Why Is Litecoin and What Is It Used For?

Learn the difference between the two

Cryptocurrency - gold dollar signs coming out of laptop screen.

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Often referred to as the little brother of Bitcoin, Litecoin is a peer-to-peer (P2P) cryptocurrency that has gained widespread adoption since its creation in 2011.

A form of digital money that uses a blockchain to maintain a public ledger of all transactions, Litecoin is used to transfer funds between individuals or businesses without the need for an intermediary such as a bank or payment processing service.

What Makes Litecoin Different

Three things make Litecoin different from other cryptocurrencies like Bitcoin:

  • Speed
  • Number of coins
  • Market cap

Litecoin is based on the same open-source code behind Bitcoin, with some notable differences. Created by engineer Charlie Lee to be the silver to Bitcoin's gold, one of the main differences between the two cryptocurrencies is the transaction speeds.

Because it generates blocks about four times faster than Bitcoin, Litecoin can confirm the legitimacy of transactions more quickly and process more of them in the same timeframe.

Number of Coins
One of the reasons some cryptocurrencies hold intrinsic value is because of their limited supplies. Once a certain number of bitcoins (BTC) or litecoins (LTC) are created, that's it: No more new coins can be created.

Bitcoin has a limit of 21 million coins, but Litecoin will max out at 84 million.

Market Cap
Although the market cap pales in comparison to Bitcoin, Litecoin still ranks among the top five cryptocurrencies. These rankings fluctuate based on price and number of coins in circulation.

Mining Litecoin

Another significant difference between Bitcoin and Litecoin is the hashing algorithm each uses to solve a block, as well as how many coins are distributed each time a solution is found. When a transaction is made, it is then grouped with others that have been recently submitted within a cryptographically protected block.

Computers known as miners use the cycles of their GPUs (graphics processing units) and/or CPUs (central processing units) to solve complex mathematical problems, passing the data within a block through the aforementioned algorithm until their collective power discovers a solution. At this point, all transactions within the respective block are fully verified and stamped as legitimate.

Miners also reap the fruits of their labor each time a block gets solved, as a predefined number of coins is distributed among those who helped out—with the more powerful hashers getting the lion's share. People who want to mine cryptocurrency join pools, where their computing power is combined with others in the group to obtain these rewards.

Litecoin and Bitcoin use contrasting algorithms when hashing. Bitcoin employs SHA-256 (Secure Hash Algorithm 2), which is considered relatively more complex; Litecoin uses a memory-intensive algorithm referred to as scrypt.

Different proof-of-work algorithms mean different hardware, and you must be sure that your mining rig meets the proper specifications for producing Litecoin.

If you're interested in moving forward with Litecoin mining, try some copy-paste sample CGminer.conf and Bat Files.

How to Buy Litecoin

If you'd like to own some Litecoin but aren't interested in mining it, purchase cryptocurrency with another cryptocurrency on an exchange site. Some of these exchanges, as well as other services such as Coinbase, also allow you to purchase Litecoin with fiat currency (currency that's backed by its issuing government), like U.S. dollars.

When investing and trading cryptocurrencies, watch for these red flags.

Litecoin Wallets

Like bitcoins and many other cryptocurrencies, litecoins typically are stored in a digital wallet. There are different kinds of wallets; some are software-based and live on your computer or mobile device, and others are physical hardware wallets.

Another secure yet outdated and complex method to store litecoins is to create a paper wallet, which involves generating and printing a private key on a computer not connected to the web.

WalletGenerator.net paper wallet creator screenshot

Each wallet has private keys that are required to receive and send coins to and from your Litecoin address. Because these keys are stored offline in a hardware wallet, they are inherently more secure than wallets connected to the internet.

These application-centric wallets exist in the form of desktop or mobile software and are available for almost all popular operating systems and devices. In addition to third-party applications such as Electrum, laptop and desktop users also have the option to install Litecoin Core, which is the full-fledged client created and updated by the Litecoin development team. Litecoin Core downloads the entire blockchain directly from the peer-to-peer network, avoiding any middleman in the process.

Litecoin Blockchain Explorers

As with other public cryptocurrencies, all Litecoin transactions within its blockchain are public and searchable. The easiest way to peruse these records or search for an individual block, transaction, or even address balance is through a Litecoin block explorer. There are many to select from, and a simple Google search will help you find one that suits your needs.

Blockcypher Litecoin explorer screenshot