Litecoin 101 – everything you need to know before buying
These days, besides Bitcoin, there is one more little guy making the headlines. While Bitcoin rose about 1,731% since the start of 2017, this guy on the other hand has risen about 7,291%. In case you didn’t guess it, we are talking about Litecoin – an altcoin (alternative coin) forked off the bitcoin ledger in late 2011. Often called the little brother of bitcoin, Litecoin is the fourth largest cryptocurrency behind Bitcoin, Ethereum and Bitcoin Cash.
If Bitcoin is gold, litecoin – the lighter and faster version of that is the silver. The network is fast in the sense that it takes only 2.5 minutes for a transaction on the litecoin network in contrast to the 10 minutes time for Bitcoin coin. That’s about four times faster. Moreover, the number of litecoins are capped at 84 million – that’s about four times the 21 million cap of bitcoin and a psychologically pleasing reason to invest in Litecoin given it’s smaller price for a single unit.
Charlie Lee, the creator, once quoted, “The vision is always I wanted Litecoin to complement bitcoin—not compete,Bitcoin can be used for like moving millions of dollars between banks, buying houses, buying cars. It’s really secure… Litecoin can be used for cheaper things.”. This clearly suggests that Lee wanted Litecoin to be used for day to day transactions where security is not much of a concern.
Talking about the founder, Charlie Lee was a former Google Employee. He first got involved with Bitcoin in 2011. Not long after that, in late 2011, he launched Litecoin. That being said, creating an altcoin was not his intention. As he said in a coinbase talk,”It was an excuse to kind of learn the Bitcoin code”. He further said that he decided that he could actually create an altcoin that’s better than what’s out there.
While we know almost nothing about the creator of Bitcoin except that pseudonym “Satoshi Nakamoto”, the creator of the coin however is really well known in the crypto world. He left Google, created the cryptocurrency and joined Coinbase as the director of Engineering. He got serious about litecoin this year and left his job at Coinbase. His twitter handle is “SatoshiLite” and for the interested ones, here is the link to his profile. https://twitter.com/SatoshiLite.
And now the time for the million dollar question,”Why was it so successful?” After all, a lot of cryptocurrencies are launched every year. Not all of them survive. With this tough competition for survival, how did Litecoin manage to make it to the top five?
Looking back at history, we realise that from the beginning itself, litecoin wasn’t so far behind Bitcoin. In November 2013, it surpassed $ 1 billion and that’s about eight months after Bitcoin. Not too long. So Litecoin certainly had the advantage of being one of the first ones in the market. It was the first coin to be forked off bitcoin.
Another reason might be the different mining process for Litecoin. While Bitcoin uses the SHA-256 algorithm and uses ASIC, Litecoin uses Scrypt Algorithm for proof of work. Litecoin is generally mined on graphics cards or GPUs because of the large memory requirements of Scrypt. This is the reason why most ASIC makers have been barred from developing a suitable technology. That being said, Zeus and Flower Technology are beginning to bring ASICs for mining. The present mining reward is 25 litecoins. It was 50 litecoins in the beginning. That got halved to 25 litecoins in October 2015. That amount will be halved every 840,000 blocks. Doing some math gives us the time for this to be roughly 4 years.
From the investment point of view, the currency is currently priced at $322.67 at the time of writing. The recent price rise news with which we started the article with, might be because of the fact that investors are looking out for new cryptocurrencies to buy other than Bitcoin. This might be because Bitcoin is already much higher in price and has a lower rate of growth than Litecoin. The fact that it is a fork of Bitcoin might also have contributed to the growth of Litecoin.
That being said, one must be careful when investing in cryptocurrencies for they are known to be really volatile when it comes to price. As has always been said, one should not invest more than one is willing to lose.
Quoting Charlie Lee from 12th December, 2017, “Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can’t handle LTC dropping to $20, don’t buy!”. Such is the volatility of cryptocurrency world.