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History of Litecoin: A Quick Primer
Litecoin is often compared to bitcoin, which was launched by Satoshi Nakamoto in 2009. Nakamoto is rumored to be a group of people rather than a single person, first publishing a research paper called “Bitcoin: A Peer-to-Peer Electronic Cash System” and launching bitcoin shortly after its publication. At this point, many people were taking notice of the cryptocurrency, which used a peer-to-peer network to prevent double-spending, and would be completely decentralized — with no server or central authority. One such person taking notice was Charlie Lee, a graduate of MIT and former employee of Microsoft and Google.
Lee not only followed bitcoin, but used the cryptocurrency and learned more about the ideas behind the technology. He started to see new ways in which this currency could be improved, which inspired him to create his own cryptocurrency, one that would allow him to improve these fundamental areas.
With the launch of litecoin in 2011, people found that one key area was much different from bitcoins: the speed. Mining Litecoin and Litecoin transactions occur at a much quicker rate than that at Bitcoin, which is seen as an advantage. Many of the fundamentals were similar to those of bitcoin, but Lee took a different approach with the “proof of work” algorithm. He used Scrypt rather than the widely used SHA-256 — a choice that would serve as the linchpin for many important differences.
This is a quick history of litecoin, but let’s talk more about how litecoins work and why people favor them over other cryptocurrencies. The price of Litecoin is lower than that of bitcoins when compared in USD, but there are still key differences that make this currency an attractive option for those interested in mining.
Key takeaway. Litecoin is similar to bitcoin and was inspired by the currency; however, there are key differences between litecoin and bitcoin that make litecoin worth investigating for those interested in cryptocurrencies and mining.
What Are Litecoins?
The operation of litecoin is similar to that of other cryptocurrencies in a few key areas. There is a maximum number of litecoins available, and once those flow into the system via mining, there will never be another new LTC generated.
This is very different from fiat currencies, for which it’s possible to print additional currency, creating widespread potential impacts and affecting the value of money that is currently in circulation.
Litecoins are released during the mining process, at which time transactions are verified and added to a public ledger. This public ledger is known as a “block chain.” When this task is complete, the miner (or mining group, if a group of individuals work together) is awarded 25 litecoins. Litecoin’s block mining reward halves every 840,000 blocks, so the next time it halves, recipients will receive 12.5 coins per block. As a result, as time goes on, it gets more difficult to receive coins.
Unlike with fiat currencies, the security of litecoins is robust and it’s virtually impossible to mine the same coin twice. For example, let’s say that somebody tries to mine the same coin twice. The activity would be detected immediately by another miner, and it would be impossible for the fraudulent action to take place.
As a result, cryptocurrencies such as litecoin make it nearly impossible to “game the system” or create counterfeit currency. This security element is attractive to those interested in litecoin, because they feel that the value of their currency is safe from this type of threat.
Key takeaway. Litecoin is not radically different from other types of cryptocurrencies. The conversion of litecoins to fiat currencies does result in a lower value than bitcoins, but since you can generate blocks faster and it’s easier to get started, it’s worth a look, especially for those new to the mining of cryptocurrencies.
Where Can I Find Litecoins?
If you haven’t used cryptocurrencies in the past, you may wonder how to acquire this type of coin. Is there a place where you can exchange your local currency for LTC? One method for acquiring LTC is to receive through mining (more on this in a minute). Alternatively, you can purchase coins through an exchange.
The challenge with litecoins, however, is that very few exchanges will sell litecoins directly, so you need to implement a workaround. The easiest method is to exchange your local currency for bitcoins. At this point, it’s easy to exchange the bitcoins for litecoins — and then add them to your digital wallet. The process should be fast, taking only minutes. But let’s say that you don’t want to purchase litecoins, but instead you want to earn them through mining. Where should you start?
Key takeaway. There are two major ways to acquire litecoins. The first is to purchase them, and the second is to mine them. If you’re up for Litecoin mining, this can offer valuable payoffs, but if you’re just wanting to get some experience with cryptocurrency or diversify your current holdings, opt for purchase.
Mining: A Quick Guide
When litecoin first started, miners earned 50 coins when they verified a block. Since this number halves every 840,000 blocks, that reward today is 25, but the reward is still worthwhile. In fact, the halving of litecoin occurs less frequently than the halving of bitcoins, which occurs every 210,000 blocks. Because of many of the improvements that Lee made, mining for litecoin is also said to be easier than mining for other cryptocurrencies.
Litecoin and bitcoin use a “proof of work” concept. This is basically an algorithm that verifies work. However, when Lee invented litecoin, he decided to use a totally different algorithm. Bitcoin uses an SHA-256 hashing algorithm, which favors systems that have the largest processing power during mining.
Litecoin is designed using the Scrypt algorithm, which takes a different approach and favors systems with the largest amount of random access memory for mining. Requiring large amounts of memory is said to make it costly to perform large-scale customer hardware attacks, making this type of attack less likely.
The litecoin mining algorithm is also said to be simpler than that of bitcoin, and as a result, litecoin can be mined on computers with less power — and uses less overall energy. Since there is a shortage of graphic cards and the need for these cards is increasing, this is an advantage to those who are considering mining.
It also is much faster to verify a block with litecoin than with bitcoin. In fact, the amount of time it takes is reduced to only 2.5 minutes, compared with 10 minutes required for bitcoins. As a result, transactions for litecoins are said to be four times faster than transactions for bitcoins.
A Few Last Words
Litecoin is not a brand-new cryptocurrency. In fact, it was created only a couple years after bitcoin. Lower transaction fees, faster transaction times, and an escalating value make an interesting case for adoption of litecoin as people learn more about this widely talked about — but surprisingly established —cryptocurrency.
The recent growth of litecoin’s value is inspiring many to take another look at the cryptocurrency market and ask, “Bitcoin may be No. 1, but what other opportunities exist?”
Over the past decade, many new cryptocurrencies have come to market, and not all of them have survived. Litecoin is an interesting option because not only is it growing, but it also has established and proven its relevance by sticking around while others have died out.
As with any new technology, the best approach is always to take it slow and to act carefully and deliberately. Test the cryptocurrency — through either purchase via exchange or mining — and measure your results. And through this testing, you’ll better understand the benefits and whether litecoin provides worthwhile and long-term rewards for you.
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