Introduction
The past decade or so has witnessed several cryptocurrencies gain credence. Among these cryptocurrencies, Litecoin emerged in 2011. This article provides more insight into this cryptocurrency.
What is Litecoin?
Those curious to learn what Litecoin’s definition is will be pleased to note that it is simply a form of cryptocurrency that was made by Charlie Lee who was previously an engineer at Google. Litecoin presently occupies a major presence within the world of cryptocurrency as is evident from its positioning as the ninth-largest cryptocurrency. Originally, this cryptocurrency gave Bitcoin a run for its money. Over time, however, as the cryptocurrency market became more saturated and more offerings emerged on the scene, Litecoin’s popularity has witnessed a decline.
Litecoin was released two years following the launch of Bitcoin and has often been perceived to be a creation made in response to Bitcoin. Its founder even went as far as to call it the “lite version of Bitcoin”. Owing to this very fact, Litecoin has several features that are akin to those of Bitcoin’s, however it has also adapted and changed other aspects that its development team felt could be enhanced.
Examining the Scope of Bitcoin
Just like all other decentralized cryptocurrencies, Litecoin has not been issued by any government. This is worth noting as, from a historical point of view, governments have been the sole entities responsible for issuing money that society has trusted. As opposed to being regulated by any central bank and being engraved and printed in a certain manner, Litecoins are generated with the aid of a complex cryptocurrency procedure called mining. Mining involves processing Litecoin transactions that have been listed.
While traditional currencies have no fixed supply limits, the supply of Litecoins is fixed. This means that no more than 84 million Litecoins will ever be in existence. The Litecoin network is responsible for generating a new block-a ledger entry every two and a half minutes for each recent Litecoin transaction that occurs across the world.
Mining software is responsible for verifying this block and is visible to any participant in the system who would like to see it. Participants here are called miners. Once miners verify the block, another block enters the chain which serves as a record for each Litecoin transaction that has ever been made.
Mining Litecoin brings with it incentives as is evident from the fact that the first miner responsible for verifying a block was rewarded 12.5 Litecoins. The amount of Litecoin awarded for this task has reduced over time. By August 2019, the amount rewarded for successfully verifying a Litecoin block amounted to half the original reward. This amount will continue to wane at regular intervals until the final Litecoin (i.e., the 84,000,000th) has been mined.
In order to mine cryptocurrency at a rate that is ideal for miners, a significant amount of processing power is needed and is ordinarily only possible with the aid of specialized hardware. Most personal computers lack the central processing unit needed to mine cryptocurrencies at a sufficiently fast pace. That being said, Litecoin differs from most other cryptocurrencies in this regard as it can be mined with personal computers. However, the more capable a machine is at mining cryptocurrency, the greater is the chance that it will be able to earn something of value for its miner.
It is worth noting that all currencies including gold bullion are only as valuable as society deems them to be. In the event that the Reserve Bank of India began circulating too many Rupee banknotes, the value of the Indian Rupee would plummet in no time. This phenomenon is not limited to currency alone. Instead, any good or service diminishes in value once it becomes available with ease and is inexpensive. Litecoin’s creators were cognizant of this very fact from the get-go and realized that it would be hard to create a reputation for a new currency in the marketplace. They restricted the number of Litecoins in circulation such that they could mitigate people’s fears of overproducing this cryptocurrency.
Litecoin vs. Bitcoin
The primary difference that exists between these two cryptocurrencies pertains to the cryptographic algorithms that they each employ. While Bitcoin makes use of the SHA-256 algorithm, Litecoin employs Scrypt which is a newer algorithm.
Next, Litecoin prioritizes transaction speed owing to which it became popular. Bitcoin has an average transaction confirmation time that amounts to close to nine minutes for each transaction while Litecoin’s time is close to two and a half minutes. Litecoin’s network also happens to be able to handle more transactions owing to its faster block generation time.
The market capitalization of Litecoin is USD 11.9 billion which happens to fall considerably behind that of Bitcoin’s which is USD 1 trillion.
Finally, while Litecoin has a fixed coin supply amounting to 84 million coins, Bitcoin only has 21 million coins.
Concluding Thoughts
Litecoin can be understood to be a form of digital money that can be used by individuals as well as institutions to buy commodities and services and to transfer funds between accounts. Each of these transactions is conducted without the presence of an intermediary. Popular intermediaries include payment processing service providers, banks, and credit card companies.
