What is Litecoin (LTC): A “Lighter” Version of Bitcoin
Litecoin is an open-source and decentralized peer-to-peer cryptocurrency that carries the ticker LTC. It is currently the ninth-ranked blockchain-based digital currency or asset and has a total market capitalization above $11 billion. One Litecoin currently costs approximately $185.
Litecoin v.s Bitcoin
As one of the first source code forks of the original Bitcoin core client, Litecoin is often considered “the silver to Bitcoin’s gold.” Indeed, the “lighter” version of Bitcoin shares many similarities to the foremost cryptocurrency — but is, by design, faster and cheaper to transact.
Though Bitcoin’s scalability issues have largely been remedied since its egregious average block times and fees skyrocketed in late 2017, it is still a relatively slow (and sometimes expensive) means of transacting smaller amounts. The average block time of the Bitcoin network is generally 10 minutes, and its average fee surpassed $30 in Feb. 2021.
Litecoin, on the other hand, averages a new block every 2.5 minutes. Its average transaction fees are also minuscule at less than $0.03. This makes LTC more suitable for smaller everyday peer-to-peer payments. The cheaper transaction fees also translate, generally speaking, to lower LTC withdrawal fees from centralized cryptocurrency exchanges — making Litecoin a popular vehicle for cross-exchange transactions.
As is the case on the Bitcoin network, the total supply of coins on the Litecoin network is also capped. However, at 84 million coins, there will eventually be four times as many Litecoins in existence as Bitcoins — making obtaining a whole Litecoin easier for most people.
Despite this, Litecoin is still significantly less popular than its inspiration. The total volume of LTC traded on cryptocurrency exchanges is only 10% that of BTC’s total volume, in general terms. Additionally, the raw number of transactions on the Bitcoin network every 24 hours is roughly 2.5x greater.
How is Litecoin mined?
Litecoin uses the less-intensive Scrypt hashing algorithm, which is lighter on processing power than Bitcoin’s SHA-256 hashing algorithm. By focusing more on the utilization of high-speed RAM, Litecoin mining is theoretically easier for anyone to participate in — and, by extension, less centralized.
Litecoin block rewards for miners are, like Bitcoin block rewards, cut in half approximately every four years. More specifically, Litecoin mining rewards are halved every 840,000 blocks. The most recent Litecoin Halving occurred in August 2019, when the block reward was reduced from 25 LTC to 12.5 LTC. The next Litecoin Halving will reduce block rewards to 6.25 LTC — making the supply of new Litecoins 50% more scarce by design.
Who founded Litecoin?
Though we do not know the real identity of Bitcoin’s creator, we know a lot about who created its earliest spin-off. Litecoin was founded by Charlie Lee, a well-known figure in the blockchain world and a former employee of Google, in 2011. Lee is active on Twitter under the handle @SatoshiLite — a notable nod to his and his project’s inspiration.
Lee has proven to be very open and transparent about his ongoing involvement and/or stake in Litecoin. However, this has also opened the creator to criticism from other industry participants.
Most notably, Charlie Lee announced that he “sold and donated” his entire LTC holdings in December 2017 — which coincided with the notable altcoin’s all-time price high. Though Lee claimed that his noteworthy sale “did not crash the market,” the price of LTC immediately declined and never reached similar highs.
Litecoin creator Charlie Lee announced the sale/donation of his entire LTC holdings in December 2017, which coincided with the altcoin’s all-time price high. Source: TradingView
What is the future of Litecoin?
News on interesting partnerships and the adoption of Litecoin has slowed over recent years, despite the renewal of a cryptocurrency bull market in 2020.
Perhaps most notably, Litecoin developers are working to implement MimbleWimble — a privacy and scalability-focused mode of structuring and storing transactions — into the blockchain’s protocol. The implementation of MimbleWimble Extension Block technology is expected to launch on March 15, 2021.
Some industry participants remain skeptical about future Litecoin developments after some hype-driven projects failed to see the light of day. The most high-profile failure was LitePay, a payments processor meant to facilitate the widespread adoption of Litecoin via a dedicated crypto wallet and debit card. The project was shuttered in 2018 when Lee apologetically tweeted that “we got too excited about something that was too good to be true and we optimistically overlooked many of the warning signs.”
In terms of mainstream adoption, Litecoin received a big boost from the altcoins addition to PayPal. The payments giant now lets users buy, sell and hold LTC — exposing a significantly wider user base to Bitcoin’s little brother.
Grayscale Investments has also been adding large amounts of LTC to its holdings. According to recent reports, the digital-currency investing giant added 174,000 coins to its holdings in February 2021 — bringing the total value of its Litecoin holdings to nearly $250 million. This aggressive investing has provoked many industry analysts into assuming that Grayscale is anticipating increased demand for LTC exposure from institutional clients and investors.
Because Litecoin is a pure peer-to-peer cryptocurrency, like Bitcoin, there are no plans to implement smart contract support to the protocol. This makes Litecoin unattractive to market participants more focused on decentralized finance (DeFi) or non-fungible tokens (NFTs).
Fundamentally, Litecoin acts as intended. It is a “lighter” version of Bitcoin that allows for faster and cheaper peer-to-peer transactions.
Though founded in 2011, it remains a popular altcoin nearly one decade later — a testament to its design, use cases, and fundamental value proposition. It is available on almost all major cryptocurrency exchanges and currently remains a Top 10 blockchain-based digital currency or asset.
Litecoin is valued for its simplicity and ease of use. However, it is that simplicity that has caused development to stagnate when compared to more-complex initiatives, such as the advancement of decentralized finance and non-fungible tokens through advanced smart contract protocols.