Have you ever heard of digital currency? Have you tried it? What about Litecoin? If not yet, then this is your chance to know more amazing things about this and how it works. In this way, you can gain new knowledge that you can use on your future journeys and might incline processes connected to this topic. Given that, let yourself be educated with the basic concepts and the process of how Litecoin works. But first, let us have a brief definition and history of Litecoin.
Litecoin refers to the open-source and peer-to-peer cryptocurrency software project that was released under the license of MIT/X11. Transfer and creation of coins are based on a cryptographic protocol that is open-source and isn’t managed by a central authority. It all started way back in October year 2011 as an early altcoin or bitcoin spinoff.
Also, Litecoin is considered as the third-largest cryptocurrency through the measurement of market capitalization. It follows the other two successful digital currencies: XRP and Bitcoin. All of them follow the same vision, and that is to provide the customers with an effective and efficient way of online payments. It can be compared to what an online bank network or PayPal does, but it doesn’t use any dollar currency. Instead, these digital currencies use unit transactions.
How was Litecoin made?
Just like any other digital currency or cryptocurrency, no government or authority issued the release and operation of Litecoin. Also, the government is the only trusted entity wherein people can meddle with their money and make use of it in their own wills. Instead, Litecoin was regulated by the Federal Reserve and released off for press at the Bureau of Engraving and Printing. The Litecoins are then made with the elaborated procedure known as the mining. It is also defined as the processing of the Litecoin transactions list.
Compared to traditional currencies, there is a fixed supply of Litecoin. In circulation, there is a total of 84 million Litecoins and not one more. It means that in every 2.5 minutes, there is a process wherein it generates blocks, defined as the recent transactions of Litecoins’ ledger entry around the world. The mining software then verifies the block and makes it visible to any potential miner that can go along with it. When the miner verified it successfully, the block will then enter the chain, a place that holds and records every inch of Litecoin transaction.
Mining for Litecoin
There is an incentive when a miner verifies a block for the first time, and it is rewarded a total of 50 Litecoins. With time, the numbers of awarded Litecoins per task are reduced. For example, in October 2015, the Litecoins were halved, and each portion continued with regular intervals until 84,000,000 Litecoins are mined.
But, can an unscrupulous miner bring changes to the block and enable the same Litecoins for a two-time expense? Well, the answer is no. Other miners can immediately detect an act of scam without letting the first anonymous knowing it. The one and the only way to play the system is through having the agreement of the majority regarding the false transaction’s process, which is impossible.
A mining cryptocurrency that is at a rate requires power processes that are ungodly, with a specialized hardware’s courtesy to the customers. In order to mine more cryptocurrencies, the Dell Inspiron’s central processing unit must not be anywhere near fast in completing the task. Furthermore, it brings different points in Litecoin: that they can be mined through ordinary computers that are classified as off-the-shelf more so compared to what other cryptocurrencies can. Note that the greater the quality of the machine’s mining capacity, there will be better chances of earning more value for the miners.
Litecoin Transactions: How Does It Work?
Litecoins can be easily transferred from one Litecoin wallet to other people through the Litecoin wallet. For example, you want to send a total of 0.5 Litecoins to your friend, Sam. Here, you must first copy and paste the wallet address of Sam into your wallet app. Then, you need to type the amount of 0.5 LTC, into the text field quantity and simply click send. There is also another way, and that is through scanning Sam’s QR code with your phone. This can prevent any inconvenience when typing the wallet address.
Moreover, to help in supporting the network, Litecoin miners are asked for a small miner’s fee. This fee will then be used to improve the services and quality of the platform for the benefit of all. In a single transaction, for example, which is not an entire block, it can be asked for a small Litecoin fraction only.
- The wallet app makes use of a private key to check and sign any outgoing transaction. It is also used to confirm that it is the user who tries to transfer the coins to another wallet.
- The wallet app is broadcasting transactions to other network nodes. Also, it is a node that works and initiates the transaction.
- Litecoin core refers to the node that broadcasts the transaction to other nodes of Litecoin.
- The nodes are responsible for verifying the legitimacy of any transaction through hash checking. This is also used to prevent any potential theft or tampering as well as to preserve the chain integrity.
- Nodes to the confirmations, and there is a required minimum number to complete a single Litecoin transaction.
Benefits of Litecoin
Although Litecoin was originally rooted in Bitcoin- another successful cryptocurrency that operates around the world, it still has independent advantages that can benefit a lot of people. Given that, here are some of its benefits:
- Quicker processes and confirmation of any transaction compared to what the Bitcoin network has. This only means that the quality and speed of transaction here in Litecoin is way more effective than the Bitcoin. Also, the transaction costs here are way manageable and lower, which can significantly help a lot of customers.
- In Litecoin, there is a very flexible way of purchasing other cryptocurrencies, such as that of Bitcoin. The process of purchasing is also easy and effective. Exchange platforms such as Coin base and CryptoAPI are also compatible to Litecoin.
- It has a significant gain in terms of market concerns, and one example of that is during the financial year way back in 2017. In 2018, Litecoin ranked top as it earned the spot of being the 6th largest and successful capitalization made available in the market. In addition to that, Litecoin earned skyrocketing scores in its first week of the year in terms of the profit margin.
- Litecoin uses the Scrypt algorithm is way safer and effective than what other cryptocurrencies mostly applies for the process of the digital currencies. Compared to the SHA-256 algorithm, for example, Litecoin’s Scrypt algorithm is way safer and effective to use for harmonious transactions within the platform.
- Lastly, Litecoin has a large number of existing coins that sums up to a total of 84 billion. This is four times greater than what Bitcoin has in its network and its produce. This only means that there is a greater margin of profit as well as lesser mining competition.
Bitcoin vs. Litecoin: Advantages over Bitcoin
- There is the presence of a leader figure, Charles Lee. Other people still have trust issues in Bitcoin since it is not yet trustworthy when it comes to the management of money and other processes involved in it.
- Litecoin is less political than Bitcoin. With people that are having political wars over the future of Bitcoin, it is more recommended to join the Litecoin family and system.
- Also, Litecoin has an easier adaptation of modern technology and application of it to the platform’s continuous development. Compared to Bitcoin, which is already massive, it experiences problems and infightings even with a single movement within its system. One example of that is the activation process of SegWit that took a year before completion.
- Lastly, Litecoin is ASIC resistant. This means that it can successfully avoid any form of centralization in mining activities. Compared to Bitcoin that still uses the SHA256 algorithm, Litecoin already changed to Scrypt. With this algorithm, the system became more effective and faster in responding to any activities inclined to it.
Disadvantages of Litecoin
- The energy-intensive process of mining is active in Litecoin.
- It is not yet accepted a fiat currency or Bitcoin widely.
- Scaling process and vision of it for the future has a challenging approach knowing that there are new and rising cryptocurrencies such as Railblocks, which provides high-quality services.
- Necessary technical knowledge is needed to secure the coins within the platform. If not, backing up the private keys will be difficult can then result to losing access to funding if the computers are malfunctioning.
Litecoin is a practical and useful cryptocurrency that anyone of us can use to save, share, and use the money for our own sake. With the continuous development and innovative visions that this cryptocurrency wants to partake, may it all benefit and do good to all of us.