What is Litecoin? The Beginner’s guide

What is Litecoin? It is one of the oldest and most popular cryptocurrencies. Litecoin has its origins in Bitcoin. The currency dates back all the way to 2011. Nowadays Litecoin is part of almost every professional crypto portfolio. This article is the beginner’s guide to Litecoin.

Litecoin is one of the oldest cryptocurrencies

Let’s put Litecoin to the right place among thousands of other cryptocurrencies. We can split cryptos roughly into three clearly different categories: platforms, tokens and currencies.

Ethereum is the best-known example of a platform, which can be also called an ecosystem, operating system etc. It is an environment for software developers to build dApps and use smart contracts. Other crypto projects in this category are EOS, Tron and NEO.

Token is a cryptocurrency, which is created inside such an ecosystem. Most tokens are built on Ethereum and they use Ethereum’s well-known ERC-20 standard. Basic Attention Token and Pundi X are good examples of tokens. The purpose of tokens is often to function inside a certain application.

Then we have the (crypto)currency category. The purpose of a digital currency is to function as money and as a store of value. The most popular currency is of course Bitcoin. Other well-known cryptocurrencies are Monero, Dash and Dogecoin. Litecoin belongs to this category as well.

If Bitcoin is digital gold, Litecoin is digital silver. Many crypto OGs share this view of Litecoin. It is considered as Bitcoin’s “little brother” and sometimes as a test environment.

Let’s go through next Litecoin’s history and technology.

Litecoin founder is Charlie Lee

When you think Litecoin, you think also Charlie Lee. He really puts a face on this cryptocurrency. Lee is a computer scientist born in Ivory Coast, who moved to United States at the age of 13. He graduated from MIT with a master’s degree in computer science in 2000.

After his graduation, Lee worked at Google for about ten years. He found Bitcoin at 2011 and understood quickly the importance of Satoshi Nakamoto’s invention.

charlie lee litecoin
Charlie Lee – the founder of Litecoin

Litecoin wasn’t the first project Charlie Lee started himself. He was developing a coin called Fairbrix, which was a clone of another cryptocurrency, called Tenebrix. Fairbrix was launched in 2011 and failed badly.

The founder of Fairbrix pre-mined himself millions of coins before the launch, which didn’t go too well with the community. There were also some serious bugs in the software.

Lee found out that there was a demand for a new cryptocurrency anyway, if only the distribution and mining was done fairly. His second attempt was Litecoin, which was launched in October 2011.

Charlie Lee announced Litecoin at Bitcointalk forum with a topic titled [ANN] Litecoin – a lite version of Bitcoin. Launched! His creation is the oldest cryptocurrency still used right after Bitcoin.

Many newbies don’t know that Litecoin is based almost entirely on Bitcoin. Some people say Lee just copy-pasted the Bitcoin code and changed few parameters. Even if this was the case, it can be done by anyone with Litecoin as well. Both Bitcoin and Litecoin are open source and free for anyone to use.

The important thing is to understand that Litecoin is not a Bitcoin fork, like Bitcoin Cash (or other Bitcoin forks). Litecoin has its own blockchain and runs its own miners like any other independent cryptocurrency.

Charlie Lee started to work at Coinbase in 2013, which is nowadays one of the best-known services to buy, sell and store cryptocurrencies. No wonder, that Litecoin was also listed at Coinbase early on.

Lee is now working full-time for Litecoin foundation. This non-profit organization is guiding the development work of Litecoin. He has also sold all his Litecoins, which caused some drama in December 2017. The price tanked a lot after Lee had sold his Litecoins and created quite a bit of bad publicity on him.

The differences between Litecoin and Bitcoin

As mentioned above, Litecoin and Bitcoin have a lot of common in the program code. This is also one of the strengths of Litecoin.

The founder Charlie Lee has mentioned few times, that Litecoin benefits from all the features developed on Bitcoin. It can use these components due to the high comparability between the currencies. SegWit and Lightning Network technology updates are good examples.

As the name suggests, Lee launched Litecoin (light coin) to be the light version of Bitcoin. In this context, light means fast transactions. Another major difference is in mining.

ASIC miners started to take over the Bitcoin quite early, which drove average Joe out of the mining business with their laptops or GPU rigs. Bitcoin mining hasn’t been profitable in any other way than using an ASIC for long time.

Litecoin and Bitcoin both use the Proof of Work consensus method. This means that the blockchain maintenance work is done with physical mining machines, which consumes a lot of energy. Nowadays PoW systems have been replaced with Proof of Stake, where the cryptocurrency is pre-mined and blockchain maintenance is done through software.

The difference between Bitcoin and Litecoin comes from the hashing algorithm, which is also called as the mining algorithm. Litecoin is using an algorithm called Scrypt, while Bitcoin is using the famous SHA-256.

The idea behind Scrypt is that it’s more memory intensive, while SHA-256 is only about CPU processing power. This makes it impractical to run the algorithm on ASIC.

The situation is different now, though. Chinese mining manufacturer Bitmain presented its Antminer L3 in 2017, which became instantly a huge hit. This is an ASIC miner designed to work with the Scrypt algorithm.

bitmain antminer l3
Bitmain’s Antminer L3 for Litecoin mining.

There are also other differences between Litecoin and Bitcoin, such as the maximum supply. As many readers might know already, Bitcoin’s max supply is 21 million coins. Litecoin’s supply is exactly four times that, 84 million.

New Litecoins come into existence through mining due to the Proof of Work algorithm used until the max supply is reached. Currently, 25 new Litecoins are “born” with each block. These are handed out to miners as rewards.

The inflation rate slows down over time. Every 840.000 blocks there is an event called halving, when the amount of new Litecoins is reduced by 50%. The next halving occurs in August 2019.

A new Litecoin block is created on average every 2,5 minutes. Bitcoin blocks are created every 10 minutes, which makes Litecoin about four times faster. The downside is reduced safety, because it’d be faster for an attacker to re-organize the blocks in the blockchain.

Litecoin and Bitcoin are technically very similar. If you are not entirely familiar with Bitcoin, Proof of Work mining and blockchain yet, check out the following articles.

The principles mentioned in these articles can be also applied to Litecoin.

Litecoin development

The year 2018 was rough on Litecoin and the whole crypto market. LTC coin price moved from 300 dollars to almost 20 dollars between January and December. However, Litecoin has been one of the top investments in 2019 (when this article is written) and more than tripled its value.

The development of Litecoin didn’t stop despite the bear market. All major crypto projects kept developing and building during the long bear market of 2018, but it just never showed in the prices.

Litecoin has taken similar steps as Bitcoin, which is due to the similar code base. A good example is the Bitcoin soft fork SegWit, which was also activated in Litecoin last year.

The Litecoin project has also raised its brand awareness. They sponsored the UFC 232 event in December 2018 and had the Litecoin logo in the middle of the ring.

One of the most important steps is the Lightning Network. Many newcomers might think, that LN is Bitcoin’s scaling solution. It is only partially true, because this technology can be also applied to other cryptocurrencies.

Litecoin’s own Lightning Network is up and running now. You can check the statistics from  1ml.com/litecoin/. There are currently two hundred nodes, so the project is at an early stage.

Lightning Network is a very interesting solution, because it gives Bitcoin lightning-fast and cheap transactions. This has been the main reason why cryptocurrencies like Litecoin and Bitcoin Cash have been developed. They’ve basically a solution to Bitcoin’s expensive and slow transactions.

But now, anyone can make a micro transaction with close to no costs through the Lightning Network. What purpose does Litecoin or Bitcoin Cash have after this? No wonder, that Litecoin is also building its own Lightning Network.

Litecoin project is also going forward on other areas. MAST and CT (Confidential Transactions) are listed in the roadmap, which could bring privacy features to Litecoin. Many analysts expect Bitcoin to eventually have privacy features as well. This would put pressure on privacy coins such as Monero.

Charlie Lee has also demonstrated atomic swaps between Litecoin and Bitcoin already in 2017. Atomic Swap means that a cryptocurrency can be swapped to another cryptocurrency without the need of a third party (cryptocurrency exchange). When atomic swaps and Lightning Network are combined, interesting possibilities will arise.

The development work is guided by the Litecoin Foundation. One of its board members is Charlie Lee.

Litecoin as an investment

“The little brother of Bitcoin” is soon eight years old. Litecoin has established itself as one of the top 10 cryptocurrencies in the world. Recently it’s been fighting between 4th and 6th position with Bitcoin Cash and EOS.

The success of Litecoin is tied to Bitcoin at some level because of the similar technology. At the moment, Litecoin is definitely one of the top challengers or alternatives to Bitcoin with Bitcoin Cash. It isn’t directly competing with privacy coins like Monero and not with platforms like Ethereum either.

How can you evaluate Litecoin as an investment? As mentioned earlier, cryptocurrencies can be roughly divided to three different groups: platforms, tokens and currencies. Each group has different factors, which drive the demand and success of a project.

Litecoin is one of the (crypto)currencies, so one should evaluate its success through adoption. How many people are using Litecoin, how many people are hodling Litecoin, how many transactions are done, how many addresses are created?

One of the key factors is the real-world adoption. Can you pay with Litecoin in your local McDonald’s soon? How about at Amazon? This development must be then compared to its rivals.

It’s also important to think how the Lightning Network is going to change the currency sector, when micropayments become available for Bitcoin as well.

This article is written in May 12th of 2019. At this point in time, the Litecoin halving is a very important factor. It’ll take place in August of 2019. Many analysts expect Litecoin price to rally before the halving takes place. This is because the halving is a deflationary event, which cuts the supply of new Litecoins in half.

Real-time price of Litecoin:

Litecoin is easy to buy with fiat money from popular online exchanges. The number one option is Coinbase, where you can also buy other top cryptos easily with GBP, USD, EUR etc. Other options are Coinmama, Bitpanda, CEX and eToro.

Litecoin is available in every major crypto exchange in the world. Where fiat currencies aren’t supported, it’s possible to buy Litecoins using Bitcoin.

It’s also very easy to store Litecoin, because it’s supported by the major wallet apps. You can store small amounts in the exchange you buy them as well, but it’s not a recommended long-term solution. Desktop wallet Exodus and hardware wallets Ledger Nano & Trezor offer much safer alternatives.

Many investors see LTC as an integral part of their crypto portfolio. Especially crypto OGs seem to prefer Litecoin over its competitors, such as Bitcoin Cash. One of the best-known Litecoin fans is Bix Weir, who praises the coin almost daily. Litecoin seems to be popular among the gold bugs and silver bugs as well.

The strength of Litecoin is the long history it has – this coin has proven itself over the years. It has an experienced team behind it, and the personality of Charlie Lee has also helped to grow Litecoin’s popularity.

If you want to keep up with Litecoin follow Charlie Lee in Twitter. The reddit page of Litecoin can be found at reddit.com/r/litecoin.

Kuva: Charlie Lee screencap of this video, Litecoin photo by Eivind Pedersen from Pixabay