While traders and cryptocurrency enthusiasts alike grabble to hit “Bitcoin Gold,” there is a rival altcoin that emerged soon after the original digital currency and has been making waves in the market ever since.
Litecoin was gleaned from the source code of Bitcoin. It is not so much a fork as an upgrade – a sharper knife. There are subtle but crucial differences between Litecoin and the genesis cryptocurrency Bitcoin. Yet, what is the “silver to Bitcoin’s gold?”
What Is Litecoin?
In 2011, just after Bitcoin sent shockwaves through the financial markets, a new “altcoin” was born. Founder Charlie Lee (also known as “Chocobo”) was a former disciple of the Bitcoin movement, yet he saw the inherent flaws in the cryptocurrency. Bitcoin was built with blockchain technology, a disruptive method of approving transactions through solving cryptographic “blocks” along a “chain” of data. Yet, Bitcoin was slow – each block took an average of 10 minutes to create or “mine.” Charlie Lee realized early on that the speed issues would prevent Bitcoin from ever being a viable alternative to fiat currency. You could not really use Bitcoin for myriad daily transactions at that speed. It was confined to being a store of value, a sort of Fort Knox of the cryptocurrency markets.
Lee decided to create a cryptocurrency with faster transaction speeds that were easier to scale and, as a result, could be used for quick and cheap online payments. As Lee described it, he envisioned a “light version” of Bitcoin that could one day become the “silver to Bitcoin’s gold.” The developers of Litecoin did not foresee their creation as a competitor to Bitcoin so much as a compliment. Yet the markets saw things differently, and today the two digital currencies have divided cryptographic communities.
How Does It Work?
From a technical perspective, Litecoin (LTC) is very similar to Bitcoin (BTC). Both cryptocurrencies use a “proof-of-work” consensus algorithm to approve transactions. In other words, the network users who solve the cryptographic puzzles mentioned earlier are rewarded with new blocks. This doubles as both an incentive mechanism to encourage users to expand the cryptocurrency and securely approve financial transactions on the network.
Where Litecoin differs is with the hash algorithm it uses: Scrypt. Bitcoin’s SHA-256 hashing function requires heavy power from a central processing unit (CPU), making mining an expensive and energy-intensive operation. Litecoin’s Scrypt algorithm is easier for individuals to use. Litecoin’s mining times blew Bitcoin’s out of the water: an average of 2.5 minutes a block compared with Bitcoin’s 10 minutes.
Litecoin is better suited to microtransactions and online payments, thanks to its speed and low transaction fees. The “MimbleWimble Testnet” was announced as part of Litecoin’s 2020 upgrade. This feature promises enhanced privacy in the financial transactions on the network.
To prevent inflation, there is a maximum total supply of 84 million Litecoin. As of January 2021, 66,245,000 Litecoin is in circulation. Nonetheless, the Litecoin Foundation assures its community that it will be over a century before Litecoin is capped, thanks to the “halving” schedule. Every four years, the number of LTC tokens created per block is halved. Litecoin is currently ranked #13 in the CoinMarket charts, and one LTC is valued at $137.31. There is an increasing interest in this cryptocurrency which could have a promising future as both an internet currency and a store of value.
Investing In Litecoin
If you are interested in holding some of the “silver to Bitcoin’s gold,” there are two main avenues open to you. Enthusiasts of this altcoin who wish to use Litecoin to make cheap online payments or support the altcoin can purchase LTC directly from a cryptocurrency platform or a peer-to-peer exchange. By choosing this option you could trade another cryptocurrency for Litecoin. Alternatively, there are a growing number of exchanges that accept credit or debit card payments. Once you have made your first deposit and bought a number of LTC, you may want to consider moving your tokens offline. Storing your Litecoin in the original crypto exchange that you purchased it from can pose security risks. As a glance at the cryptocurrency headlines show, online investments are open to cyberattacks, hacking, and scams.
A safer way to store your LTC would be in a “cold” wallet, i.e., offline on hardware such as a USB, computer disc, or file. Remember, in this case, that the key to your crypto riches lies in that security phrase. Try to neither share it nor forget it!
The second avenue to investing in Litecoin is to use a broker. Many investors prefer this route as it opens up more options to you. For example, you could trade LTC with derivatives such as a CFD (“Contract for Difference”). This would allow you to speculate on the micro price changes and subtle fluctuations of Litecoin across the financial markets without the hassle of purchasing the tokens themselves. Many brokers will even let you leverage your trades (borrow money) to open more significant trading positions. Bear in mind using leverage will amplify both losses and gains, however. Look for a broker with a decent customer support team to guide you through the process of investing in Litecoin and good trading tools to equip you for the markets.
Here at TradeOr, we can offer all the above and more. Our invaluable customer support team is available 24/7 to answer any questions you may have about your Litecoin investment. Should your trading interests extend beyond the cryptocurrency markets, we also offer trading pairs across forex, commodities, stocks, futures, and energies. We offer trading with derivatives such as CFDs, and TradeOr clients can access leverage of up to 500:1. Our charting software (TradingView) is second to none.
There is no cryptocurrency crystal ball, and traders use a combination of market analysis, strategies, and an element of gut instinct to make their trades. One of the most critical tools to arm you for something like investing in Litecoin is the use of indicators. Trading indicators are a mathematical calculation that allows you to plot lines on price charts to spot future patterns and trends. Indicators like Bollinger Bands, the Moving Average Convergence Divergence (MACD), and the Relative Strength Index (RSI) help traders plan when to open and close trades.
Silver may not replace gold anytime soon, but many market experts believe that the future of Litecoin is bright. The coinpriceforecast site estimated that LTC could reach $404 within five years, while a crypto analyst on Coinpedia predicted that Litecoin could average at $500.84 by 2026.
If you are not convinced, head over to TradeOr and get informed on a wealth of cryptocurrencies and other market assets. Trade with the guidance of expert analysts and swap tips with fellow traders.