin’s gold, and I don’t see that narrative changing anytime soon. Therefore, it’s my opinion that Litecoin is here to stay and will be making an impact for years to come.

What do you think about Litecoin? Will it innovate and move beyond Bitcoin’s shadow or continue its path being the silver to Bitcoin’s gold? Let me know in the comment section below.


Mr.CryptoWiki
Mr.CryptoWiki

In crypto since 2002 ;)


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