Litecoin does not rely on a single authority to ensure payments are sent and received as agreed. This means there are no banks involved. Instead, it uses a network of thousands of nodes to verify transactions.
Litecoin was started in 2011 by Charlie Lee, a former Google engineer. It is based on the original Bitcoin Core client. For this reason, the two currencies share many core functionalities.
- Peer-to-peer digital currency based on the Bitcoin Core client.
- Powered by blockchain technology.
- Main difference from Bitcoin is faster block times.
- Decentralized currency with a limited supply and irreversible transactions.
- Payments are private and transparent at the same time.
- Price is determined by supply and demand.
The Litecoin network is based on blockchain technology. The blockchain is stored as a distributed ledger containing the entire history of Litecoin transactions. This technology makes Litecoin:
- Safe – it is almost impossible to hack a blockchain;
- Peer-to-peer – Litecoin is sent directly from one user to another;
- Immutable – once a transaction is confirmed, it can no longer be undone;
- Transparent – anyone can view the entire transaction history;
- Private – even though transactions are public, the actors remain pseudonymous.
Litecoin shares all these features with Bitcoin. They are the basic premises on which these cryptocurrencies were built. But the two currencies differ in a few key ways.
Litecoin vs Bitcoin
Litecoin was created with the intention of covering transactions that were too small to be economically viable on Bitcoin. The biggest difference between the two currencies is block creation time, or simply block time. The average time it takes to create a new block is 2.5 minutes for Litecoin and 10 minutes for Bitcoin.
Blocks are data containers that are linked on the blockchain. Think of them as secure digital safety deposit boxes. Once information is deposited inside and added to the blockchain, it can no longer be changed. With cryptocurrencies like Litecoin, blocks contain data about transactions on the network.
When you send LTC to another address, it is recorded on the blockchain as a transaction. The blockchain holds a complete list of transactions, from the very first to the latest. New blocks are generated through a cryptographic method called mining.
This is another key difference between Litecoin and Bitcoin. Litecoin uses a different algorithm to create new blocks. Litecoin’s algorithm is called Scrypt, while Bitcoin uses SHA-256. This difference is relevant for miners, but not for traders and end-users of the system.
More important for traders is the difference in total supply of coins. New Litecoin is consistently being mined. However, the total number of coins is fixed, just as it is with Bitcoin. The difference is in the number. The max LTC volume is 84 million, while BTC is limited to 21 million coins. The price of these cryptocurrencies is based on supply and demand. Thus, the total possible supply does play a factor for traders.
But having a limited supply does not mean that we will run out of Litecoin. The currency can be divided and transferred in units as small as 0.00000001 LTC. Thus, it is highly unlikely that the world could ever face a Litecoin shortage.
How to buy LTC
You can buy the Litecoin coin on Bitstamp. Sign up for a Bitstamp account and start trading LTC today!
Disclosure: Bitstamp is licensed to engage in virtual currency business activity by the New York State Department of Financial Services.