Litecoin meaning and how it works

Litecoin meaning and how it works

Litecoin (LTC) is a digital coin developed in 2011 by Charlie Lee, a former Google engineer. It was one of the first alternatives to bitcoin (altcoin) in the crypto market. Litecoin is built on the original source code of Bitcoin and this allows it to share some similarities with BTC. The primary reason why Litecoin was created is to improve on Bitcoin especially as regard transactions seem

Even though Litecoin was originally a prominent enter into the crypto world, it has lost and gained value over the years. In terms of volatility, Litecoin is no different from other digital coins at trustpedia.io/brokers-reviews/.

Though Litecoin was initially a popular entry into the crypto category, it has gained and lost value over time, displaying similar volatility to many cryptocurrencies (or even certain stocks and bonds). As of December 17, 2021, Litecoin was worth approximately $149.54 with a market capitalization of $10.34 billion.

If you want to understand how Litecoin operates, what it is used for, and whether or not it’s a good investment, then keep reading

What Is Litecoin?

Like any other type of digital coin, Litecoin is a peer-to-peer, decentralized cryptocurrency. Litecoin was developed from a fork in the Bitcoin blockchain and was designed to allow almost instantaneous transactions at a highly negligible cost.

Similar to Bitcoin, Litecoin makes use of a proof-of-work system (PoW) to validate transactions on the blockchain network. However, owing to specific modifications, it is regarded as a light version of Bitcoin. The primary difference between Litecoin and Bitcoin is the mining algorithm known as scrypt used by Litecoin to facilitate rapid transactions.

Litecoin produces a new block ready to be mined every 2.5 minutes which is approximately four times faster than Bitcoin. To note, the Litecoin supply is four times more than that of Bitcoin. Therefore, while Bitcoin has a supply cap of 22 million, Litecoin’s supply cap is placed at 84 million.

With a total supply cap of 84 million, about 67 million has already been mined. That’s about 79% of the total supply cap already in circulation.

How Does Litecoin Work?

The mining process of Litecoin is similar to other blockchain-based digital coins including Bitcoin. Each block of the transaction is verified by miners and then secured to the blockchain. These miners make use of very powerful computer hardware to verify and secure each block. The mining process involves billion of calculations  and estimates, hence the terminology “proof of work”

Immediately the block is verified, the preceding block enters the chain. Transactions carried out in the blockchain network are generally believed to be anonymous (although the term “pseudonymous” better explains it since each user has a public address. Minerals who verify each block successfully are rewarded with 12.5 Litecoins. Also similar to bitcoin, the number of Litecoins awarded to miners is halved constantly.

Litecoin’s Use Case

Litecoin’s primary goal is to serve as a means of transacting payments independent of third-party intermediaries and traditional banks. It was designed to be utilized for affordable transactions, and offer a more efficient payment structure every day.

Also, like every other digital coin, Litecoin can be used as a store of value. Many investors buy Litecoin and hold it to make profits either for long or short-term purposes.

Risks associated with Litecoin

Risks associated with Litecoin are similar to that of most digital coins. The crypto industry is still relatively young compared to other financial markets. And like every growing industry, the risk of losses looms widely.

Some of the risks associated with Litecoin include;

High volatility

The crypto market is no doubt speculative, hence volatility is usually high. For instance, Litecoin was one of the top 10 digital coins in June 2021. Right now, in December 2021, the digital coin is close to the bottom of the top 20.

This is how volatile the market can be. So ensure you take all necessary precautions when venturing into Litecoin.

Uncertain future

Frankly, the novelty has worn off the Litecoin project courtesy of endless new crypto competitors. Therefore it remains unclear where LTC has enough to keep investors glued.

Regulatory holdups

While in theory, Litecoin is supposed to disrupt conventional payment systems via swifter payments. But in reality, the full adoption of crypto as a payment method option is still up in the air.

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