Litecoin for newbies: Invest in Litecoin from A to Z

Faster and more secure than bitcoin, Litecoin has been enjoying explosive growth in 2017. Let’s take a closer look at why.

Having started from very modest origins and possessing only subtle technical improvements over bitcoin, Litecoin has grown to become the second largest cryptocurrency on the market. It is now often characterised as the silver to bitcoin’s gold, but there’s far more to the currency’s sudden growth than meets the eye.

What is Litecoin?

Icon	Symbol	Initial release date	Algorithm type	Max. supply
	LTC, Ł	7 October 2011	scrypt	4 million LTC

Released on 7 October 2011 by former Google employee Charlie Lee, Litecoin (LTC, Ł) is an open source, peer-to-peer cryptocurrency – digital currency operating independently of any country’s central bank. While similar to bitcoin in many ways, Litecoin also incorporates several improvements (such as Segregated Witness) which help reduce bottlenecks in the network and increase the speed with which transactions are carried out.

Litecoin has experienced massive growth since its inception, reaching a $1 billion market cap in November 2013, and over four times that much by 2017.

GLOSSARY TIP: SEGREGATED WITNESS

In May 2017, Litecoin became the first cryptocurrency to adopt Segregated Witness (or SegWit, for short). The system splits every transaction into two segments, removing the signature (the “witness” part) from the original data. This makes the processing of every transaction faster, one of the key advantages of Litecoin over bitcoin.

How is Litecoin different from bitcoin?

While there are a lot of similarities between Litecoin and its more widely accepted competitor, bitcoin, Litecoin has a few distinct advantages when it comes to mining, transaction verification speed and security:

• Higher volume of transactions. The Segregated Witness process increases the rate at which transactions are verified on the block, reducing the time for confirmation of payment from 10 minutes (for bitcoin) to 2.5 minutes (for Litecoin).

• More secure. This faster processing time also helps maintain a secure environment by reducing the chance of double-spending attacks – a hack in which the attacker spends the same money twice to pay for two different transactions.

• Larger coin limit. While bitcoin has a maximum coin limit of 21 million coins, Litecoin has an upper limit of 84 million coins.

• Harder to mine. This might not be seen as an advantage at first glance, but because Litecoin uses scrypt hashing (instead of SHA-256) mining cannot be accelerated by using parallel processors, as can be done when bitcoin mining. This has created a much more level playing field as opposed to the arms race that bitcoin mining has become.

Scrypt vs SHA-256 mining

Cryptocurrencies that allow mining of coins all use a particular hashing algorithm. The algorithm both protects the transactions and data of the network from tampering, and allows miners to collect coins by cracking the hashing and verifying the transactions themselves. The most common algorithm is SHA-256 (used in bitcoin and all its forked coins), but some currencies like Litecoin use scrypt (read: ess-crypt) instead.

Where can I use Litecoin?

You can use Litecoin nearly anywhere you can use bitcoin. Since its release it has become the second largest cryptocurrency after bitcoin, and merchants have been quick to adopt it. The Litecoin website has an always-growing list of services, merchants and providers that accept Litecoin, ranging from financial consulting services to health and beauty product merchants.

How do I invest in Litecoin?

As with most other cryptocurrencies there are quite a few ways to put some Litecoin in your wallet.

• Purchase directly from an exchange. The easiest and most straightforward method of acquiring Litecoin is to buy some from an exchange. Exchanges mostly accept credit card payments, cheques, and some even money transfers, and will in turn deposit Litecoin into your wallet. Exchanges also usually charge a percentage fee for their service, typically in the 0.5-2% range, depending on the service provider and the volume of Litecoin you’re exchanging.

• Receive payment in Litecoin. Whether you’re providing a service or selling goods to a consumer, you can always accept Litecoin as payment just as you would any other currency. With its lower fees, commissions and costs, compared to receiving fiat money (ie, government-issued currency), receiving payment in Litecoin results in more money in your pocket. Additionally, Litecoin transactions are secure, faster and less susceptible to fraud.

• Earn Litecoin through mining. Generating Litecoin through the process known as mining is slow and requires specialised equipment to be worth the effort, but it is nonetheless a legitimate method of generating coins. You can just put your computer to work, validating and verifying transactions made on the Litecoin network by other users, and in return you are paid in Litecoin. The faster you can mine, the more Litecoin you can make.

Using Litecoin to transfer money

As with cryptocurrencies in general, payments with Litecoin are lightning fast and incredibly easy. To pay someone with Litecoin:

1. Enter the person’s address into your wallet application, or scan the QR code that corresponds to that address.
2. Enter the amount of Litecoin you’d like to send.
3. Send.

That’s it. There's nothing else to it.

Making money with Litecoin

Over the years, Litecoin has attracted a lot of speculators and currency investors looking to make money from the rise and fall of the cryptocurrency. It’s most explosive growth came in 2017, on the heels of bitcoin’s meteoric rise. Sitting at a measly $3.80/LTC March 01, 2017...

...it multiplied its value by an unprecedented 22x in just 6 months to reach a high of $84.09/LTC on September 01, 2017.

Because of its growing popularity and cost, many investors have taken to buying Litecoin and then reselling it when the price increases. This is a very popular strategy but it also comes with its own pitfalls. Litecoin prices are extremely volatile – quick rises often mean quick falls – and you should always be very careful and spend time studying the currency before making any costly investment decisions.

What to watch out for

Not unlike its bigger sibling, Litecoin has its disadvantages. Here are a few of the cryptocurrency’s shortcomings:

• Not as widely accepted. Litecoin is still growing and while its acceptance has become more and more common, bitcoin is still the most commonly recognised cryptocurrency.

• Not different enough. Many consider Litecoin’s technical improvements too subtle and this might hinder Litecoin’s growth. Faster transaction times and more difficulty in mining might be good enough reasons for specific-use cases, but in the grand scheme of things many are of the opinion that it does not differentiate itself from bitcoin enough to sustain long term growth.

The future of Litecoin

Litecoin’s market cap growth is not expected to slow down anytime soon which will lead to more and more businesses adopting the altcoin, either alongside bitcoin or as a complete replacement.

Additionally, a lot of work is being carried out on improving the network Litecoin runs on, which will improve the speed at which transactions are verified even further and will, more importantly, allow Atomic Swaps.

With new Litecoin ATMs being installed and a growing number of companies slowly making the switch to Litecoin, its future is looking brighter than ever.

GLOSSARY TIP: ATOMIC SWAPS

With Litecoin joining the Lightning network, users will soon be able to participate in what is known as Atomic Cross-Chain Trading or Atomic Swaps for short.

Imagine Alice needs to pay Bob. Without Atomic Swaps, if Bob has a bitcoin wallet and Alice only has Litecoin, she would need to first exchange her Litecoin into bitcoin, open a bitcoin wallet, then pay Bob in bitcoin. This is clumsy and has been a major hindrance to the acceptance of altcoins over bitcoin.