Can Litecoin Still Be a Good Investment? $LTC Pros and Cons
Litecoin (LTC) is a digital currency created in 2011 by Mr. Charlie Lee, a graduate of the Massachusetts Institute of Technology, as a replica of Bitcoin. It has many similarities with Bitcoin but was built to be better and more scalable. The initial aim of the Litecoin project was to address the concerns investors and developers had about Bitcoin. For example, there were many concerns about bitcoin being too centrally controlled and making mining difficult for firms that mine on a large scale. With Litecoin, these concerns were addressed and modified to be better.
Since its “debut,” the coin has become a multipurpose coin as it is mineable and even used for peer-to-peer payments. However, it failed when it was initially launched as enterprise miners were acquiring the lion’s share of its mining. Litecoin has since improved on these shortcomings and become a better coin.
Understanding Litecoin (LTC)
One of the premier missions of the Litecoin project was to stop enterprise-sized miners from using encryption methods to gain control of the mining process. Unfortunately, this mission was not successfully done. Instead, the miners adapted to the changes made using Litecoin by creating specialized machines that ensured they were still in control of the mining process. In fact, their mining capacity continued to grow.
Litecoin uses the same miners as Bitcoin — the ASIC miners. They used mining software that makes blocks visible to the miners. These blocks contain transaction information that the miner needs. Once the block’s information has been made visible to the miner, it will be verified, and the next block will be created. When this is done, the miner receives the reward as Litecoin (LTC).
Litecoin Maximum Supply
Like Bitcoin, Litecoin has a maximum supply that can be in circulation. However, its supply is designed to reduce over time to maintain the coin’s value.
When the coin was released into circulation, there were about 150 pre-mined coins and a total of 84 million coins. These ensured newcomers were able to get the coins and trade with them.
Litecoin currently has a block generation time of 2.5 minutes. As of April 2022, it had over 14 million Litecoins (LTC) left to mine.
As said earlier, there are lots of similarities between Litecoin and Bitcoin. One of these similarities is Halving. Halving is the process by which the reward of a block’s hash is reduced while other necessary parts of block creation remain the same. The transaction information within each block remains the same, and the block creation process remains the same. With Halving, the Litecoin reward that miners get after validating each block is reduced by half the value of the previous reward. This process reduces the rate at which new coins are created.
Litecoin has had several halvings in the past. Here are the dates where Litecoin has halved:
- 50 to 25 LTCs — Aug. 25, 2015
- 25 to 12.5 LTCs — Aug. 5, 2019
- 12.5 to 6.25 LTCs — Aug. 23, 2023 (expected)
Litecoin Hashing Algorithm
As much as Litecoin has mirror similarities with Bitcoin, it also has clear differences from it. One of such differences is in its hashing algorithm. Unlike Bitcoin, Litecoin uses a different hashing algorithm called Scrypt. Compared to Bitcoin’s SHA-256, Scrypt requires a higher amount of memory. The cryptocurrency community initially rejected the Scrypt algorithm until 2011. In 2011, the Tenebrix project modified it to work with regular CPUs for mining.
Due to the large memory requirements for Scrypt, application-specific integrated circuits (ASICs) have also been difficult to develop. However, the ASIC-resistant setup was not long in living as the world’s first Litecoin ASIC miner was released in 2016.
Litecoin has experienced steady development since its release into the cryptocurrency market. It has moved from its initial mining ecosystem dominated by individual miners to a setup more advantageous to corporations. In this corporate setup, high-profile tech firms run the large mining pools. These firms account for the majority of the mining of Litecoin.
Compared to more popular coins, Litecoin’s market capacity is much smaller. Nonetheless, it remains one of the most traded cryptocurrencies, maintaining a position among the top 30 cryptocurrencies on CoinMarketCap (a platform that tracks more than 18,000 cryptocurrencies). This indicates that it is still a popular cryptocurrency. However, it isn’t as popular as Bitcoin and some newer coins.
How is Litecoin Different from Bitcoin?
There are clear differences in the administration of Litecoin and Bitcoin. Here are some of these differences:
- There is a difference in the maximum supply capacity of Litecoin and Bitcoin. For Bitcoin, it has a supply capped at 21 million coins. On the other hand, Litecoin has a supply capped at 84 million coins.
- Also, Bitcoin uses a different hashing algorithm from Litecoin. Bitcoin uses the SHA-256 hashing algorithm while Litecoin uses Scrypt. The present version of scrypt Litecoin is modified to generate more coins.
- The distinction in these algorithms has implications on how these coins process transactions and the speed at which those transitions are processed. At the moment, Litecoin processes and confirms transactions four times faster than Bitcoin. However, Litecoin suffers more from this “speed lap” as the coin’s security is endangered. This is because the algorithm does fewer verification rounds on transactions in the blocks.
- Bitcoin takes roughly 10 minutes to confirm transactions. In contrast, Litecoin’s confirmation time is 2.5 minutes, which is ideal for merchants who do not want or need super-secure transactions.
- Bitcoin has a larger market capitalization than Litecoin. Although Litecoin has a significantly smaller market cap than bitcoin, it still ranks among the most traded cryptocurrencies.
How is Litecoin Used?
Due to its high liquidity, Litecoin is a cryptocurrency that is easier to trade than other cryptocurrencies. As a result, several crypto exchanges accept Litecoin, including Newegg, Sling TV, and even non-profits like the American Red Cross.
You can even make payments using LTC through digital currency applications like BitPay or CryptoPay. If you need to transact with people, you can opt for a peer-to-peer merchant like Binance.
LTC Pros and Cons
Advantages of Litecoin
- The major advantage Litecoin has over cryptocurrency market leaders is its transaction speed. Litecoin, without any additional layers of technology added to its blockchain, is a faster and more affordable cryptocurrency than Bitcoin.
- Litecoin also has low transaction costs. As of May 6, 2022, Litecoin transaction fees were approximately 0.06% per transaction, compared with Bitcoin’s 3.92%.
Disadvantages of Litecoin
- One of the major disadvantages Litecoin has had is its low investor affinity. The reason for this is not far-fetched. After divesting most of his Litecoin holdings due to a conflict of interest, Litecoin creator Charles Lee caused a bit of a panic among cryptocurrency investors, and many also withdrew their stakes in the coin.
The CEO and co-founder of SeedOn has this to say, “Something that caught the investor’s eye and had an impact on the investor’s confidence is that in 2017, Charles Lee, Litecoin’s founder, has sold his stake in Litecoin,”
- A researcher at 21 Shares observes that the Lightning Network, while designed to have higher transaction throughput than bitcoin, has sped up Bitcoin transactions and has diminished Litecoin’s use case as a faster payment network.
Additionally, newer cryptocurrencies offer faster transaction processing rates. For example, EOS has 4,000 TPS, XRP has 1,500 TPS, and Cardano has 257 TPS.
Will Litecoin Have a Future?
For now, no accurate assessment shows how the market will move or adjust to the demand of investors, traders, and the government. However, as the days go by, more cryptocurrencies are created. Each of these cryptocurrencies will build on the shortcomings of present coins and improve them.
Also, the cryptocurrency market is very volatile, and governments are doing everything to clamp down on digital currencies. Therefore, it is difficult to predict a future for Litecoin this way.
Is Litecoin Still a Good Investment?
With the unpredictability of the market, it is difficult to make a bold statement on how Litecoin will behave going forward. However, suppose you want to continue investing in Litecoin. In that case, it is advisable to get a professional advisor to help you determine if Litecoin is a good investment.
What Factors Affect Litecoin’s Price?
There are several factors responsible for the volatility in the price of Litecoin in the market and at crypto exchanges. Some of them are:
Digital currencies are decentralized currencies, meaning they are not regulated by a central authority. With Litecoin being unregulated, there is no authority to take measures to keep its price stable.
There are large amounts of Litecoins in circulation today. As a result, the coin’s price can also be determined by the rate at which it enters the market.
The price of Litecoin can also be affected by how the market views the coin and the market leaders like Bitcoin and ethereum.
The price of Litecoin is also affected by the number of high-profile enterprises, investors and consumers that adopt it as a means of payment. Although it hasn’t done much as a payment method, some businesses still view blockchain technology as a technology that can be adopted in the future.
What’s Better, Litecoin or Ethereum?
Litecoin was built basically as a payment method for P2P transactions. However, Ethereum is built as an ecosystem for other cryptographical technologies. Although it is built as a global virtual machine, it has a token called Ether (ETH) for transactions and payment methods. Ether is ranked as one of the top 5 valuable cryptocurrencies and has a larger trading volume when compared to Litecoin.
The better digital currency, however, will be based on your interest, needs, and goals.
How to Exchange Litecoin
If you buy Litecoin on a cryptocurrency exchange, you will usually see the price of Litecoin expressed in US dollars. This means that you are selling your USD to purchase Litecoin. Trading Litecoin on cryptocurrency exchanges functions on a basic principle — you sell when the price of Litecoin rises, and you buy when the price of Litecoin goes down.
To buy or sell Litecoin at the best deals, visit Swapzone, a cryptocurrency exchange aggregator that lists various exchange rates so you can select the best rates for transactions.