Litecoin was created by Charlie Lee, an engineer who previously worked for Google and Coinbase. The coin was released in 2011, shortly after Bitcoin was created in 2008. Lee designed his cryptocurrency using the same blockchain technology, as well as the basic code as Bitcoin.
As a result, Litecoin’s code and blockchain function very much the way that Bitcoin does. The major difference is that Litecoin transactions can be processed much faster than Bitcoin can.
Although Litecoin has not made the same impact as Bitcoin, the cryptocurrency has several features that deserve a second look.
In this Litecoin guide, we discuss the potential and limitations of investing in Litecoin. Be aware that this article is to be read as information and is not a directive to buy any particular cryptocurrency.
One of the best features of Litecoin is that the transactions are confirmed much faster than Bitcoin’s are. This is different from how Bitcoin works. It takes 10 minutes to confirm and uses a high complexity hashing SHA-256. While Litecoin only takes 2.5 minutes to confirm, and is easier to mine, which means that less computing energy is required.
Because its code is like Bitcoin’s, Litecoin also uses proof-of-work consensus blockchain and decentralized nodes to mine and approve transactions. But, Litecoin is mined and confirmed more easily because of its lower hashing rate. Because mining Litecoin requires less energy to confirm, its fees are much lower than Bitcoin’s.
Because the overall cost and efficiency are greater than Bitcoin’s, Litecoin is a much more flexible coin. What this means is that Litecoin has more potential to be used for smaller purchases.
With the expense and volatility of Bitcoin, it is a very valuable coin to hold. However, it is inadvisable to use Bitcoin for small purchases and day-to-day transactions for the same reason. Bitcoin’s value changes very quickly, and once you include transaction fees, it is hardly worth buying something for a $100 value with BTC.
Litecoin, on the other hand, has been at the top of crypto markets since its inception. And it has remained there with less volatility or price explosions than other cryptocurrencies. While it has not had the exponential growth of Ethereum or Bitcoin, it has steadily maintained value, with a general upswing over the past 12 months.
Finally, Litecoin’s activity demonstrates that the coin has a healthy network, as there are currently over 100,000 active addresses.
Litecoin has not had the economic success that Bitcoin and Ethereum have enjoyed. One reason may be that it has neither the cachet Bitcoin. Nor is it as immutable as Bitcoin, due to the lower hash-rate. Litecoin also doesn’t have the same utility and applicability as Ethereum.
At the time of this article, the value of Litecoin is $13.7 billion US, compared to Bitcoin’s, which is nearly $1 trillion. That means that Bitcoin’s market cap is 70 times that of Litecoin’s. The valuation of Bitcoin is due in large part to the recent halving in May 2020 and Elon Musk’s $1.5 billion purchase in February 2021.
By investing in Litecoin, it is unlikely that investors will see the incredible returns that they have with Bitcoin and Ethereum. When investing in Litecoin, both short and long-term goals need to be considered. Without the same growth as other cryptocurrencies, Litecoin is not as easily day-traded, and profiting from sales will require the investor’s close attention to market movement.
Apples and Oranges
Although very valuable, one of Bitcoin’s major limitations is the transaction cost and computing power necessary. While this has had no real impact on the value of Bitcoin, it reduces the utility and future sustainability of Bitcoin.
On the other hand, with the increased adoption of cryptocurrencies, users are looking for more flexible digital currencies. The fact that Litecoin uses less than one-quarter of the energy to mine may give it a leg up in the future, as it is a much easier coin to use.