Litecoin is a better alternative to Bitcoin. It offers features similar to Bitcoin but distinguishes itself by transaction speed and low to zero fees. It is cheap, and its utility extends to personal or small business use. Find out more in this guide.
Litecoin (LTC) is one of the oldest cryptocurrencies on the market. It is a peer-to-peer cryptocurrency that aims to serve as a global digital payment system. Litecoin is similar to Bitcoin (BTC) in codes and protocol but operates on a separate blockchain. It is an open-source, fully decentralized network with no central authority, just as Bitcoin. Litecoin set itself apart from Bitcoin with speed, fees, mining algorithm, and supply. However, it is referred to as “silver to Bitcoin’s gold”.
The very many similarities between Litecoin and Bitcoin have made crypto users conclude that the former is Bitcoin complementary, alternative, and Silver to it. It is established that the only distinction between them is the minor modifications to the Bitcoin blockchain that make Litecoin four times faster in block creation within an average of 2.5 minutes against Bitcoin’s 10-minute standard. Besides, against Bitcoin, Litecoin has an improved total number of units and hedges mining difficulty quickly.
However, Litecoin, like Bitcoin, primarily intends to be a digital currency that you can exchange peer-to-peer, untrusted, securely, very rapidly, and at a minimal cost. Its ability to offer cheaper and faster transaction time allows Litecoin to fulfill the role of “digital cash” much more efficiently. It is most preferred as a better alternative to Bitcoin, which functions as a store of value. In addition, Litecoin is best suitable to general purchases day-to-day transactions.
Origins of Litecoin
Litecoin (LTC) was among the earliest alternative coins. Its network was launched by an ex-developer at Google (NASDAQ: GOOGL), Charlie Lee, on October 13, 2011. Its launch added to the numbers of existing altcoins such as Namecoin, Ixcoin, 10coin, Solidcoin, V1 & V2 GeistGeld Tenebrix, and Fairbrix tapping from Bitcoin features and experiencing its casualty effect such as high volatility. Litecoin almost suffered the same, having replicated Bitcoin, but the influence of Litecoin’s founder on social networks has presented Litecoin well to a community that believes in its potential and long-term price appreciation.
Years later, several alternative coins targetted overcoming average time taken for new block discovery and transaction fees associated with the flagship crypto asset. Notably, none of them was able to outperform Bitcoin. As a result, many went into extinction with few survivors. Although they succeeded in creating competition among miners, Litecoin is an exception.
Litecoin is a digital currency that aims to be a global asset, peer-to-peer enabled, trusted, secure, fast, and cheap. However, Litecoin’s main principles are mainly based on the blockchain from which Litecoin taps its innovation. Its proof of work algorithm uses the Scrypt hash function. Litecoin has a four times faster block discovery with an average interval of 2.5 minutes. The total number of units is four times larger with 84 million. Litecoin mining difficulty changes every two and a half days.
Litecoin vs. Bitcoin
As earlier said, Litecoin (LTC) taps from the innovation of Bitcoin, which means that some aspects, such as code and protocol, have similarities. A loss to Bitcoin is also a loss to several altcoins, and Litecoin is part of it because it is like the lite version of BTC. However, there are distinctions. What sets the difference between the two is the blockchain. They operate on a different blockchain, enabling and delivering varying experiences to users.
Similarities between the two coins are the following:
- Proof-of-work
Bitcoin and Litecoin use the proof-of-work validation system. It is a system where miners approve of the nodes within a transaction before it goes through. It helps in avoiding cases of double payments and other scams.
The significant similarity that people notice between Bitcoin and Litecoin is that they both readily harbor the same proof-of-work ecosystem. This means that the underlying process used to mine both of these cryptocurrencies is fundamentally similar throughout it all. This includes the processes of generating, authenticating, and then adding it to a public ledger or blockchain. Their proof-of-work operation is identical.
- Storage and transactions
When looking at it through an investor’s eyes, it is relatively easy to think that many of the basic transaction elements are similar, and through inexperienced eyes, they may be. They can both be easily bought via an exchange, or you can mine them using a mining rig. Both Litecoin and Bitcoin require a digital or cold storage wallet to be safely stored between transactions.
The prices of the two are still very similar as well. Over time, they have both proven that they are heavily dramatic and extremely volatile forms of digital currency. This also depends upon a large range of factors that can range from investors to the interest in government regulations.
There are, however, several significant differences between the two coins. They are as follows:
- Transaction differences
This is one of the significant differences of the digital duo asset. Litecoin (LTC) is famous for discovering or generating a new block within two and a half minutes. Its transactions are four times faster than Bitcoin’s. Litecoin’s unique transaction feature makes it more preferable and attractive to merchants, contrary to Bitcoin that best serves as a store of value.
- Proof-of-work algorithm
Fundamentally, there is a distinction between Litecoin and Bitcoin as per the mining algorithm. Although both cryptocurrencies operate PoW, Bitcoin utilizes the traditional SHA-256 hashing algorithm. At the same time, Litecoin takes advantage of the new innovated algorithm, Scrypt, which requires less computer power and is cheaper for users while mining.
- Distribution
Another difference between Bitcoin and Litecoin concerns the general number of coins that each cryptocurrency can produce. This is the point at which Litecoin can distinguish itself from Bitcoin dramatically. Bitcoin itself can never exceed a limit of 21 million coins, which makes it a finite cryptocurrency. In contrast, Litecoin can accommodate a limit of up to 84 million coins with an option to extend that limit.
- Mining reward
Miners get a reward of 12.5 new Liitecoins per block, halved roughly every four years (every 840,000 blocks). Therefore, the Litecoin network is scheduled to produce 84 million Litecoins, four times as many currency units as Bitcoin.
Litecoin’s Use Cases
Litecoin is a proven medium of commerce complementary to Bitcoin. It is more suitable for day-to-day transactions. This is because it is faster, its fees are cheaper, and its updates are usually gearing towards increasing the scalability of its chain. The use case for Litecoin is simply a currency. Individuals and institutions use Litecoin to purchase things and to transfer funds between accounts. Stores are already adopting it for payment. However, Litecoin is not recommendable as a store of value.
Among businesses accepting Bitcoin are the following:
- eGifter. This is a unique platform that deals in the sale of premium gift cards and makes its deliveries via email or text. The platform also does physical delivery. eGifter accepts Litecoin and several other cryptos, such as Ethereum (ETH), Bitcoin, BTCash (BCH), Dash (DASH), and XRP (XRP).
- Travala. This is an aviation website. It adopts crypto tokens such as Litecoin that individuals can use to make hotel, flight tickets, bookings, reservations.
- Coaex. This is a crypto-enabled online store where gold bullion bars and silver bullion bars are purchased using Litecoin, Bitcoin, and Dash.
- RE/MAX. This platform deals in estate management. An interested person can buy or rent property on this website with Litecoin and Bitcoin.
- Snel. Snel is an online store that specializes in the sale of domain names, web hosting, cloud hosting, dedicated hosting, VPS services using Litecoin as a payment method.
- Unlock Base. This website offers to unlock services for devices such as iPhones. Their unlocking services are paid for with cryptos, such as Ethereum, Litecoin, Bitcoin, Bitcoin Cash, Dash.
- CryptoGames. CryptoGames is one of the famous shops that accept Litecoin without any trouble. Its reasons are simple, as well. It is a gambling website where you can make investments in cryptocurrency and bag your winnings.
Advantages of Litecoin
Firstly, Litecoin’s transactions are fast, taking on average around 2.5 minutes, four times faster than Bitcoin, which takes around 10 minutes. It achieves this by its shorter block processing times. Secondly, LTC is cheap to use for transactions, especially when compared to the regular costs for Paypal, credit cards, or wire transfers. In comparison with Bitcoin, whose average transaction fee is around $3 at the time of writing, Litecoin is incredibly cost-efficient. Thirdly, Litecoin has a faster block generation. Every 2.5 minutes, a block is mined, and 12.5 coins are generated. The next halving will occur in August 2023. This means that there is more LTC to go around. If you are an aspiring miner, there is a higher chance of getting rewards for your mining efforts than with other certain currencies.
Further, thanks to the Atomic swap technology, Litecoin can be exchanged to other currencies without going through an exchange, thus saving you money. Finally, LTC is decentralized. The community validates LTC transactions, and the record is stored on the blockchain. As a result, there is no one central authority controlling it.
Risks Associated with Litecoin
The security of Litecoin (LTC) relies upon a high token price. If the price falls, the mining rewards will also drop, leading to fewer miners and less hashing power. As Bitcoin’s Lightning Network gains adoption and its transaction fees drop, Litecoin’s place in the cryptocurrency ecosystem becomes less clear. Without a unique use case or clear competitive edge over other projects, Litecoin could become unnecessary as stablecoins become more prevalent. Other projects discover scaling solutions, leading to lower fees and faster transaction times.
Conclusion
Litecoin (LTC) is a better alternative to Bitcoin. It offers features similar to Bitcoin but distinguishes itself by transaction speed and low to zero fees. It is cheap, and its utility extends to personal or small business use. Try it!