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What is Litecoin?

Litecoin, abbreviated as LTC, started out as an early competitor to Bitcoin in 2011. The crypto market has grown, but it has remained a close competitor of Bitcoin despite new currencies entering the market. The currency is currently gaining traction in the market since no other crypto coin has stayed in the top ten-cryptocurrency charts longer as a close second to Bitcoin.

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Litecoin shares many similarities with Bitcoin since it’s based on Bitcoin’s original source code. It was created when the Bitcoin blockchain diverged into two separate paths, thus creating a whole different coin. The aim of designing Litecoin was to create a digital currency that would carry out cheaper transactions, which would be more efficient in everyday use.

The currency uses blockchain technology, which means it can transfer money directly among individuals and businesses, ensuring that public ledgers of all exchanges are recorded. Blockchain technology also allows Litecoin to operate decentralized payment arrangements away from the bank and government censorship or control. Like Bitcoin, its existence as a blockchain ensures that participating nodes process transactions with miners providing security and verification for each transaction, thus making them secure.

In as much as Litecoin is based on Bitcoin’s original source code, it has some subtle differences, which include:

  1. A higher transaction speed: Litecoin processes transactions faster than Bitcoin because it requires more advanced technology to mine as compared to Bitcoin. The blocks in Litecoin are generated four times faster, making financial transactions processed quicker and at a higher number at a given time than Bitcoins.

  2. While both have a limited number of coins in the market, Litecoin has 84 million coins available. In contrast, Bitcoin has 21 million coins.

  3. Litecoin has a lower transaction fee compared to Bitcoin due to the congestion in the Bitcoin blockchain.

  4. Litecoin has a smaller market cap compared to Bitcoin but has the advantage of being among the most traded and popular cryptocurrencies.

  5. The two digital currencies use distinct mining strategies, with Litecoin using Scyprt, one of the initial hashing algorithms implemented on blockchain networks, and Bitcoin uses the SHA-256 hash function.

How Litecoin works

Since Litecoin is set up as a decentralized network, it has no oversight from banks or governments. Litecoin is tracked using blockchain technology, which stores information in such a way that:

  • It creates lasting transactions timelines in blocks.

  • It does not allow editing of transaction records, which prevents hackers from getting into the system and stealing currency.

  • It provides transparency in how the money flows through the network.

  • It is decentralized discouraging control from any single entity.

If hackers do succeed in accessing the Litecoin platform, they can be easily traced. While the hacker may remain anonymous, any stolen Litecoins can be tracked through the blockchain and returned to their owner.

Unlike having money in the bank, transacting in the Litecoin platform happens much faster, and transfers are not limited to business hours. Litecoin transactions can occur within minutes or hours. The cryptocurrency market, just like a digital bank, is open twenty-four hours a day, seven days a week. Also, there is no limit as to when and how one can access their money.

Trading Litecoin

The price of Litecoin is typically quoted against the United States dollar. Therefore, when buying Litecoin, one sells the dollar. When the value of Litecoin increases, one can sell it at a profit since they purchased it at a lower price. One, however, makes a loss when they opt to sell after the price falls.

Trading Litecoin in the cryptocurrency market can either spread betting or use a CFD (Contract for difference) account. These options allow a trader to speculate on Litecoin’s price movement without owning it. Instead, the trader opens a position whose value increases or decreases depending on Litecoin’s price shift against the U.S. dollar.

Since CFDs and spread betting are leveraged products, a trader only needs to deposit a fraction of the full trade value to open a particular position. There is no need to tie all one’s capital by outrightly buying Litecoin. They can instead employ an initial deposit that will get the exposure to amounts that are more significant. Leveraged trading usually allows for the magnification of returns. The flipside is that the losses accrued are also magnified since they are typically based on the position’s total value.

Why invest in Litecoin

Litecoin continues to consistently maintain a spot in the top ten currencies despite the upsurge of digital currencies in the market. With over 5,000 cryptocurrencies available, this record goes on to make Litecoin stand out and impress investors. Litecoin also has a higher supply than the leading cryptocurrency in the market, Bitcoin. Its hard-cap is at 84 million Litecoins. In comparison to Bitcoin, Litecoin generates new blocks faster, making it more appealing for transactions.

Potential Benefits

  1. Litecoin has demonstrated stability over the years.

  2. It is unique due to its exceptional market price.

  3. It has affordable shares even though it is priced higher than most of its competition.

  4. It has an appealing price range due to its ability to compete in the market and its growth potential.

Potential Risks

Every investment carries risk and investing in Litecoin has its risks, which include:

  1. Its consistency is not coupled with steady growth, as many investors would like.

  2. It has a lower market cap compared to other cryptocurrencies.

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Image: Streetwise

Factors affecting Litecoin’s price

Generally, Litecoin’s price is volatile due to the following factors:

  1. Lack of regulation: Since Litecoin is run on a decentralized network, it is currently not regulated by governments or banks, making the price highly volatile. Its value goes up or down unchecked.

  2. Litecoin’s supply: Unfortunately, Litecoin’s availability is finite, with only 84 million Litecoins available for mining. The speed at which Litecoin enters the market can cause this availability to fluctuate, affecting the prices.

  3. Press: Public perception can affect the prices with a positive perception raising the prices and vice versa. The longevity, security, and costs of other cryptocurrencies can also affect Litecoin’s prices.

  4. Adoption: Litecoin is yet to be fully adopted by many consumers and businesses as a mode of payment. However, blockchain technology is showing promise, and its adoption imminent, which means that its prices will grow.

Typically, Litecoin is a peer-to-peer digital currency that enables instant and cheap payment to anyone globally, with a fully decentralized open-source, global payment network. The currency’s faster transaction times and efficient storage makes it a worthy competitor in the cryptocurrency market. It has proven to be a suitable medium of commerce that complements its predecessor, Bitcoin, since it has substantial industry support, trade volume, and liquidity.

Litecoin is a wise investment option for long-term investors. The currency’s track record in maintaining steady numbers over the years is proof enough that it is not much of a risky investment. For a trader who has no qualms about taking risks, investing in Litecoin could result in a significant payoff in the future when Litecoin finally breaks through and takes the lead over other competitions. Even with the chance that it could be overtaken by one of the thousands of other cryptocurrencies trying to break into the cryptocurrency market, Litecoin still stands out as a tough competitor.

This information is not intended to be financial advice. The content in our Insights blog is intended for education and entertainment purposes only. All information that you receive here is intended as examples and not actual trading advice on any particular Crypto! Nothing here shall be construed to be financial, legal, or tax advice. Purchasing crypto poses considerable risk of loss. I don't guarantee any particular outcome. Past performance does not indicate future results. Never trade or invest more than you can afford to lose.

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