Litecoin Explained - Chapter 1: What is Litecoin?

Litecoin Explained - Chapter 1: What is Litecoin?

23 July 2019

Vontobel now offers investors access to the crypto currency «Litecoin». But what is Litecoin (LTC)? In three chapters, we want to give you high-quality knowledge about the exciting topic of «Litecoin».

The lesser-known crypto currency Litecoin (symbol: Ł or LTC) has been experiencing a real price rally since the beginning of the year. Litecoin was already introduced in 2011 and is the oldest crypto currency after Bitcoin. According to Kraken, an LTC costs USD 90.53* or SEK 854.08*. According to Coinmarketcap.com, Litecoin has a market capitalization of approx. USD 6 billion, making it the fourth largest crypto currency. Litecoin's number of transactions has also risen sharply in recent years. In this article we take a closer look at what Litecoin actually is, what it has to offer compared to Bitcoin and why its popularity has increased in recent years.

How Litecoin works

Litecoin is one of the oldest crypto currencies after Bitcoin (BTC). Charlie Lee – formerly employed by Google – developed and introduced LTC in October 2011. He was inspired by Bitcoin, which is why LTC is based on its original source code. It is also an open source software project and it works on a peer-to-peer basis. Litecoin makes it possible to transfer money to any person worldwide in real time and almost free of charge. Litecoins can be exchanged to traditional currencies and they can also be used to purchase goods or services. Litecoin also operates independently of central banks, governments and any central authorities. Like Bitcoin, it is a decentralized digital currency.

Litecoins are created and transmitted via the cryptographic open source protocol. Blockchain technology is also used to record a decentralized public ledger of all transactions. Recently completed transactions are grouped into «blocks» by the miners. The blocks are then cryptographically secured before being linked to the existing blockchain. A similar blockchain technology is also used by Bitcoin.

LTC is faster and cheaper than BTC

Litecoin is similar to Bitcoin in many ways, as it is also a digital currency with a digital payment system. Although there are some similarities between BTC and LTC, there are some important differences to Bitcoin: Litecoin offers almost free transactions and faster transaction times compared to the leading crypto currency (2.5 minutes compared to 10 minutes in the Bitcoin network). Crypto experts therefore claim that in the future Litecoin will primarily be used for cheaper transactions to make daily use more efficient, while Bitcoin will rather serve as a long-term store of value. Litecoin is therefore a perfect complement to Bitcoin.

Why Litecoin is gaining more and more importance

The value of Litecoin has risen significantly since its introduction. The increasing popularity of Litecoin in 2017 is due to the fact that the currency took over and tested a number of new functions from Bitcoin. For example «Segregated Witness», which fixed some vulnerabilities in the Bitcoin source software. Or the so-called «Lightning Network», a technology that allows the network to process more transactions.

However, there are other reasons for the continuous appreciation of the Litecoin: On the one hand, the next «Halving» date takes place at the beginning of August 2019. Halving means a shortage of coin supply. This is intended to limit the amount of coins and prevent the crypto currency from decreasing in value. Such halvings are typically undertaken every four years. Usually the prices of the respective crypto currencies rise every time before a halving takes place. When the Litecoin was halved four years ago, its value rose by about 80% in the three months before (from USD 1.58 on 9th April 2015 to USD 7.66 on 9th July 2015). Initially, 50 Litecoins were mined per generated block, which then fell to 25 Litecoins and will fall to 12.5 by the next Halving. Mining describes the process by which each block is secured to the existing blockchain using mining software. Once a block is secured, new units of crypto currency are created. Miners can then sell these units directly to the market.

Another reason for its popularity is the increasing acceptance of crypto currencies - even by institutions that do not belong to the circle of innovative Silicon Valley startups. At the US telecommunications group AT&T, customers can now pay their bills in digital currencies. The software and hardware manufacturer Microsoft also accepts payments in Bitcoin for digital goods. In addition, Facebook recently announced details about plans for its own crypto currency «Libra».

*As of 23.07.2019

 

  

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10/12/2019 08:53:37

 

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