What Is Litecoin? – Understanding, How Is Different from Bitcoin, and More
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What Is Litecoin?
Litecoin is a cryptocurrency founded in 2011, two years after bitcoin, by a former Google engineer named Charlie Lee. Measured by market capitalization, it is the ninth-largest cryptocurrency.
Initially, it was a solid competitor to bitcoin according to bitcoin-up.co. However, as the cryptocurrency market has become more saturated in recent years with new offerings, its popularity has waned.
It has always viewed as a reaction to bitcoin. When Lee announced the debut of Litecoin on a popular bitcoin forum, he called it the “lite version of Bitcoin.”
For this reason, Litecoin has many of the same features as bitcoin while also adapting and changing some other aspects that the development team felt could be improved.
Like other decentralized cryptocurrencies, Litecoin not issue by a government, which historically has been the only entity that society trusts to issue money.
Instead of regulating by a central bank and coming off the press at the Bureau of Engraving and Printing, Litecoins create an elaborate cryptocurrency procedure called mining, which consists of processing a list of transactions.
Unlike traditional currencies, the supply of Litecoins fix. There will never be more than 84 million Litecoins in circulation.
Every 2.5 minutes, the network generates a new block–a ledger entry of recent Litecoin transactions worldwide.
The block verified by mining software and visible to any system participant (called a miner) who wants to see it. Once a miner verifies it, the next block enters the chain, a record of every transaction ever made.
There are incentives for mining Litecoin: the first miner to successfully verify a block reward with 12.5 Litecoins.
The number of Litecoins awarded for such a task reduces with time. In August 2019, it halved, and the halving will continue at regular intervals until the 84,000,000th Litecoin mine.
Mining cryptocurrency at a rate worthwhile to the miners requires a considerable amount of processing power, courtesy of specialized hardware.
The central processing unit in most personal computers isn’t fast enough to mine most cryptocurrencies.
However, Litecoin can differentiate from most other cryptocurrencies because it can mine with personal computers.
Although the greater a machine’s capacity for mining, the better the chance it’ll earn something of value for a miner.
Any currency–even the U.S. dollar or gold bullion–is only as valuable as society thinks it is. If the Federal Reserve started circulating too many banknotes, the dollar’s value would plummet in short order. This phenomenon transcends currency.
How Is Litecoin Different from Bitcoin?
The most crucial distinction between Litecoin and Bitcoin is the different cryptographic algorithms that they employ. Bitcoin uses the SHA-256 algorithm, whereas it makes use of a newer algorithm, called script.
It has some inherent advantages when compared to bitcoin. It found to prioritize transaction speed, and this is a significant reason for its popularity.
The bitcoin network’s average transaction confirmation time is currently under nine minutes per transaction, while Litecoin’s is roughly 2.5 minutes. Its network can handle more transactions because of its shorter block generation time.
Bitcoin has a significantly greater market capitalization than Litecoin. As of April 21, 2021, the total value of all bitcoins in circulation is around $1 trillion, while the market capitalization is approximately $18.3 billion. Bitcoin’s market capitalization still dwarfs all other digital currencies.
Both bitcoin and Litecoin have fixed supplies. However, bitcoin’s supply limit to only 21 million coins, while its total fixed supply is 84 million coins.
Goals of Litecoin
Litecoin, like all virtual currencies, is a form of digital money.
Both individuals and institutions can use it to purchase things and to transfer funds between accounts.
Participants can make transactions without using intermediaries like banks, credit cards, or payment processing services.
Rather than focusing on its functionality, many investors interest in Litecoin as a potential long-term holding.
Similar to investments in any currency, investors are speculating that they will build relative wealth over time.
How Does Litecoin Work?
Litecoin is a peer-to-peer virtual currency, which means a central authority does not govern it. Its network offers instant, near-zero cost payments that individuals or institutions across the globe can conduct.
Bitcoin, Litecoin, and many other cryptocurrencies use the proof-of-work (PoW) algorithm to secure their networks.
PoW requires that one party proves to all the other participating parties in the network that a required amount of computational effort has expended.