What Is Litecoin (LTC)?
Litecoin (LTC) is a cryptocurrency that was founded in 2011, two years after Bitcoin, by a former Google engineer named Charlie Lee. Like Bitcoin, Litecoin is based on an open-source global payment network that is not controlled by any central authority. Litecoin differs from Bitcoin in aspects like faster block generation rate and use of Scrypt as a proof-of-work (PoW) scheme.
It is considered to be among the first altcoins, derived from Bitcoin’s original open source code.
Initially, it was a strong competitor to Bitcoin. However, as the cryptocurrency market has become much more saturated and competitive in recent years with new offerings, Litecoin’s popularity has waned somewhat.
Litecoin has always been viewed as a reaction to Bitcoin. In fact, when Lee announced the debut of Litecoin on a popular Bitcoin forum, he called it the “lite version of Bitcoin.” For this reason, Litecoin has many of the same features as Bitcoin, while also adapting and changing some other aspects that the development team felt could be improved.
As of November 2021, 1 LTC (one Litecoin) is worth around $215, making it the 14th-largest crypto with a market capitalization of just under $15 billion.
Key Takeaways
- Litecoin is a cryptocurrency that was founded in 2011, two years after Bitcoin, by a former Google engineer named Charlie Lee.
- Litecoin can be used as an avenue for paying people anywhere in the world without an intermediary having to process the transaction.
- Measured by market capitalization, Litecoin is the 14th-largest cryptocurrency.
- There will never be more than 84 million Litecoins (LTCs) in circulation.
Understanding Litecoin
Like other decentralized cryptocurrencies, Litecoin is not issued by a government, which historically has been the only entity that society trusts to issue money. Instead of being regulated by a central bank and coming off the press at the Bureau of Engraving and Printing, Litecoins are created by an elaborate cryptocurrency procedure called mining, which consists of processing a list of Litecoin transactions.
Unlike traditional currencies, the supply of Litecoins is fixed. There will never be more than 84 million Litecoins in circulation. Every 2.5 minutes, the Litecoin network generates a new block—a ledger entry of recent Litecoin transactions around the world.
The block is verified by mining software and made visible to any system participant (called a miner) who wants to see it. Once a miner verifies it, the next block enters the chain, which is a record of every Litecoin transaction ever made.
There are incentives for mining Litecoin: The first miner to successfully verify a block is rewarded with 12.5 Litecoins. As with Bitcoin, the number of Litecoins awarded for such a task reduces with time. In August 2019, it was halved, and the halving will continue at regular intervals until the 84 millionth Litecoin is mined.
Halving dates for LTC have been:
- Aug. 25, 2015 (50 -> 25 LTCs)
- Aug. 5, 2019 (25 -> 12.5 LTCs)
- Aug. 23, 2023 (expected) (12.5 -> 6.25 LTCs)
Special Considerations
Mining cryptocurrency at a rate worthwhile to the miners requires a huge amount of processing power, courtesy of specialized hardware. The central processing unit (CPU) in most personal computers isn’t fast enough to mine most cryptocurrencies. However, Litecoin can be differentiated from the majority of other cryptocurrencies because it can be mined with personal computers. However, the greater a machine’s capacity for mining, the better the chance it’ll earn something of value for a miner.
Any currency—even the U.S. dollar or gold bullion—is only as valuable as society thinks it is. If the Federal Reserve (Fed) started circulating too many banknotes, the value of the dollar would plummet in short order. This phenomenon transcends currency. Any good or service becomes less valuable the more readily and cheaply available it is.
The creators of Litecoin understood from the start that it would be difficult for a new currency to develop a reputation in the marketplace. But by restricting the number of Litecoins in circulation, the founders could at least allay people’s fears of overproduction.
The Litecoin Foundation estimates that it will be around 2142 when the maximum of 84 million Litecoins will be reached.
How Is Litecoin Different from Bitcoin?
The most important distinction between Litecoin and Bitcoin is the different cryptographic algorithms that each employs. Bitcoin uses the SHA-256 algorithm, while Litecoin makes use of a newer algorithm, called Scrypt.
Litecoin has some inherent advantages compared to Bitcoin. It was founded with the goal of prioritizing transaction speed, and this is a major reason for its popularity. The Bitcoin network’s average transaction confirmation time is currently just under nine minutes per transaction, while Litecoin’s is roughly 2.5 minutes. Litecoin’s network can handle more transactions because of its shorter block generation time.
Bitcoin has a significantly greater market capitalization than Litecoin. As of Aug. 31, 2021, the total value of all bitcoins in circulation is around $1 trillion, while the market capitalization of Litecoin is around $11.9 billion. Bitcoin’s market capitalization still dwarfs all other digital currencies.
Both Bitcoin and Litecoin have fixed supplies. However, Bitcoin’s supply is limited to only 21 million coins, while Litecoin’s total fixed supply is 84 million coins.
Goals of Litecoin
Litecoin, like all virtual currencies, is a form of digital money. Both individuals and institutions can use Litecoin to purchase things and transfer funds between accounts. Participants can make transactions with Litecoin without the use of an intermediary like a bank, credit card company, or payment processing service.
Rather than focusing on its functionality, many investors are interested in Litecoin as a potential long-term holding. Similar to investments in any type of currency, investors are speculating that Litecoin will build relative wealth over time.
What is Litecoin, and how does it work?
Litecoin is a peer-to-peer (P2P) virtual currency, which means it is not governed by a central authority. Litecoin’s network offers instant, near-zero cost payments that can be conducted by individuals or institutions around the globe.
Bitcoin, Litecoin, and many other cryptocurrencies use the proof-of-work (PoW) algorithm to secure their networks. Basically, PoW requires that one party proves to all the other participating parties in the network that a required amount of computational effort has been expended. Unlike Bitcoin, which uses the SHA-256 PoW hashing algorithm, Litecoin uses the less resource-intensive Scrypt PoW algorithm.
What is Litecoin used for?
Litecoin can be used as an avenue for paying people anywhere in the world without an intermediary having to process the transaction.
What has Litecoin’s highest price been?
On May 10, 2021, Litecoin (LTC) hit an all-time high of $410.26. Its all-time low of $1.15 was recorded on Jan. 14, 2015.
What was LTC’s original price?
When it debuted in 2013, 1 LTC was worth around $4.30.
When was Litecoin’s last halving?
Like Bitcoin, the creation of Litecoin tokens involves a process called mining. For participating in the act of mining, miners are rewarded with Litecoin. A Litecoin halving refers to an instance of halving the amount of Litecoin rewards that miners are given for each block.
Litecoin halvings aim to preserve Litecoin’s purchasing power. The last Litecoin halving took place on Aug. 5, 2019. On this date, the mining reward was reduced from 25 LTCs per block to 12.5 LTCs per block. The next halving (from 12.5 LTCs per block to 6.25 LTCs per block) is expected around Aug. 23, 2023.
How many Litecoins are left?
Ultimately, there will be only 84 million LTCs in circulation. In November 2021, there were just over 69 million LTCs in circulation. That leaves less than 15 million LTCs to be mined.
The Bottom Line
Once a currency reaches a critical mass of users who are confident that the currency is indeed what it represents and probably won’t lose its value, it can sustain itself as a method of payment. Litecoin isn’t anywhere near universally accepted. But as cryptocurrencies become more readily accepted and their values stabilize, one or two of them—possibly including Litecoin—will emerge as the standard currencies of the digital realm.
Investing in cryptocurrencies and other initial coin offerings (ICOs) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own Litecoins.