Key takeaways
- Litecoin was created in 2011 by Charlie Lee, offering fast, cheap transactions and addressing Bitcoin’s scalability issues.
- The Litecoin blockchain is a fork of Bitcoin but features faster block times, a higher total supply and Scrypt hashing.
- While Bitcoin is thought of as digital gold, Litecoin is pitched as digital silver, acting as a compliment to Bitcoin rather than a competitor
- Litecoin is widely available and often used as a payment method thanks to its speed and low fees.
Litecoin (LTC) was one of the first alternative peer-to-peer cryptocurrencies to Bitcoin (BTC). The history of Litecoin dates back to its launch in 2011. Since then, it has grown to become one of the largest cryptocurrencies in terms of market capitalization and transaction volumes.
The blockchain technology used for the Litecoin cryptocurrency is similar to Bitcoin. It’s a fork of the Bitcoin code with several tweaks. Charlie Lee initially created Litecoin to address the Bitcoin scalability concerns.
It is not designed to be a competitor; rather, Litecoin complements Bitcoin in the crypto ecosystem. Litecoin inventor Lee delivers clear messages about his goal for the project: If Bitcoin is digital gold, then Litecoin is digital silver.
While Bitcoin might be seen as a store of value, Litecoin scalability is designed to be more suitable for smaller regular payments. It is built to deliver faster and cheaper transactions with four times more supply and block creation every 2.5 minutes.
While Litecoin has built a multibillion-dollar market cap and hit all-time highs of over $300, it has slipped out of the headlines recently compared to newer projects. That doesn’t mean it’s become irrelevant in the crypto landscape. It’s still an important project thanks to its differences from Bitcoin and subsequent benefits.
Did you know? Charlie Lee worked for Google writing code for ChromeOS before moving into the crypto space and joining Coinbase as engineering director.
How does Litecoin differ from Bitcoin?
Yes, Litecoin was derived from Bitcoin, but they are not identical twins — more like siblings born two years apart; they share DNA but live different lives.
Litecoin vs. Bitcoin
With the Litecoin blockchain, a new block is validated every 2.5 minutes, significantly faster than Bitcoin’s 10 minutes. This delivers faster transactions. Both blockchains have a 1MB maximum block size, although the implementation of SegWit protocols helps to expand the data added to each block for both.
Because blocks are four times faster, Litecoin halving events were altered as well. Bitcoin halves every 210,000 blocks, while Litecoin halves every 840,000 blocks. This helps Litecoin mimic Bitcoin’s long-term mining trajectory and supply issuance.
Bitcoin is famously capped at 21 million coins, whereas Litecoin’s supply limit is 84 million. This enables a cheaper Litecoin price, keeping it accessible as a payment cryptocurrency.
Another technical difference is the hashing algorithm — aka the mathematical formula that scrambles data for secure storage. Litecoin uses Scrypt, which is intended to make it harder for specialized mining hardware to dominate than Bitcoin’s SHA-256 hashing algorithm.
This reduced the risks of centralized mining in the early days as it made mining accessible to users with a home computer. Unfortunately, this was short-lived, as mining software has been developed to run application-specific integrated circuits (ASICs) with Scrypt.
Did you know? Litecoin was once the third-biggest cryptocurrency by market cap at its height during the 2017 crypto bull run, only outstripped by Bitcoin and Ether.
The benefits of using Litecoin for transactions
- Lower transaction fees: Litecoin benefits from low transaction fees; on average, they sit at around $0.03. This is much cheaper than competitors like Bitcoin or Ether (ETH), which can be $0.8–$10+.
- Faster transactions: Litecoin transactions are incredibly fast, usually validated in 2.5 minutes. Upgrades like Lightning Network can even speed this up to be instantaneous.
- Trading pair: With high supply, liquidity, low fees and transaction speed, Litecoin is popular as a trading pair for traders to move in and out of positions.
How to buy and store Litecoin safely
As the “OG” altcoin, Litecoin is widely available, which is great news if you’re wondering how to invest in it. You’ll find it listed on reputable exchanges like Coinbase or Kraken.
How to buy Litecoin
- Register an account on an exchange. You’ll need to provide a government ID and pass Know Your Customer (KYC) checks.
- Deposit funds into your account. This could be fiat currency via credit card or bank transfer.
- Use your funds to buy or trade for Litecoin within the exchange platform.
- Withdraw your Litecoin to store it in your chosen crypto wallet.
How to store Litecoin
There’s a huge range of options to store Litecoin. Exchanges, hardware wallets and software wallets are all available.
- Hardware wallets are the securest storage option, enabling you to store Litecoin offline. It’s useful if you have large amounts or are a long-term buy-and-hold investor. Ledger and Trezor hardware wallets have LTC compatibility.
- Software wallets offer more usability for day-to-day transactions. Software wallets store your Litecoin directly on your computer or phone, so they’re always accessible. This is less secure, as internet-enabled devices pose a higher risk of being hacked. Exodus and Atomic are options worth investigating.
- Exchange wallets are useful if you’re regularly trading or don’t want complete responsibility for your Litecoin. You can store it with a custodial exchange like Coinbase or Binance. The company holds your funds like a bank account, but this does require you to trust there won’t be security or fraud issues, like seen with FTX and Mt. Gox.
Mining Litecoin explained
To validate transactions, secure the network, and mint new coins, Litecoin uses a process called mining. Litecoin mining is similar to Bitcoin mining, which involves validating transactions and adding them to the blockchain. Computers that perform this function are rewarded for their work with freshly minted LTC and a share of transaction fees. This crypto-mining method is called proof-of-work (PoW).
In order to mine, computers work to solve a cryptographic puzzle. The first one to solve it is rewarded for its work by validating a new block onto the blockchain and receiving LTC as a reward.
More miners connected to and working on the network allow the Litecoin ledger to be shared among a larger number of participants to sustain decentralization and remove single points of failure. The more computational power mining on the network improves security, making it hard to overpower and take control.
Early on, anybody could mine Litecoin using their home computer; now, this is not the case. As the network has grown, so has the amount of computational power required to compete, with the “difficulty” of mining increasing as well. This was sped up by technology with ASIC miners developed specifically for the Scrypt algorithm.
Did you know? You can buy almost anything using Litecoin, including airline tickets and groceries, and even pay rent through payment platforms like BitPay.
Does Litecoin have staking?
Litecoin staking is available but not directly on the Litecoin blockchain due to its PoW architecture.
You can still earn yield and interest on Litecoin using third-party platforms and decentralized finance (DeFi) protocols. For example, DeFi lending platforms like Nexo allow you to lend Litecoin and earn interest on your investment.
Litecoin’s ever-evolving role in the crypto ecosystem
You might be surprised to learn just how popular Litecoin use cases have become. Litecoin adoption as a way to pay for services and goods is growing, just like Litecoin founder Charlie Lee originally dreamt.
Stats from BitPay, a crypto bill payment platform, show Litecoin as the most commonly used crypto for transactions.
Litecoin still plays a complementary role in the development of Bitcoin. Due to its likeness and historical stability, the “digital silver” is useful as a test protocol for the “digital gold.” For example, its blockchain has tested and launched features like the Litecoin Lightning Network and Segregated Witness (SegWit) before integration into the Bitcoin protocol.
Is Litecoin a good investment?
Litecoin is a popular cryptocurrency that has stood the test of time since its launch in 2011. It plays a key role in the Bitcoin and crypto ecosystems. Its likeness to Bitcoin makes it useful for testing protocol upgrades without it becoming a direct competitor.
Although many more cryptocurrency competitors boast fast and cheap transactions now, Litecoin’s history and stability as a blockchain still make it a leader in day-to-day payments for goods and services.
As with any investment, you should do your own research, including Litecoin technical analysis and understanding Litecoin future predictions.
Frequently Asked Questions about Litecoin
What is Litecoin used for?
Litecoin is a cryptocurrency designed to be used as a payment method with fast transaction times and low fees.
Is Litecoin better than Bitcoin?
Litecoin and Bitcoin have different use cases. Bitcoin might be better for a long-term store of value, whereas Litecoin is favorable for fast, low-cost transactions.
Is Litecoin better than Ethereum?
When it comes to the Litecoin vs. Ethereum debate, the Ethereum blockchain is more sophisticated than Litecoin, offering smart contract functionality. However, Litecoin’s simplicity and speed give it an edge for payments.
Is Litecoin better than Dogecoin?
Both are fast and low-cost Bitcoin forks. Dogecoin (DOGE) has a loyal memecoin following, while Litecoin gains respect for technological advancements in the Litecoin vs. Dogecoin debate.
Is Bitcoin better than XRP?
In the Litecoin vs. XRP (XRP) debate, XRP is favored by large corporations and financial institutions, while Litecoin is considered better for peer-to-peer daily transactions.