Step-by-Step Guide to Litecoin

Litecoin Guide

Contents

What Is Litecoin?

Created by former Google engineer Charlie Lee, Litecoin was one of the first “altcoins”—a name given to cryptocurrencies other than Bitcoin (and sometimes other than Ethereum). “Litecoin is the second-oldest cryptocurrency, forked from the Bitcoin protocol in 2011,” says Jay Blaskey, digital currency specialist at BitIRA. “It was engineered to be used for fast, secure and low-cost payments.” Think of it as a Bitcoin spinoff. The goal in launching Litecoin was to improve on Bitcoin in a few different ways. For one, Lee developed a new hashing algorithm for Litecoin called Scrypt (pronounced S-crypt). The simpler algorithm supported Litecoin’s faster transaction speeds. Bitcoin has a slow transaction processing speed of roughly five transactions per second. Generating new blocks on the Bitcoin blockchain can take about 10 minutes. This slow transaction speed frustrates merchants who want to accept Bitcoin as payment. You can wait up to an hour, on average, for the six confirmations required for a Bitcoin transaction. Imagine buying something online using a credit card and being on that “your transaction is processing” screen for an entire hour. Litecoin’s transaction processing speed, on the other hand, is 54 per second—and new blocks on the Litecoin blockchain can be created about every 2.5 minutes. While Litecoin still requires a minimum of six confirmations from most exchanges to be considered irreversible, peer-to-peer (P2P) crypto payment networks can often settle Litecoin transactions almost immediately. The improved transaction speed was meant to prove to merchants that they no longer had to be frustrated by Bitcoin’s long settlement time. Instead, they could accept Litecoin and settle payments faster and, therefore, conduct business more quickly and at speeds more on par with other digital payment methods.

What is Litecoin used for?

Litecoin was one of the first successful alternative cryptocurrencies and over time, it was criticized for lacking a clear value proposition. As it has a finite supply and has been marketed as the “silver to Bitcoin’s gold,” it has attracted users. Litecoin’s inflation is controlled through a halving mechanism. Since it was created back in 2011, its blockchain has been proven secure enough to avoid 51% attacks, which occur when a mining entity or entities manage to have over 51% of the computing power that secures the network and use it to alter the blockchain’s history. Its reliability is a major factor playing in its favor. Because it hasn’t suffered any major exploits, it is indeed seen as a reliable cryptocurrency that can be used to transact at a relatively low cost and in that sense, is the “silver” of the cryptocurrency world. The cryptocurrency is now also popular among investors and traders who rely on its limited supply and issuance reductions to speculate on its price. Given its reliability, LTC may be used in a portfolio to give investors exposure to the crypto market’s movements without any negative surprises. Maintaining privacy on the Litecoin network is much easier than on networks with higher transaction fees, as the cost of moving funds around is lower. It’s also used to pay for goods and services, with most cryptocurrency payment processors supporting it. Litecoin is a highly liquid cryptocurrency available on most major cryptocurrency exchanges, making it ideal for traders. As transactions on its network are relatively cheap, some even use it to move funds between different exchanges or lending platforms to avoid high transaction fees on networks such as Bitcoin or Ethereum. The Litecoin network consistently processes over 100,000 transactions per day and usually has between 200,000 and 300,000 active addresses. While it isn’t as popular as the Bitcoin network, its usability seems undeniable.

How Litecoin works?

Litecoin is a digital currency that is decentralized, meaning that it functions without relying on any centralized financial institution. Litecoin uses blockchain technology to process and record transactions, with batches of transactions continually adding more blocks of information to the Litecoin blockchain. Litecoin miners use immense computing power to solve complex mathematical problems and earn the right to verify transactions, which adds new blocks to the blockchain. Litecoin miners are compensated in Litecoin. As a currency, Litecoin can be bought, sold, and used for purchases with some merchants. Most Litecoin holders use one of these cryptocurrency apps or exchanges to purchase or sell the cryptocurrency: Coinbase (NASDAQ:COIN): Publicly traded cryptocurrency exchange that began offering Litecoin in 2017. Gemini: Crypto exchange that started offering Litecoin in 2018. PayPal Holdings (NASDAQ:PYPL): Global payments app that began enabling users to buy and sell cryptocurrency, including Litecoin, in 2020.

How to mine Litecoin?

ASIC mining machines in which mining software is pre-installed can be used to mine Litecoin. On the contrary, if you’re mining using a central processing unit (CPU) or graphical processing unit (GPU), you’ll have to pick your own program while keeping security in mind. Malware could be included in a software product. You should also be on the lookout for other shady, if not malevolent, activities. After you’ve settled on your mining equipment, you’ll need to pick whether you’ll mine solo or in a pool. You run the risk of going a long time without discovering a block if you mine alone. However, if you locate a block mining solo, you keep the entire 25 Litecoin plus fees. Please note that it is only possible if you have a significant amount of hash power (multiple ASICs). In addition, you have virtually no chance of ever earning any LTC if you mine alone using a GPU or CPU. Pool mining is better than solo mining; however, rewards are distributed to the pool participants based on the hash power they contributed.

How to buy and store Litecoin?

If you plan to buy Litecoin from exchanges like Coinbase or Binance rather than mining it, you need to set up an account with the exchange of your choice. Security, fees and ease of use are the various metrics you can gauge before choosing an exchange. After your account is verified, decide the amount of LTC you want to buy. The exchange you choose determines the buying procedure and accepted payment options (such as debit/credit card, bank transfer). Select Litecoin from the “Buy” menu once the funds are available. Enter the amount you wish to buy and check the transaction preview to see the costs and the quantity of Litecoin you’ll receive. Confirm the transaction if you’re happy with everything. Finally, you might want to look into crypto wallets to store your cryptocurrency. Many investors retain their cryptocurrency on the exchange where they purchased it, but transferring it to a crypto wallet provides additional security. For instance, you can also install the Litecoin wallet on your iPhone or Android phone to keep track of your LTC.

How to stake Litecoin and earn money?

In 2020, the Litecoin PoS network was launched, a unique take on the Bitcoin codebase, with significant performance and consensus enhancements. Validators staking LTCP must stake matured coins because it is a proof-of-stake system. Additionally, the coins to be staked must be in address/transaction types that are compatible. To begin staking your coins, you’ll need a wallet with some LTC in it, as well as a network account — all of which are free! You can stake your coins by putting them into a staking pool on exchanges that provide staking services. As a result, you’ll be able to validate blocks and earn newly created Litecoin.

Should you buy Litecoin?

Whether Litecoin succeeds or fails as a cryptocurrency depends on a few factors. The rate of user adoption matters, and, if more people buy Litecoin either to transfer funds or as a store of value, then its value is likely to increase. Litecoin’s availability on several major exchanges is a plus for the coin. But Litecoin doesn’t receive much media attention, and a cryptocurrency’s popularity plays a major role in its ability to gain value over time. Also, governments are still in the process of deciding how to regulate cryptocurrencies, and new regulations can lead to large price shifts for every cryptocurrency, including Litecoin. With little in the way of competitive advantage, Litecoin may not be the best choice for investors. If you are interested in owning cryptocurrency as a store of value, then other digital currencies may be better options.

FAQS

Where to Buy Litecoin

Most cryptocurrencies can be purchased on cryptocurrency exchanges. Several exchanges can conduct transactions within the United States; many more are outside the U.S. It’s important to note that exchanges within the U.S. are monitored and regulated by the Securities and Exchange Commission to ensure that the best interests of investors and traders are upheld. With that in mind, if you live in the U.S., your choices are limited to exchanges within the U.S.

Because exchanges are regulated and regulations are still being developed, the places you can buy and sell cryptocurrencies fluctuate.

Exchanges outside the U.S. may or may not have regulatory authorities, although many countries have implemented controls or granted regulatory authority to their financial regulating agencies. Some U.S. exchanges where you can buy Litecoin are:

  • Coinbase
  • eToro
  • Kraken
  • Binance.US
  • Robinhood
  • Gemini

How to Sell Litecoin

You can sell your Litecoin on the same exchanges where you can purchase it. However, selling your crypto on a centralized exchange is different than selling it on a decentralized one. For example, if you’re selling your Litecoin on an exchange like Kraken, you’ll need to send your LTC to your Kraken address. From there, the exchange facilitates the sales of your Litecoin.

If you’re using a decentralized exchange like Kucoin or Crypto.com, you connect your wallet to the exchange and go through the “know your customer (or client)” registration process. Once approved, you can deposit your Litecoin and begin selling it.

Some exchanges may let you withdraw fiat currency, so if you’re looking to exchange your LTC for fiat, you’ll have to find an exchange that allows it.

How is Litecoin Different from Bitcoin?

The first difference between Litecoin and Bitcoin lies in their maximum supply cap. Bitcoin has a supply capped at 21 million, while Litecoin’s supply is constrained to 84 million.

Another distinction between Litecoin and Bitcoin lies in the protocols to mine coins. As mentioned earlier, Bitcoin uses SHA-256 and Litecoin relies on a modified version of Scrypt to generate coins. The difference in protocols has implications on transaction processing times for both coins. Litecoin is four times as fast as Bitcoin in processing and confirming transactions.

The speed in processing transactions can come at the expense of security because fewer rounds of transaction verification are involved. Litecoin’s confirmation time of 2.5 minutes (as opposed to the roughly 10 minutes that Bitcoin takes to confirm transactions) is convenient for small merchants who do not want or need their transactions to be super secure.

Will Litecoin Have a Future?

It is difficult to determine how investors, traders, cryptocurrency fans, governments, and the general public will treat Litecoin in the future. Cryptocurrency is being scrutinized by governments, more cryptocurrencies are being created every day, and the markets are volatile.

Is Litecoin Still a Good Investment?

Litecoin wasn’t intended to be a speculative investment or a method of storing value. However, some investors use LTC this way, and some don’t. It’s best to consult a professional advisor to see if Litecoin is a good investment for you.

What Is Better, Litecoin or Ethereum?

Litecoin is a cryptocurrency designed for peer-to-peer transactions. Ethereum is an ecosystem that runs on a global virtual machine that powers many different cryptography-based technologies. Ethereum has a token, ether (ETH), used to facilitate transactions within the Ethereum blockchain. In terms of value, ETH generally ranks in the top five and has more trading volume. Which is better depends on your interests, goals, and intended uses.