Litecoin, dubbed the “silver to Bitcoin’s gold,” was launched in October 2011 by Charlie Lee, a former Google programmer. It came two years after Bitcoin and was meant as a lighter, faster version of Bitcoin with a supply cap four times higher. Since then, Litecoin has grown into one of the crypto world’s most used and traded altcoins. There’s been a lot of speculation lately on whether Litecoin’s price will rise heading into its halving day in early August 2023. But what exactly is Litecoin and how does it work? This article will give an introduction to Litecoin and its mechanism.
Like Bitcoin, Litecoin is built on open-source software and uses blockchain technology to enable a peer-to-peer payment network without central authority. Transactions are confirmed and secured with cryptography. While technically similar, Litecoin was engineered to provide enhancements over the pioneering cryptocurrency Bitcoin, including faster transaction times.
The major differences between Litecoin and Bitcoin:
- Faster transaction times: Litecoin aims for transaction confirmation times of around 2.5 minutes versus 10 minutes for Bitcoin. This allows for faster payments.
- Increased coin supply: There is a maximum supply of 84 million Litecoins versus 21 million Bitcoins. This means the supply is more abundant, making individual units of Litecoin more affordable.
- Different mining algorithms: Litecoin uses the Scrypt algorithm, which allows it to be efficiently mined with widely available consumer-grade hardware like GPUs. In contrast, Bitcoin’s SHA-256 algorithm requires specialized ASIC machines designed specifically for Bitcoin mining.
- Lower transaction fees: The average Litecoin transaction fee is significantly lower than Bitcoin’s, making small Litecoin payments more feasible.
Like with any currency, Litecoin derives its value entirely from what buyers are willing to pay and sellers are willing to accept for it. Litecoin has real-world utility in enabling fast, inexpensive digital payments much like traditional fiat currencies. But it also trades like an asset, with fluctuations in price determined by supply and demand in the broader market. The general public can easily buy, sell or trade Litecoin on popular crypto exchanges such as CoinEx, which currently offers over 700+ cryptos with 1,100 trading pairs.
How the Litecoin Network Works
Litecoin, like Bitcoin, relies on a decentralized blockchain ledger to record transactions and manage coin issuance. This public ledger contains the history of all Litecoin transactions ever executed. The shared record of transactions enables Litecoin to function without central clearinghouses or financial institutions.
The Litecoin blockchain is maintained by a distributed network of user-run nodes that verify and relay transactions. Anyone can run a node to help validate the network. The process of mining also serves to add new validated blocks to the Litecoin blockchain.
Mining Litecoin
Mining is the process by which new Litecoin transactions are verified and blocks of transaction data are added to the blockchain ledger. Network participants called miners compete to use their computers to solve complex cryptographic puzzles and verify blocks. The first miner to successfully verify a new block is rewarded with newly minted Litecoins.
Litecoin mining originally could be done profitably using regular graphics cards. But over time, Application-Specific Integrated Circuits (ASICs) designed specifically for Scrypt mining have come to dominate Litecoin mining, just as they did with Bitcoin. Solo Litecoin mining has become extremely difficult, so most miners today work together in mining pools that share computing resources and rewards.
Making Litecoin Transactions
A Litecoin address, or public key, is needed to send and receive LTC payments on the network. Litecoin wallets generate a private key and public key pair for each user. The public key functions like a bank account number and can be shared. The private key is like the PIN to access the account and should be kept secret.
To send Litecoin to another address, the payee’s public address is added along with the amount to be transferred. The transaction must be signed with the sender’s private key to authorize it. The signed transaction is then broadcast to the peer-to-peer network and gets included in a new block to make it official. Small everyday Litecoin payments can transfer in minutes for less than a penny by leveraging the miner network to verify transactions without the need for banks. Larger payments may take a bit longer to confirm as they require more extensive verification.
Litecoin Halving
In August 2015, the first Litecoin price halving took place. The first block reward for miners was 50 LTC; this was subsequently decreased to 25 LTC, and in August 2019, the mining reward for Litecoin decreased from 25 to 12.5 LTC. In early August 2023, the incentive is anticipated to be halved once again, going from 12.5 to 6.25 LTC.
Where to Buy Litecoin
Users can trade Litecoin on most cryptocurrency exchanges, including CoinEx — the reputable exchange with a high level of security and stability since its inception in 2017. CoinEx offers the LTC/USDT, LTC/USDC, LTC/BTC Spot pairs, and LTCUSDT Futures trading. Traders can buy LTC with the USDT stablecoin via a contract with leverage. Simply fund the verified account with USDT, or convert another cryptocurrency to USDT.
The Future of Litecoin
Despite Litecoin adoption being niche compared to traditional payment options, it has been gaining traction among crypto enthusiasts. Though Litecoin has a much lower market cap than larger coins, it remains one of the most traded cryptocurrencies, ranking in the top 15 out of the over 18,000 that CoinMarketCap tracks.
Litecoin will likely face ongoing volatility as a speculative investment asset. But its inherent utility as an efficient means of value transfer continues to build as people discover the usefulness of decentralized cryptocurrencies firsthand for payments, trading, and hedging economic risks. While challenges remain, Litecoin has firmly established itself over the past decade as an alternative cryptocurrency that promises to play an integral role in the future of money.
About CoinEx
Established in 2017, CoinEx is a global cryptocurrency exchange committed to making trading easier. The platform provides a range of services, including spot and margin trading, futures, swaps, automated market maker (AMM), and financial management services for over 5 million users across 200+ countries and regions. Founded with the initial intention of creating an equal and respectful cryptocurrency environment, CoinEx is dedicated to dismantling traditional finance barriers by offering easy-to-use products and services to make crypto trading accessible for everyone.
