Online Store

Decoding Litecoin (LTC): What is Litecoin? How Does it Work?

A silver Litecoin LTC on a blue background stacked with bitcoin and Ethereum coins.
Market State by Cryptorank

While some experts might label Litecoin as a “ghost chain,” suggesting a lack of cutting-edge technological advancements, the current interest from crypto traders reveals a different perspective. 

Today’s crypto enthusiasts, often considered “degenerate traders,” find significance in the Litecoin blockchain due to its crucial role in securing Dogecoin. All these battles for the top spot continue to occur amidst big names like Bitcoin and Ethereum.

Initially, Litecoin aimed to prevent large-scale miners from dominating the mining process by employing an alternative encryption method. Despite this intention, miners swiftly adjusted and persistently expanded their mining capacity.

What is Litecoin?

Litecoin, crafted by Charlie Lee in 2011, is a peer-to-peer cryptocurrency. It’s built on the Bitcoin protocol but distinguished through the hashing algorithm employed. Unlike Bitcoin, Litecoin utilizes the memory-intensive Scrypt proof-of-work mining algorithm, enabling everyday hardware like GPUs to mine these coins effectively. 

Similar to Bitcoin, Litecoin is minable using ASIC miners. 

Litecoin Maxim Supply

Litecoin came into play with 150 pre-mined coins with a maximum supply of 84 million. The blockchain of this cryptocurrency produces a new block approximately every 2.5 minutes. The design of Litecoin’s supply is intended to decrease gradually, a measure taken to maintain the coin’s value.

As of August 2023, the remaining Litecoins available for mining were slightly below 10.5 million.

How Litecoin Halves

Like Bitcoin, Litecoin undergoes halving to manage its supply, which is capped at 84 million coins. However, every time miners successfully add a new block to Litecoin’s blockchain, they receive newly generated LTC as a reward. This could lead to an endless increase in Litecoin’s supply without the halving mechanism.

Halving is a strategy to control the reward when a block’s hash and transaction information are validated, creating a new block. The process involves cutting the number of Litecoins awarded by half, slowing the creation of new coins.

Take a look at the halving dates for LTC:

  • Aug. 25, 2015: Reduced from 50 to 25 LTCs
  • Aug. 5, 2019: Reduced from 25 to 12.5 LTCs
  • Aug. 23, 2023: Reduced from 12.5 to 6.25 LTCs

How is Litecoin Used?

The liquidity nature of Litecoin makes it easy for crypto trades. As a matter of fact, Litecoin holders have high acceptance with merchants like Newegg and American Red Cross on the frontline.

Digital currency apps like BitPay or CryptoPay may also be useful for Litecoin payments. If you wish to use LTC for P2P payments, the Binance app can be used when paying someone with LTC.

Litecoin Advantages

Right from the start, the Litecoin blockchain operates as a swifter cryptocurrency for transactions than Bitcoin without adding any extra technological layers. 

Litecoin facilitates transactions at a lower cost. Currently, Bitcoin transaction fees are notably higher, averaging around 3.92%, in contrast to Litecoin’s transaction fees, which hover around 0.06%.

Litecoin Disadvantages

In 2017, Litecoin’s founder, Charles Lee, made headlines by divesting most of his Litecoin holdings, citing a “conflict of interest.” This move had a noticeable impact on investor confidence. 

Although Litecoin was initially designed to boast a faster TPS rate than Bitcoin, the emergence of “Layer-2 solutions on top of Bitcoin like the Lightning Network” has accelerated Bitcoin transactions, raising questions about Litecoin as a faster payment network. 

The cryptocurrency landscape now features newer cryptocurrencies with even faster TPS speeds, including EOS at 4,000 TPS, XRP at 1,500 TPS, and Cardano at 257 TPS, among others.

Should You Buy Litecoin?

So, Litecoin remains one of the most traded cryptocurrencies, but is it worth your money?

Blaskey of BitIRA says Litecoin could be the best fit for seasoned cryptocurrency investors’ portfolios who need clarification on its flexibility and staying value. This is especially handy for those who want a combination of store of asset value and convenient transactions.   

Typically, Litecoin could also be useful for new crypto investors, who could quickly get used to the ins and outs of crypto trading. 

As to whether LTC is a good investment choice, there’s an endless list of blockchain competitors, but Litecoin remains a relevant choice.

Before investing in Litecoin, learn how to buy Litecoin and gain knowledge on cryptocurrency wallets by speaking to a financial expert for better insight based on your financial goals. 

Image Source: Adobe StockDisclaimer:This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.