What is Litecoin?

Understanding Litecoin

Litecoin is a decentralized digital currency like Bitcoin. It uses the same encryption techniques to transfer and create funds and to confirm transactions. The main difference between Bitcoin and Litecoin is that Litecoin has a larger amount of coins that can be created and it has faster transaction rates.

It can be helpful to think of it like this: “Litecoin is the Silver to Bitcoin’s Gold.”

Next to the very similar cryptocurrency Bitcoin, Litecoin has one of the highest largest market capitalizations of any coin and it has longevity.

These above facts makes Litecoin one of the better cryptocurrencies in which to invest in (this being true from about 2015 to 2017; one can’t speak to the future).

FACT: Back in June 2015 when we created this page Litecoin could be traded for $1.50 USD (after reaching heights of $40 USD briefly in 2013). In 2017 Litecoin traded as high as $400. Aside from a few periods of extreme volatility, Litecoin has gradually seen a rise in value since its inception in 2011 and has often been one of the top coins by market cap. It may never see gains like it did from 2015 to 2017 again, but then again, it may. The cryptocurrency market is young, and anything can happen.

FACT: Litecoin was created in October 2011 by former Google engineer Charles Lee (see his Twitter). Charles Lee worked for Coinbase (one of the most popular cryptocurrency wallet-exchange-brokers in the US) from 2015 to 2017. Considering the importance of Google, Litecoin, and Coinbase… that is somewhat of a big deal.

How is Litecoin Different From Bitcoin?

Without getting too technical, there isn’t much of a difference between Litecoin and Bitcoin. Key differences include:

The rate at which transactions are confirmed: Bitcoin’s algorithm allows for one transaction to be added to the public ledger every 10 minutes, Litecoin has a faster rate of confirmation at one per 2.5 minutes. In theory, this helps avoid one of the only types of fraud that can happen with cryptocurrency: “double-spending”.

The number of coins that can ever be created: Litecoin’s algorithm will allow for a total of 84 million Litecoins to be created. This max capacity is 4 times greater than that of Bitcoin, mirroring the 4 times faster rate of transaction confirmation (confirming transactions creates new coins via a process known as “mining“).

Slight differences in cryptography algorithms: Both coins use a proof-of-work algorithm, but while Bitcoin uses the SHA256 hashing algorithm, Litecoin uses the scrypt hashing algorithm. In essence, this makes confirming Litecoin transactions more CPU-intensive on machines designed to mine Bitcoin.

In other words, Litecoin is in many ways an improved Bitcoin with less brand awareness. In a perfect world it would trade at exactly 1/4 the price of Bitcoin (as it will have very roughly 4x the total coins in circulation when all BTC and LTC are in circulation)… this is not a perfect world however, and Litecoin is trading at $50 and BTC at $4,200 here in early October 2017.

TIP: In simple terms, there is a proposed update for Bitcoin and Litecoin called “SegWit.” This update would speed up both Bitcoin and Litecoin (thereby taking away Litecoin’s advantage to some degree). With that in mind, the creator of Litecoin has made a case for the longeviity of Litecoin anyway. See Charlie Lee’s My Vision For SegWit And Lightning Networks On Litecoin And Bitcoin.

TIP: For more reading, see CoinDesk’s “What is the Difference Between Litecoin and Bitcoin?

Author: Thomas DeMichele

Thomas DeMichele has been working in the cryptocurrency information space since 2015 when CryptocurrencyFacts.com was created. He has contributed to MakerDAO, Alpha Bot (the number one crypto bot on Discord),...