What Is Litecoin (LTC), How it Works, Its Uses, And A Complete Guide On Using Litecoin

In 2009, after the creation of Bitcoin, the first digital currency, the idea of digital currencies began spreading worldwide. However, right from the beginning, there were some drawbacks to Bitcoin. Firstly, Bitcoin demanded extensive computational power for mining, secondly, the transaction speed of Bitcoin was quite slow. To address these drawbacks of Bitcoin, a lightweight digital currency named Litecoin was introduced to the market, which later went to become one of the most extensively used digital currencies. In this blog post on Litecoin, we will learn what Litecoin is, how Litecoin works and about its uses.

What is Litecoin (LTC)?

Litecoin is a decentralized digital currency that was in the year 2011 as an alternative digital currency to Bitcoin. Coins like Litecoin are categorized as 'altcoin' as they are devised to be an alternative to traditional digital currencies like Bitcoin. Litecoin was created by Charlie Lee who was an engineer at Google back then.

The purpose behind the introduction of Litecoin was to create a comparatively cost-effective digital currency for everyone to use.

Similar to Bitcoin, Litecoin is also an open-source digital currency which implies anybody can see and contribute to the development of the digital currency.

By its nature, Litecoin is a 'deflationary' digital currency - which means that the total supply of Litecoin is fixed, i.e.: 84 million4 million. As the total number of coins is fixed, demand becomes the prominent factor in determining the value of coin.

How does Litecoin work?

Behind the working of every digital currency, there are thousands of lines of codes that are written to implement the rules, security, and process of transactions.

Litecoin, like most other popular digital currencies, relies on blockchain technology - the heart of decentralized payments and finance. It has its own blockchain network, commonly referred to as ‘litecoin blockchain’ where it is operated.

The blockchain is  like a giant transparent ledger where all the transaction data are stored in the form of blocks. There is no single entity to control the system - the blockchain system runs on a decentralized system - a network of computers spread across the world.

Litecoin Mining Explained for Beginners

In a blockchain network, there are mainly 4 types of computers (referred as ‘nodes’). Miners are a special type of node which are equipped with powerful hardwares to perform complex cryptographical calculations.

When a mining node successfully solves cryptographic calculations - a new block is added to the blockchain network. As the reward of the hardware and energy used, the mining nodes are rewarded with the Litecoins it minted.

How does Litecoin Transaction Work?

For transactions, this digital currency uses a peer-to-peer (one to one) network. Unlike Bitcoin, Litecoin does not use the SHA-256 for hashing and meaning data integrity. Rather, Litecoin uses Scrypt algorithm for hashing - in fact, Litecoin was one of the earliest digital currencies to adopt Scrypt algorithm. Because of the use of the Scrypt algorithm instead of SHA-256, transactions using Bitcoin take very little time as compared to Bitcoin.

Benefits of using Litecoin over Bitcoin -

Here are the top benefits of using Litecoin over Bitcoin to make transactions -

Less Transaction Cost:

Whenever a user wants to make a payment using digital currencies, they need to pay a small transaction fee which is distributed primarily to mining and validation nodes.

For digital currencies like Litecoin, the transaction fees are very low as compared to Bitcoin which makes payments using Litecoin very affordable not only for individual users but also for businesses.

Faster Settlement:

Every transaction made on blockchain is added to the blockchain network in forms of blocks. A block contains the record of a bunch of transactions. The Bitcoin blockchain takes 10 minutes to generate every block while the Litecoin blockchain takes 2.5 minutes to generate a block.

This huge gap in block-generation time makes Litecoin 4x faster than Bitcoin.

Supply:

Though Litecoin and Bitcoin - both have a fixed supply, but the number of Litecoin is four times more than the number of Bitcoins.

Energy Efficiency:

As mentioned, the Scrypt algorithm that Litecoin uses requires very less processing power than Bitocin’s SHA-256 algorithm - making transactions made using Litecoin energy efficient.

Uses of Litecoin

Peer-To-Peer Transactions:

Litecoin can be used to make direct payment between two parties - the transaction neither needs an intermediate nor is it governed by any authority. By using their Litecoin digital wallet, a user can transfer their Litecoin to another Litecoin user.

International Transactions:

Litecoin has made it very easy to make cross-border payments. Unlike traditional payment systems like banks that take up to a few business days to complete an international fund settlement, Litecoins can be transferred from one country to another country within a few minutes.

E-commerce Transaction:

Another effective use of Litecoin is to make payments on e-commerce and quick commerce platforms. Many e-commerce platforms now accept payments via digital currencies - users can make payments using their Litecoins in these e-commerce platforms. You can collect payment in your e-commerce platform using Collections that offers real-time payment settlements. 

Other use of Litecoin

Apart from its use to make payments, Litecoin has other uses too, for example:

Investment:

Many new digital currencies lose their value and eventually vanish out from the market within a few months of their launch. However, only a few digital currencies can sustain a period of over a decade in the market. Litecoin has done that and so is considered as an investment option by many digital currency investors.

Investors invest in Litecoin to diversify their portfolio and as a potential tool for hedging.

How to use Litecoin for daily transactions?

In the following lines, we’ve provided a step-by-step guide to buying Litecoin and making payments using it in day-to-day life.

1. To make payments using Litecoin, you will need to have some Litecoins in your possession. As Litecoins are digital currencies, you’ll need to have a digital currency wallet to store them. While choosing a Litecoin wallet, make sure to check the hidden fees and other security features. You may need to submit a government-issued photo ID depending on your region to be able to add or withdraw funds from your digital currency wallet.

2. Next, you’ll need to add some Litecoin in your digital wallet. The best place to buy Litecoins is digital currency exchanges from where you can buy Litecoins using your traditional currency at market rates. Some of the most popular Litecoin exchanges are - Binance, Coinbase, WhiteBIT etc. Check for fees associated with trading Litecoin on the exchange.
3. To send the Litecoins to another person, you’ll need to have the wallet address of that person. Once you enter the wallet address in your own Litecoin wallet, you’ll be prompted to enter the amount. Upon confirmation, the Litecoins will be debited from your account and will reach the receptints wallet.
4. As an advanced security measure, you should use a long, hard-to-guess password and should enable two-factor authentication for your digital currency wallet - this significantly reduces the chances of your wallet getting compromised.

Conclusion

To end, Litecoin has long established itself as a trusted digital currency. With a market cap of around 9 Billion dollars, it is one of the top altcoins and one of the longest thriving altcoins.

We hope that as a digital currency enthusiast, this post has helped you to gain insights on Litecoin and its wide use-case scenarios. Apart from everyday transactions, Litecoins can be used to buy digital assets - Ramp provides businesses with exclusive ways to buy digital assets.

Frequently Asked Questions

1. How to store Litecoins safely?

To safely store your Litecoins, you should use a digital currency wallet with best-class security features such as 2FA. The wallets too are of 3 kinds - Paper Wallet, Hardware Wallets, Software Wallets. Among all these hardware wallets are the most secure, so in order to get maximum security, you should store your Litecoins in a Hardware wallet.

2. How secure is Litecoin for payments?

Litecoins are a secure way of making payments as the total infrastructure is built on Blockchain.There is no central authority involved - minimizing the chances of a centralized security attack. All the data are transparent and available to all the nodes connected on the blockchain.

3. Which digital currency is called digital silver?

Litecoin, a digital currency which was introduced to the market in 2011, is known as ‘digital silver’. Just like Silver that offers better accessibility than gold, Litecoin provides better accessibility than Bitcoin (known as digital gold).

4. Is investing in Litecoin risky?

If you are investing into Litecoin, you should know that digital currencies are not as stable as gold or other physical assets. Litecoin, generally, is considered as a good investment option among all digital currencies due to its long existence in the market.

However, like Bitcoin, Litecoin’s price is also controlled by demand and supply. If there’s a huge demand, the price of it can go high and vice-versa. Additionally, government rules and regulations can play a huge role behind determining the value.

5. What payment methods can I use to purchase Litecoins?

Depending on the wallet, you can use payment methods such as credit or debit card, netbanking and even other digital currencies to purchase Litecoins.