Litecoin Introduction

Litecoin Introduction

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Charles Lee created Litecoin in 2011, and it is now the 2nd or 3rd largest digital currency after Bitcoin.  For those already using Bitcoin, Litecoin has a few surprises for you. The main desktop application is an enhancement of Bitcoin-QT Client, and you can download it from Litecoin’s website—you can also use it as a digital wallet. 

Litecoin is different from Bitcoin in some ways. To begin with, the cap for Bitcoin is 21 million coins while the cap for Litecoin is 84 million. 

Litecoin has begun with a mining reward of 50 coins for every block just like Bitcoin. However, the award for Litecoin halves every 840,000 blocks which is larger than the set 210,000 for Bitcoin. 

The Litecoin transaction fee is slightly higher than that of Bitcoin, but again, one Litecoin is worth 0.019BTC. 

Where on earth can you get Litecoin? If you are not a miner, you have to purchase Litecoin from one of the few;

•    BitBargain UK

•    Bittylicious

•    Bitfinex

•    BTC-e

•    BTER

•    Kraken

•    Cryptsy

•    Vircurex

•    CoinMKT

Litecoin is still very far from matching Bitcoin’s standards and getting merchants to accept this digital currency is not easy. 

The algorithm that Litecoin uses as “proof of work” is entirely different from the one that Bitcoin does. Bitcoin uses SHA256 hashing algorithm, and Litecoin uses Scrypt algorithm. In simple terms, the Litecoin system only favors systems with a very high RAM (which is very costly), and it is a kind of “Memory Hard Problem.” Apart from that, transactions are conducted just as in Bitcoin. 

The Litecoin mining process is very much similar to the Bitcoin mining process. Same with other crypto-mining, in Litecoin mining there are mining pools that increase rewards for miners. 

Whether you plan to solo mine or join a pool of miners, use cgminer—it is the best mining software. 

Just like cryptocurrency in general, Litecoin is not for everyone. Charles Lee in an interview said that most will use Bitcoin for expensive purchases and Litecoin for micro transactions.

What is a crypto currency wallet? It is a software program for storing public and private keys and interacts with different blockchain to allow users to send and receive online currency and also monitor their balance. 

Although there are so many people that use digital currency wallets today, there is still a lot of confusion on how they work. As opposed to traditional wallets, online wallets do not store currency. These currencies are neither stored anywhere nor do they exist in any physical form. It is only the records of transactions that exist and are stored on blockchain. 

When someone sends you cryptocurrency, they are signing off ownership of those coins to the address of your wallet. The private key in your wallet has to match the public address the currency is assigned to if you want to spend the coins and unlock funds. If the private and public keys match, your digital wallet balance will increase while the sender’s balance will decrease. So do not expect a real exchange of actual coins. The proof of the transaction is its record on blockchain and the change in balance in the wallet. 

Various types of wallets offer different ways to access and store your online currency. There are three distinct categories of wallets; paper, hardware, and software. Software wallets are online, mobile or desktop. 

How secure your wallet is, depends on its type (hardware, online, desktop, mobile, paper) and your service provider. It is riskier to store currency on a web server compared to offline since offline wallets cannot be hacked.  However, regardless of the wallet you are using, you should be careful because if you lose your private keys, you lose your money as well. In another case, you can be scammed. 

1.    Backup your wallet. Only store small amounts online and keep the rest in a highly secured environment.

2.    Update your software regularly (both on your mobile and computer).

3.    Add extra security layers. 

Multi-currency Wallets

Bitcoin is the most popular cryptocurrency, but many others (altcoins) have come a long way. If you would like to have a variety of digital currencies, you can do so without having a different wallet for each one. There are multi-currency wallets that allow you to have several currencies in the same wallet.

Some transactions require you to pay a fee while others don’t. Alternatively, you can set your fee. Either way, the fees are usually too small. 

Wallets are pseudonymous. Your wallet is tied to your identity, but your identity is not public. However, your wallet address can trace back to your identity.

There are many options for you. But you need to know how you are going to use it first before making a decision.

The following are examples of great wallets that you may want to try out.

•    Bread wallet—it is available on Google Play and the Appstore.

•    Mycelium—this one offers you total control over your bitcoins.

•    Exodus—still new and only available on the desktop.

•    Copay—it provides a multi-signature feature and you people/partners can fund.

•    Jaxx—for people looking for a multi-currency wallet.

•    Armory

•    Trezor

•    Ledger Nano

•    Green Address

•    Blockchain (dot) Info

Many people like to refer to Litecoin as the “silver to Bitcoin’s gold.” By market cap, it is ranked as the third largest digital currency after Bitcoin, with Ripple taking the second place. 

Litecoin was founded to act as a Bitcoin alternative to make up for its perceived shortcomings—it was developed to be “lightweight” and be more plentiful than Bitcoin. Moreover, its proof-of-work algorithm is Scrypt which was incorporated to make it immune to ASIC mining. However, a few companies have voiced their plan to launch Scrypt ASIC miners soon. 

Processing blocks on Litecoin’s network is fast, a maximum of 84 million coins can be produced, as opposed to Bitcoin where the maximum is 21 million. 

What you should know before buying Litecoin;

•    Litecoin captured the attention of more speculators in November 2013 after Bitcoin’s price surged, but since then prices have been dropping in parallel. The prices of these two digital currencies are likely to move towards the same direction, even if Litecoin’s value is much lower compared to Bitcoin’s. 

•    Veteran Bitcoin investors should find it easier adapting to Litecoin as opposed to amateurs who might have a hard time because the infrastructure is not as established as in Bitcoin. 

•    You can alternatively gain Litecoins by using standard computing equipment to mine them.

•    Research extensively before you invest and risk only the amount that you can afford to lose. 

If after your research you have decided to invest in the Litecoin market, you need to be aware of several potential issues and pitfalls.

Buying Bitcoins is straightforward, not so with Litecoins. This, of course, is not surprising because Litecoin infrastructure is less developed. Buying Litecoins with Bitcoins is one of the simplest ways of purchasing Litecoins.; it is also the fastest and the cheapest. 

If you have Bitcoins, you buy Litecoins with them easily on several exchanges;

•    BTC-e

•    Kraken

•    Cryptsy

•    And several others that you can find on the Litecoin Wiki

Currently, exchanges are not willing to deal in Litecoin which is one of its biggest issues right now.  Most of them allow BTC/LTC conversions only. Bitfinex, BTC-E, Kraken, and Crypto-Trade sell Litecoins for dollars, rubles, and euros but again, their availability will depend on where you are. 

Purchase Litecoins for fiat on the following exchanges;

•    BTC-e

•    Bitfinex

•    Kraken

•    BitBargain UK

•    Bittylicious UK

Even buying Litecoins through money wire transfer via an exchange is not so straightforward, since it can be strenuous. For example, Coinbase and BTC China do not deal with Litecoin yet they are major Bitcoin exchanges. And also, the transaction is not as fast. 

To make it easier, purchase Bitcoin locally and save yourself the trouble of wiring money abroad to convert it to Litecoin.

Although several exchanges have online Litecoin wallets, they are rarely helpful. Many investors prefer to have secure cold offline wallets. Luckily, Litecoin has a built-in encryption feature that can help you keep your wallet safe in a few clicks. 

There are not many Litecoin wallets for you to choose from as Bitcoin. The two primary ones are Litecoin-Qt and Electrum. Carefully read the fine print when selecting a wallet since most of them charge for almost everything including storage.  

Litecoin has been making headlines. As Bitcoin and Ethereum prices declined amidst panic concerning Bitcoin’s future, Litecoin surged. It went from $40 to $55 in June. This quick increase in price has attracted the attention of investors, and they are now re-examining Litecoin. Its main weakness is that it is quite similar to bitcoin, but this might help it grow in value. 

History has led us to believe that Bitcoin is powerful enough to control the rest of the online currency market. Bitcoin’s price sunk following a 28% rally after people hoped the “Bitcoin Civil War” was coming to a stop. Shortly after, Ethereum price went streaking down following Bitcoin’s. However, even when other cryptocurrencies followed Bitcoin, Litecoin appeared to be immune to that siren call. In other cases, Litecoin price continued to rise when Bitcoin’s remained stagnant. 

Looking at the two cryptocurrencies from a technological point of view, Litecoin has the upper hand because of two reasons; its mining ease and transaction speed. Litecoin takes only 2.5 minutes to produce blocks for its blockchain while Bitcoin takes 10 minutes. Because of Litecoin’s ability to perform transactions faster, investors focusing on utility will prefer it over Bitcoin. 

Litecoin’s algorithm is very simple compared to Bitcoin—mining Litecoin takes less time and effort. With time this may change, but until then, investors will always run to Litecoin when Bitcoin’s scaling issues frustrate them. 

Another big score for Litecoin is its cohesive community. The Bitcoin community is always frustrated, with so much chaos over the upcoming “fork.” Bitcoin’s community could not come to a consensus, but the Litecoin community found common ground. This will attract investors that want stability because Bitcoin’s divided community might end up tearing it apart. 

All the above factors give Litecoin an advantage over Bitcoin. However, investors must not decide that Litecoin is the best, by considering these factors alone. Because then, they will be missing one major point; Bitcoin still possesses the first-mover advantage. It is almost ten years old and had enough time to attract investors and take control over the market—an advantage that Litecoin does not have since it was only launched around six years ago. 

Smart investors know that “a healthy investing portfolio is a balanced portfolio.” Based on that logic, it is wise to invest in several cryptocurrencies. Some investors will not agree with this because they always believe that only one online currency will triumph. However, with more cryptocurrencies in the market, and a majority of them offering fantastic utilities, it is very likely that most of them will still be there in the future.

Analysts think shortly, several cryptocurrencies will be operating in the global economy. Therefore, when an investor is evaluating Litecoin, they should focus on the characteristics that set it up to become a success in the global economy. Also, they should analyze and see if those features will help it survive its rivalry with Bitcoin. Of course, it does not have to be stronger than Bitcoin, but it should stay relevant in Bitcoin’s world.

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