Litecoin is an improved version of Bitcoin. Launched in 2011 by Charlie Lee, cryptocurrency aims to become a real everyday payment method for its users. And, like its competitors, Litecoin relies on blockchain technology. What are its particularities? Answers.
Definition of Litecoin
Litecoin is a cryptocurrency that works through blockchain technology. To learn all about Litecoin, defining what is a cryptocurrency and what is a blockchain is essential.
What is a cryptocurrency?
A cryptocurrency is an electronic money, alternative to traditional currencies. A cryptocurrency is also a virtual currency that is not available in the form of coins or banknotes, and cannot be used by bank card or check.
The functioning of an electronic money is based on three main principles:
- Disintermediation : traditional trusted third parties like banks no longer intervene in transactions;
- Security : the blockchain system (decentralized architecture, block coding) makes information inviolable and indelible;
- Autonomy : the system feeds on itself, operators acting as network nodes and developers being paid in cryptocurrency.
What is blockchain?
Blockchain technology is a suite of blocks that guarantees the security and traceability of cryptocurrencies. The blockchain is a huge digital database, where everything that is entered cannot be erased or modified.
Changing a block immediately changes all the other blocks in the chain. In addition, the decentralized architecture prevents data loss, since all the blocks are replicated in each node of the network.
Control is ensured by all of the blockchain players. If the developers improve the network, miners intervene at the network nodes to validate a transaction. By making their computers available, they contribute to the storage and computing power of the blockchain. They are paid for this work in cryptocurrency.
Good to know: A blockchain can be public, like Litecoin, or private, like Libra (Facebook). The first is open, while the second has limited access.
What is Litecoin?
Litecoin is a cryptocurrency developed from the blockchain technology of Bitcoin. If the latter is intended to store value like gold, Litecoin is designed to be used every day like digital money.
This virtual currency, symbolized on cryptocurrency exchange platforms by the letters LTC, allows instant peer-to-peer payments anywhere in the world at low cost. Each LTC is divided into millionths of Litecoin, the unit being called Litoshi.
Did you know ? The Litecoin foundation now offers a debit card. The result of a partnership with Ternio and Bibox, the Litecoin BlackCard allows you to spend your cryptocurrency online and in stores.
History and operation of Litecoin
Like every cryptoactive, Litecoin has certain peculiarities. What are they ? Back to the history of Litecoin to better understand how it works.
The creation of Litecoin
Litecoin was officially created on October 7, 2011 by Charlie Lee, a former computer employee at Google and Coinbase. The Litecoin code comes from a modification of the Bitcoin code. By the way, network node operating software works just as well to mine Litecoin as Bitcoin.
The promotion of cryptocurrency has been led, since April 2017, by the foundation 111 North Bridge Road Singapore. Under its action, the Litecoin exchange rate was referenced to Bloomberg Terminal, December 15 of the same year. Since July 2018, cryptocurrency has been present in Google’s currency conversion tool.
Did you know ? Litecoin became, in July 2019, the official cryptocurrency of the Miami Dolphins (American football franchise). Concretely, spectators can buy their lottery ticket in Litecoin.
Litecoin nevertheless underwent its first fork February 18, 2018. Called Litecoin Cash, the fork was led by a group of independent developers who are members of the Litecoin Foundation.. Litecoin Cash does not use the same system, the SCrypt algorithm being abandoned in favor of the SHA-256 algorithm, which tells Charlie Lee that it is not a hard fork.
Good to know: The SCrypt algorithm requires less computing capacity than its SHA-256 alter ego, but more bandwidth.
What are the principles of Litecoin?
The aim of the creator of Litecoin is to establish an alternative to traditional currencies, usable on a daily basis for users. To be able to make instant payments worldwide, Litecoin improves Bitcoin by erasing certain shortcomings, in particular the slowness of the transaction validation process.
Litecoin uses a hashing algorithm different from Bitcoin, multiplying by 4 the processing speed of validation of transactions. When Bitcoin makes a block every ten minutes, Litecoin generates one every 2min30.
Good to know: In 2017, the Litecoin network adopted the Segwit technology update to reduce the number of data required and push the block size limits.
What you should remember about the functioning of Litecoin:
- High speed of transactions;
- Low transaction costs;
- Divisibility to one millionth of the cryptocurrency;
- A creation limited to 84 million pieces.
Where and how to buy Litecoin?
There are three ways to purchase Litecoin:
- By acquiring it on trading platforms (in euros, dollars or yuan);
- By being paid after the mining of Litecoin;
- By exchanging it for other cryptocurrencies (e.g. Bitcoin).
Operation on Litecoin exchange platforms like Coinbase, Binance or Kraken is simple. After registration, the cryptocurrency trading platform verifies the identity of the subscriber. Once the validation is done, the latter associates his account with his bank account and makes a deposit to buy Litecoins.
Tip: It is strongly recommended not to leave your Litecoins on a platform. For security reasons, it is best to place the crypto assets on a Wallet Litecoin wallet outside.
Why invest in Litecoin?
The question of investing in Litecoin is for all investors looking for returns. Here are the advantages of buying Litecoin and the limits.
The Benefits of Buying Litecoin
Compared to other cryptocurrencies, investing in Litecoin is advantageous because:
- Cryptocurrency is well known in the market, with a large drop in experience for this sector;
- It is a scarce resource because it is limited. Its price should therefore rise in the medium term;
- The project, led by a solid and trustworthy team, is ambitious;
- Its network has solid functionalities (speed, volume of transactions, etc.).
The risks of buying Litecoin
Buying Litecoins is not without risk for the capital invested, because:
- Volatility is inherent in crypto assets;
- The future strengthening of the regulatory framework may hinder certain prospects;
- Competition from other cryptocurrencies is growing;
- Doubts about the Litecoin network’s ability to operate on a large scale remain.
Among the thousands of cryptocurrencies that exist, Litecoin is one of the virtual currencies that offers the most guarantees. If buying Litecoin is not without risk for the invested capital, its scarcity, the performance of its blockchain, the evolution of the project and institutional recognition (as in Germany for example) make it, in theory, an interesting cryptoactive.