What Is Litecoin?
Litecoin is the sixth largest cryptocurrency by market capitalization. Put simply, cryptocurrencies
are digital funds. TFG has written a detailed introductory guide to them, which you can find here.
Litecoin was inspired by the inaugural cryptocurrency ‘Bitcoin’ and is a near-replica of it in many
ways. In spite of this, it doesn’t seek to compete with Bitcoin, but rather to complement it. It’s
often referred to as ‘the silver to Bitcoin’s gold’.
It differentiates itself from Bitcoin through some fundamental differences such as in its algorithm,
transaction processing speed, and coin limit. These differences were implemented to address
what many see as fundamental flaws with Bitcoin.
To help traders that are interested in learning more about Litecoin, TFG has curated this page of
content, which contains information on its history, uses, and advantages and disadvantages.
History of Litecoin
Litecoin was founded in October 2011 by Charles Lee, a man who had previously worked as an
engineer for Google.
Since then, Litecoin has experienced huge growth. During the cryptocurrency boom of 2017,
during which the total market cap increased by more than 3600%, the price of Litecoin
increased by 8200%.
Litecoin massively outperformed Bitcoin, which increased its value by less than 2000%. This
seems to indicate that Litecoin might have achieved its original goal of improving on Bitcoin, and
may even grow to overtake it in the years to come.
But what has the journey looked like so far for Litecoin? The following timeline outlines some of
the major developments:
Bitcoin is founded, laying the foundations for Litecoin and other altcoins yet to come.
Charles Lee creates Litecoin by modifying Bitcoin’s code.
Litecoin’s market capitalization reaches $1 billion.
2013 – 2016:
Litecoin continues to develop and grow steadily.
Segregated Witness is implemented into Litecoin and the first lightning transaction takes place.
In December, the price of Litecoin peaks at around $366 USD.
Litecoin prices begin to fall, mirroring the wider trend in the cryptocurrency market.
This graph from CoinMarketCap shows how the price of Litecoin has changed over time.
Below are three use cases for Litecoin:
- As an investment vehicle
The cryptocurrency market has become attractive to many beginners and seasoned traders alike. Investors are enticed by the growth it has seen in recent years. Though prices are volatile, those that are willing to take a risk have the potential to make huge gains. Litecoin is especially attractive in this respect as it has performed well compared to other cryptocurrencies.
- Cross-border transactions
Litecoin can be used to send money overseas quickly, securely and affordably; with less transaction fees than traditional international transfers.
- As a daily payment method
Litecoin aims to be a viable digital currency that could ultimately replace fiat currencies for everyday purchases. Though the number of offline and online retailers that accept Litecoin is limited at present, this could change in the future.
Uses Within Trade Finance
Another important use case for Litecoin is in trade finance.
Litecoin is built on blockchain technology. Blockchain technology is revolutionising the world in more ways than one. As well as providing the foundation upon which all cryptocurrencies are built, it’s also being used in other industries, such as trade finance.
Trade finance has historically relied on long manual processes involving copious paper trails. These processes can be slow and expensive. Blockchain technology can change this by digitizing these processes, cutting out third parties and making international transactions faster, more secure and cheaper.
We’ve written more about this on our Blockchain and Trade Finance information page.
Advantages and Disadvantages
The below table outlines the main advantages and disadvantages of Dash:
|Transaction Processing Speed|
Litecoin has a much faster work speed than Bitcoin. Bitcoin transactions take around 10 minutes, on average, to be confirmed. With Litecoin, this is 4 times quicker at just 2.5 minutes. This means purchases can be performed a lot faster.
|Not widely accepted|
At present, there isn’t a large number of retailers that accept Litecoin. This is also the case for most cryptocurrencies.
Bitcoin will produce a maximum of 21 million coins. Dash has set their cap much higher, at 84 million coins. In theory, this could make it easier for users to acquire a whole coin as opposed to a fraction of a coin, which could work in Litecoin’s favour from a marketing perspective.
|Subject to Regulation|
Like all cryptocurrencies, Dash is subject to regulation. If more severe regulation is taken against cryptocurrencies in the future, it could limit their use and cause prices to fall heavily.
Litecoin was built with the Scrypt algorithm. This was designed to be more ASIC-resistant and make mining more accessible to every day users compared to Bitcoin. This, in turn, makes Litecoin more centralised.
|Not Fully ASIC-resistant|
Though it’s still easier for everyday users to mine Litecoin than Bitcoin, Scrypt ASIC miners have recently been made available on the market, which has made it more difficult to mine Litecoin without ASIC mining hardware.
|Cost of Transactions|
Like all cryptocurrencies, Litecoin transactions can be completed without any middlemen, thereby reducing transaction fees. Litecoin transactions are even less expensive than many other cryptocurrencies like Bitcoin.
Whilst Litecoin says it aims to complement, rather than compete with, Bitcoin, it still shares the same goal. If more users continue to use Bitcoin as their primary cryptocurrency, it will limit Litecoin’s potential.
Here are 3 fun facts about Litecoin:
- Litecoin can be directly exchanged for other cryptocurrencies on the blockchain using the ‘Atomic Swap’.
- The first Litecoin lightning transaction was performed in May 2017. The transaction took less than 1 second between Zurich and San Francisco.
- There are around 57.5 million Litecoin tokens currently in circulation (as of July, 2018)
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