What is Litecoin? LTC is one of the most important cryptocurrencies and has managed to remain in the Top-10 since its inception. Litecoin emerged as the “Bitcoin-lite” (thus called Litecoin) currency due to its relative similarity to the Bitcoin blockchain but with a much faster network.
This guide is for learning everything about Litecoin. We’ll cover the basics from the creation of LTC to the possible future of the well-known blockchain projects. This guide is purely educational. Just the facts straight to you.
Table of Contents
- What is Litecoin?
- Litecoin vs. Bitcoin: How do they compare?
- What are the Advantages and Disadvantages of LTC?
- How to Buy Litecoin
- How to Store Your Litecoin
Once considered by many to be Bitcoin’s lesser-known and less impressive cousin, the tide is now turning for Litecoin (LTC). Now, Litecoin as a cryptocurrency is increasingly viewed as a viable – if not more formidable – alternative to Bitcoin.
Litecoin’s proponents point to the following three attributes as just some of the many reasons why the cryptocurrency is giving Bitcoin a run for its money:
- Faster block times,
- Lower transaction fees, and
- Strong leadership
In fact, litecoin surpassed bitcoin in percentage of value growth in 2017, with litecoin’s value increasing by 7,291%, compared to Bitcoin’s 1,731%. Although the start of 2018 has seen the overall market cap of cryptocurrencies decline, many investors have high hopes for litecoin to pick up speed again and continue on from last year’s impressive gains.
With LTC gaining traction in the crypto world, it’s no wonder why more people have become interested in learning about its potential.
That’s why we’ve put together this comprehensive guide explaining all of the essentials you need know about Litecoin. You’ll learn everything from what it is and how it compares to Bitcoin, to its advantage and disadvantages and where to store it.
So whether you’re dabbling in the world of crypto and want to explore alternatives to Bitcoin, or you’re a seasoned investor who hasn’t quite grasped what the fuss is about with this cryptocurrency, this is the guide for you.
N.B. In the interests of delineating the protocol and cryptocurrency, in general, “Litecoin” will be used to refer to the protocol, and “litecoin” will be used to refer to the cryptocurrency.
1. What is Litecoin?
Litecoin, according to its official website, “is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world. Litecoin is an open source, global payment network that is fully decentralized without any central authorities.”
Ring a bell? If that sounds similar to how Bitcoin bills itself – as a cryptocurrency that “uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network,” – you’re on the money.
Even Charlie Lee’s Twitter banner features manga representations of Bitcoin and Litecoin forging ahead into the volatile future of cryptocurrency beside one another.
Litecoin, after all, was launched as an open source fork of Bitcoin. First released via an open-source client on GitHub on October 7, 2011, followed by the Litecoin Network live launch five days later, it was one of the very first cryptocurrencies to be introduced after the Bitcoin network debuted on 3 January, 2009.
As we explore further in the next section, LTC is in many ways technically similar to BTC, albeit with a number of notable differences. Given their unique relationship, many people assume that Litecoin’s creator, Charlie Lee, created the cryptocurrency to serve as a direct rival to Bitcoin – an assumption that is certainly driven by the many news outlets report it as such to drum up controversy!
But, as Lee has stated on countless occasions, this is not the case at all. He even coined the famous tagline, “Litecoin is silver to Bitcoin’s gold,” to help the public better understand its position in relation to Bitcoin.
Endeavoring to design a coin that was like silver compared to gold, Lee coded both LTC’s confirmation times speed and total supply 4 times those of BTC’s. The result was a “lighter” version of Bitcoin – hence the name, Litecoin.
Screenshot of one of Charlie Lee’s responses from Litecoin’s 2013 Reddit AMA.
Simply put, Lee’s goal for LTC was never to overtake Bitcoin, but instead to compliment to it. Listen for yourself on how Lee speaks of the two cryptocurrencies – he identifies them not in terms of being rivals, but as two complimentary coins with different means to the same end: to advance the general cryptocurrency ecosystem.
2. Litecoin vs. Bitcoin: How Do They Compare?
Litecoin vs. Bitcoin – are they really that different?
Now that you have a better idea about what Litecoin is, let’s take a look at the specifics of what Litecoin offers, and compare these to Bitcoin. Comparing the two cryptocurrencies will provide a basis for understanding of the fundamental ways in which they are similar, as well as highlight the numerous distinctions between them.
|Litecoin vs. Bitcoin: Similarities and Differences|
|Litecoin (LTC)||Bitcoin (BTC)|
|Total Supply of Coins||84 million||21 million|
|Blockchain Protocol||Proof of Work (PoW)||Proof of Work (PoW)|
|Average Block Time||2.5 minutes||10 minutes|
|Average Transaction Fee||0.0001 LTC/kilobyte||Dependent on blockchain load|
Total Supply of Litecoin
Bitcoin’s total supply is capped at 21 million bitcoins (BTC), whereas Litecoin’s is capped at 84 million litecoins (LTC).
At the time of writing (April 7, 2018), there are 55,975,012 LTC in circulating supply, meaning nearly 67% of litecoins have already been mined. In contrast, there are currently approximately 16,962,900 BTC in circulating supply, representing nearly 81% of the total supply of bitcoins.
Blockchain Protocol / Algorithm
Both Litecoin and Bitcoin use a Proof of Work (PoW) blockchain protocol, however they use different PoW algorithms. In simple terms, PoW is an algorithm used to confirm transactions and produce new blocks to the chain. With PoW, miners compete against each other to complete transactions on the network and get rewarded.
Bitcoin first established the foundations for PoW as a type of consensus mechanism for the confirmation and production of cryptocurrencies. Bitcoin uses the SHA-256 hashing algorithm, whereas Litecoin uses Scrypt Proof of Work.
Interestingly, Lee explained how it was a pragmatic decision for Litecoin to use a different algorithm to Bitcoin, as he had seen the significant problems other altcoins had faced when their miners were required to compete with Bitcoin’s miners.
The SHA-256 algorithm has resulted in an arms race amongst Bitcoin miners. The only way for Bitcoin miners maintain their profitability is to create increasingly powerful and elaborate mining rigs.
Key differences between SHA-256 and Scrypt?
SHA-256 is more complex than Scrypt and requires considerable processing power. As such, data block processing is slower and subsequently, so are bitcoin’s confirmation times.
On the other hand, Scrypt is significantly less complex and easier to compute than SHA-256, which allows for Litecoin’s faster confirmation times. Scrypt relies on substantial amounts of memory, so is considered a “memory hard problem” – differing from SHA-256, which is raw processing power intensive.
Another major difference between the two regards the accessibility of their mining processes. Due to the complexity of the SHA-256 algorithm, bitcoin miners soon started creating “mining pools” to use parallel processing to complete Bitcoin mining tasks more efficiently. They achieved this by making use of “application-specific integrated circuit” (ASIC) devices, which are a powerful, but expensive form of mining hardware. Consequently, BTC mining quickly became a practice reserved for those who have the means to buy ASIC devices or join a mining pool.
In opposition, Scrypt calculations are not able to be parallelized like SHA-256’s calculations as they work in a serial manner. Scrypt is therefore said to be a more democratic means of mining than SHA-256, as the “average joe” can start mining LTC by purchasing cost-effective memory cards (as opposed to cost-restrictive ASICs). That being said, more companies are starting to produce ASICs for mining LTC as well, so in time, the accessibility of LTC mining may be compromised as well.
(If you’d like to learn more about the differences between SHA-256 and Scrypt, check out the article, “SHA vs. Scrypt.”)
A comparison of Litecoin vs. bitcoin block times in the past year (Source: BitInfoCharts)
Block times also differ significantly between the two cryptocurrencies. As the above chart comparing bitcoin and Litecoin’s block times in the past year shows, bitcoin’s block times have been quite volatile – averaging at around ten minutes, and at its slowest points, hitting around fifteen minutes.
Bitcoin’s slow transaction times have been a constant issue for the cryptocurrency, one which is linked to its scalability problem. Although the implementation of the Lightning Network has helped to address the problem, network congestion still stands as a major weakness of the cryptocurrency.
In comparison, Litecoin’s block times have historically remained very consistent. The chart above illustrates how it has consistently performed at least four times faster than bitcoin, with the average Litecoin block time measuring at around 2.5 minutes.
As a result of LTC’s more efficient block generation, its network has the capacity to support higher transaction volumes than the bitcoin network can.
A historical chart of Bitcoin vs. Litecoin’s average transaction fees.(Image source: BitInfoCharts)
As the above historical chart comparing BTC and LTC average transaction fees highlights, Litecoin’s transaction fees have been historically much lower than bitcoin’s. While at their peak, bitcoin’s average transaction fees reached nearly $55, Litecoin’s peak was recorded at just above $1.
Bitcoin’s transaction fees tend to fluctuate quite dramatically as its fees are dependent on blockchain load. As a consequence, bitcoin has often been on the receiving end of criticism about its high transaction fees. While 2018 has certainly seen BTC fees leveling out, LTC’s have continued to remain comparatively lower and more stable, as the below chart shows.
Bitcoin vs. Litecoin’s average transaction fees from the start of 2018 until now. (Image source: BitInfoCharts)
Since the beginning of 2018, Litecoin’s highest recorded transaction fee was only $0.504, while it averages around $0.2 to $0.35. These almost negligible transaction fees have led to Litecoin becoming known as a cryptocurrency with very low transaction fees. If you’re wondering how this translates into LTC, Litecoin’s minimum transaction fee is 0.0001 LTC/kilobyte.
Current Market Cap & Price
In terms of market cap, Bitcoin currently sits at #1 and Litecoin sits at #5 (Image credit: CoinMarketCap)
As of April 7th, Bitcoin’s market cap sits at $117,594,795,363 – making it the leading cryptocurrency in terms of market cap. Conversely, Litecoin’s market cap is the fifth largest at $6,612,384,134, with the market caps of Bitcoin, Ethereum, Ripple, and Bitcoin Cash ahead of it.
Litecoin’s historical price chart (Image credit: CoinMarketCap)
The price of one bitcoin as of April 7th is approximately US$6,932.47, while the price of one Litecoin is approximately US$118.14.
If you’d like to keep an eye on Bitcoin or Litecoin’s market cap, price, circulating supply, or any other forms of market capitalization,CoinMarketCap is a useful resource.
3. What are the Advantages and Disadvantages of LTC?
This “silver” cryptocurrency has a number of notable advantages and disadvantages.
Just like any other cryptocurrency, Litecoin has a number of advantages and disadvantages which are important to explore. Below are some of the most significant ones.
Advantages of Litecoin
As discussed in the previous section, Litecoin is viewed favorably for its more democratic PoW algorithm, faster block times, and lower transaction fees than Bitcoin.
But its advantages don’t stop there. LTC also boasts many ‘firsts’:
- The first to implement Segregated Witness (SegWit),
- The first to implement Lightning Network, and
- The first to complete a cross-chain atomic swap
Given that Bitcoin went on to implement these developments as well, you may be wondering why these “firsts” matter at all. They are significant because they demonstrate Litecoin’s level of innovation and determination when it comes to continued cryptocurrency development. Essentially, they demonstrate how Litecoin has often been a pioneer for substantial advancements in cryptography.
Creator Charlie Lee is additionally said to be one of LTC’s major strengths. Lee is incredibly active in cryptocurrency community – lending his voice to general cryptocurrency discussions and debates, as well as commentary and updates about the cryptocurrency on mediums like Twitter, Reddit, and GitHub.
He has been particularly praised for his transparency. In a move that made many in the crypto world sit up and take notice, creator Charlie Lee famously sold off all of his Litecoins after being successively accused of promoting the cryptocurrency for his personal benefit.
Lee made the announcement on Litecoin’s Reddit, writing:
“…Some people even think I short LTC! So in a sense, it is conflict of interest for me to hold LTC and tweet about it because I have so much influence… I have sold and donated all my LTC. Litecoin has been very good for me financially, so I am well off enough that I no longer need to tie my financial success to Litecoin’s success…”
Charlie Lee’s announcement about selling off all of his Litecoin (Source: Reddit)
This is notable because transparency issues plague many cryptocurrencies, as the legitimacy of a cryptocurrency is often brought into question when its founder/s or team aren’t transparent about their stake or dealings within their own cryptocurrency company.
By selling off all of his Litecoins and thus taking himself out of one major part of Litecoin’s equation, people could no longer accuse him of manipulating the Litecoin market. It was a decision that was largely applauded in the cryptocurrency community, and gained Lee many fans of his leadership.
In direct contrast, Bitcoin’s creator is still unknown. After publishing the Bitcoin whitepaper under the pseudonym “Satoshi Nakamoto,” Bitcoin’s creator has chosen to remain both anonymous and radio silent. As such, Bitcoin’s faceless leadership has often been considered a point of contention for the cryptocurrency.
Another significant, but largely overlooked aspect of Litecoin’s creation to note is that Lee not only accounted for Bitcoin’s fundamentals when he created Litecoin. He also designed Litecoin to address the weaknesses and draw on the strengths evident in the handful of other altcoins in existence at the time.
Screenshot from Charlie Lee’s 2017 talk at CoinBase.
Litecoin can be viewed as a frankenstein monster of sorts – combining the best features of various altcoins, while addressing the shortcomings of others. In this video, Lee explains how Litecoin’s design was responsive to a number of advantages and disadvantages of other altcoins, including:
- GeistGeld’s excessive number of premined coins
- I0coin’s bad branding
- The various bugs in Lee’s first altcoin creation, Fairbrix
- The heavy competition Namecoin faced with Bitcoin’s miners
- I0coin and FairBrix’s zero premining stance
- SolidCoin’s fast block times
By designing a cryptocurrency that was directly responsive to a number of the attributes and detractions of existing cryptocurrencies, to date, Litecoin has managed to bypass many of the criticisms which Bitcoin and other altcoins have faced with their shortcomings.
Many of the Litecoin’s most pressing disadvantages are tied to the fact that it was introduced after Bitcoin. As the world’s first cryptocurrency, Bitcoin enjoys considerable first-mover advantage – and each consequential cryptocurrency that has come after it has only validated its existence. Litecoin hardly enjoys this major advantage.
Since its inception, Bitcoin has remained unrivalled in terms of market cap. It has doggedly continued to retain its position as the cryptocurrency with the largest market cap. Never discount Bitcoin’s ability to prove all predictions wrong (for good or bad).
Its market domination can be in part attributed to how it remains the most well-known and recognizable of all cryptocurrencies. Despite increasing public interest in blockchain technologies and cryptocurrencies, general ignorance still persists.
Many people mistakenly believe Bitcoin to be synonymous with cryptocurrency in general, and lack awareness of altcoins such as Litecoin. This puts Litecoin at a significant disadvantage in terms of public awareness, which in turn impacts its ability to reach widespread adoption.
Additionally, Litecoin does not have the same reach as Bitcoin due to Bitcoin’s position as the most widely accessible and widely paired cryptocurrency. Virtually every cryptocurrency exchange offers the purchase and trade of Bitcoin as standard. Although LTC is also available on most exchanges, it is not as widely available to the extent Bitcoin is.
Bitcoin is moreover the most common pairing available on cryptocurrency exchanges, meaning that BTC can be used when trading a cryptocurrency in most cases. For example, on most exchanges, you either have the option to use fiat (e.g. USD) or bitcoin to buy or trade altcoins. LTC is not often a trading pair option, so the ability to use LTC to conduct cryptocurrency trades is still quite limited.
Finally, Bitcoin is accepted as a form of payment in a larger number of real-world businesses. The number of merchants that accept Litecoin is certainly growing, but the amount that accept bitcoin still surpasses this. Further to this, Bitcoin ATMs are far more widespread than Litecoin ATMs, thus the ability to use bitcoin in real-life transactions is exponentially greater.
4. How to Buy LTC
Interested in making your first LTC purchase? Litecoin is available on most major cryptocurrency exchanges. Here is a list of three major, reputable exchanges you can buy LTC on:
5. How to Store Your Litecoin
Once you have some Litecoin to your name, it’s critical that you store it safely. Leaving your LTC on an exchange is incredibly risky, especially given the sheer volume of cryptocurrency stolen from cryptocurrency exchange hacks to date. You may not think it will happen to you, or if it does, your crypto will be able to be recovered.
However, history has shown that attacks are unpredictable and even reputable exchanges are vulnerable to hacking. What’s more, many exchanges do not end up providing recourse for stolen cryptocurrencies, or if they do promise some method of recovery, those affected are often left waiting indefinitely.
So, how then, should you store your Litecoin?
Litecoin holders can download and use the wallet created by Litecoin’s development team, “Litecoin Core,” for free on their desktops. It is considered highly secure, however, since it is the full Litecoin client and requires the entire Litecoin blockchain to be downloaded, it takes substantial time and computer space to initialize.
Alternatively, there are other full node desktop wallets to choose from, as well as light desktop wallets, which do not require as much computer space as they make use blockchains stored online.
Hardware wallets are the most expensive option for storing your LTCs. That being said, many cryptocurrencies users choose to invest in a hardware wallet due to their high level of security and usability.
We believe the CoolWallet S is one of the best Litecoin hardware wallets available. CoolWallet S is a new generation of cold storage wallet which simplifies the storage process. By storing your LTC (and your other supported cryptocurrencies) completely offline, CoolWallet S offers you the peace of mind that your cryptocurrencies are safe from online vulnerabilities.
It’s also more user-friendly and portable than many other hardware wallets. As it is the size and weight of a credit card and completely wireless, there’s no need for clunky devices or accessories to use it.
Some LTC holders choose to make a paper wallet, using a service like Liteaddress, to store their Litecoins. A paper wallet is just what it sounds like – it involves printing off your private keys or QR code onto a piece of paper.
Paper wallets offer the comfort of keeping your holdings completely in your own hands, without an intermediary service. They are also free, making it the most cost-effective wallet option. But as you can imagine, you also run the risk of losing or damaging your paper wallet if you don’t carefully store it away.
6. Additional Resources for Learning More about Litecoin:
If you want to stay up to date with Litecoin news and developments, there are plenty of resources to check out. We recommend you visit the Litecoin:
- Homepage: The official website of Litecoin.
- Reddit: A public, anonymous forum to discuss all things LTC.
- GitHub: A distributed code management platform for LTC developers and miners.
- Twitter: The official Litecoin Twitter, which focuses on major news, releases, and updates.
- Charlie Lee’s Twitter: The founder of LTC’s regularly updated Twitter.
- Litecoin Foundation’s Twitter: The official Twitter of the Litecoin Foundation, an organization established to advance the aims LTC.
- CoinMarketCap page: A useful tool for tracking LTC’s value.