Bitcoin’s little brother, the “silver”
to Bitcoin’s “gold”, Litecoin has been around for years. Created by Charlie Lee in October 2011, Litecoin
aimed to become a lighter version of Bitcoin, hence the name. It was designed to be used for everyday transactions,
compared to Bitcoin, which is viewed mostly as a storage-of-value asset. So, let’s dive in and answer the question:
What is Litecoin? Litecoin is a decentralized, peer-to-peer
network for payments using its native coin, LTC. What this means is that users all around the
globe can send LTC to each other without the need of a central authority to validate those
payments.
This is the big revolution that Bitcoin brought
with the development of the blockchain, and what Litecoin aimed to improve. In the traditional financial system, central
banks are the issuers of money and the verifiers of transactions. With the blockchain this power is transferred
to users all across the world, the so-called miners. Miners are the ones who validate the transactions,
add them to the blockchain and get rewarded with newly minted LTC and the transaction
fees for their efforts. This is the famous Proof-of-Work. But that’s not where decentralization stops. With Litecoin, and all cryptocurrencies, the
ownership of money is transferred to each holder, because cryptocurrencies use cryptography
to prove ownership of the funds and don’t rely on a central bank to do that.
Of course, all that was already accomplished
with Bitcoin. So, what was the new thing that Litecoin brought
to the table? Three things: Faster transactions, cheaper
transactions and more decentralization. This way, Charlie Lee aimed to create a coin
that was easier to use in everyday transactions. And if you’re wondering, Charlie Lee, unlike
Bitcoin’s mysterious creator, is still very much engaged in the development and promotion
of Litecoin, along with its Core Development Team. After all, Litecoin is an open-source project,
which ensures its security, as anyone can review the code and propose improvements. With Bitcoin, new transactions on average
are added to the blockchain every 10 minutes. Litecoin reduced this time down to 2.5 minutes, a much
more reasonable time to wait when paying for groceries. But that’s not the only thing to consider
when paying for everyday goods. The fees of the transaction need to be quite
low for the transaction to make sense. Although high Bitcoin fees were not an issue
when Litecoin was created, nowadays Litcoin’s fees of one or two cents really does make
a huge difference.
And both the transaction speed and cost were
further improved when Litecoin became the first cryptocurrency to adopt the Lightning
Network. In May 2017, the first ever Lightning Network
transaction took place on Litecoin, sending 0.0 0 0 0 0 0 0 1 LTC, or 1 photon as the
smallest fraction of LTC is called, from Zurich to San Francisco in under one second. Lightning Network is a layer-2 network built
on top of the actual blockchain that facilitates near instant and practically fee-less transactions
between two parties and it can scale to support millions of transactions per second. Also the litecoin blockchain supports 54 transactions
per second, that’s like a snail compared to a fighter jet. Finally, Litecoin is considered more decentralized
than Bitcoin because it uses a different Proof-of-Work algorithm, called Scrypt. But from where does Litecoin derive its value? In part, the value comes from the cost to
mine LTC, meaning the cost of the mining equipment, but mainly the electricity that equipment
consumes.
Secondly, it comes from the coin’s scarcity
and limited supply. Only 84 million LTC will ever be created,
and if you consider that central banks can, and do, print money as they wish, that property
cannot be emphasized enough. Finally, it comes from the market laws of
supply and demand. If people think LTC is valuable and want to
own some, that drives its price up.
If these properties remind you of precious
metals, you are not mistaken. Bitcoin is considered the digital gold, and
Litecoin fills the role of its counterpart, digital silver. Nowadays, though,all kinds of new and fancy
cryptocurrencies are always popping up. From smart contracts, to the whirlwind of
NFTs and DeFi so do early coins like Litecoin still have utility? I would say a resounding yes. Their utility comes from the fact they’re
built on solid foundations that have endured the test of time, they are trusted by all,
their networks are extremely widespread, and they’re simple, both to understand and to
use. Are you a Litecoin hodler? What is it that you like best about Litecoin
and what do you foresee for its future? Let us know your thoughts in the comments
below.
And if you enjoyed this video make sure to
hit that like button and subscribe for more crypto videos from Exodus. Until next time… Hodl on!.
