What is Litecoin?
Litecoin is a peer-to-peer cryptocurrency that aims to enable instant, near-zero cost payments that can be done between people or institutions anywhere across the world. Litecoin is probably most well-known for using a similar mathematical code to Bitcoin, but with four times as much supply and four times the processing speed.
Charlie Lee, a former Google employee and engineering director at Coinbase, released Litecoin in 2011 . To compare, Bitcoin was created in 2009 by an unknown person or group of individuals called Satoshi Nakamoto.
Lee designed Litecoins be a compliment to the original cryptocurrency, not to be a replacement or even a competitor. That’s why it is sometimes referred to as “Bitcoin’s little brother.” Lee has said that he wanted to create the “silver” to Bitcoin’s “gold.”
Because Litecoin can create blocks in 2.5 minutes (as opposed to Bitcoin’s 10), the transaction time is also faster. Thus, Litecoin is often considered a “lighter,” faster version of Bitcoin.
What is Litecoin Used For?
Litecoin advertises itself as a “cryptocurrency for payments—based on blockchain technology.” Its primary focus is to act as a medium for transacting payments without a bank or other third-party intermediary.
Litecoin uses a very similar technology to Bitcoin, but with the ability to conduct transactions faster than Bitcoin. How much faster?
According to Litecoin, it takes two-and-a-half minutes to “process a block” compared to Bitcoin’s ten, making the currency four times faster than bitcoin. The tradeoff is that a transaction done in litecoins may not be as secure as a transaction done in bitcoins.
But of course, many people are interested in Litecoin as a potential long-term holding, not just as a means to process transactions. Similar to making a purchase of any type of currency, the hope is that the new currency will increase in value relative to base currency.
Therefore, many speculators looking into a cryptocurrency like litecoin are generally speculating that the currency will build relative wealth over time. However, there are always risks with speculative plays like currency.
How Does Litecoin Work?
In order to understand how litecoin works, it is good to first have a base knowledge of the underlying technology of blockchain. With blockchain, information is coded and stored in a block, and each block strung together creates a chain. The chain of information acts as litecoin’s transaction ledger.
With litecoin, miners are awarded with 25 new Litecoins per block they mine, an amount that gets halved roughly every four years (every 840,000 blocks).
Litecoin has a cap of 84 million Litecoins in total—four times as many units as Bitcoin. Similar to Bitcoin, Lee designed Litecoin to have the majority of coins mined in the first two decades. As of this writing, there are over 63 million Litecoins.
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