The staggering success of Bitcoin saw the launch of several other cryptocurrencies. One of the first and most successful of these “altcoins” is Litecoin. It is one of the oldest cryptocurrencies in the market, and while not as successful as Bitcoin, it offers holders and users several advantages. We know the staggering potential of Bitcoin as an investment asset, with the cryptocurrency firmly establishing itself as a store of value and hedge against inflation. But how good of an investment asset is Litecoin?
Could Litecoin prove to become a better investment asset in the future? This article will take a look at LTC and better understand its investment potential.
Key Points
- Litecoin was one of the first altcoins in the crypto space, created just two years after Bitcoin by former Google engineer Charlie Lee.
- LTC offers significantly faster transaction times than Bitcoin.
- It shares several features with Bitcoin. However, it uses a different algorithm and can be mined on regular computers.
- Unlike Bitcoin, which has transformed into a store of value and hedge against inflation, Litecoin is designed to facilitate day-to-day transactions.
What Is Litecoin?
Litecoin was one of the first altcoins in the crypto space, created using Bitcoin’s original open-source code. It was created in 2011 through a hard fork of the Bitcoin blockchain and was touted as the “silver to Bitcoin’s gold.” Former Google engineer Charlie Lee created Litecoin after growing increasingly concerned about centralization on Bitcoin that saw the concentration of mining power in the hands of influential mining groups. Litecoin intended to create a level playing field by making it difficult for miners to gain an unfair advantage.
Like Bitcoin, Litecoin uses an open-source blockchain protocol free from the influence of any centralized entity. Each node operator maintains a copy of the blockchain, ensuring all transactions are up-to-date and do not contradict transaction history. Litecoin also uses the Proof-of-Work consensus mechanisms. However, the key difference between the two is that Bitcoin uses the SHA-256 hashing algorithm while Litecoin uses Scrypt, which allows it to work with regular GPUs and CPUs and achieve faster transactions.
Litecoin’s source code and binary were released just a week before launch, allowing developers to test mine the cryptocurrency before its official launch and iron out any bugs.
How Does Litecoin Work?
Litecoin is designed to facilitate cheaper, faster, and more efficient transactions than Bitcoin. It operates the same Proof-of-Work consensus mechanism to facilitate transactions, allowing miners to confirm transactions and add them to the blockchain. Miners are rewarded in newly minted LTC for their efforts, with the current reward at 12.5 LTC. However, unlike Bitcoin, Litecoin does not use the SHA-256 algorithm, instead using a hashing algorithm called Scrypt. Scrypt allows Litecoin to generate new blocks every 2.5 minutes, compared to Bitcoin’s block confirmation of 10 minutes.
The Litecoin team created Scrypt to create its own mining ecosystem, move away from Bitcoin, and make 51% attacks more difficult. It also made mining far more accessible to users with traditional GPUs and CPUs and prevented large miners from monopolizing mining operations. Eventually, ASIC miners for LTC mining were developed, making CPU and GPU miners obsolete.
Bitcoin and Litecoin are fairly similar, and as a result, the latter was often used as a testing ground for developers to experiment with features before implementing them on Bitcoin. Segregated Witnesses (SegWit) was first implemented on Litecoin, and when no major bugs or issues were reported, it was implemented on Bitcoin. SegWit helps the blockchain scale by segregating the digital signature from each transaction and enabling it to process more transactions per second.
The Lightning Network also saw implementation on Litecoin before Bitcoin, processing transactions on a separate layer created on top of the original blockchain. Litecoin has also implemented the MimbleWimble Extension block (MWEB), which allows information related to transactions to remain completely anonymous. The feature was deployed on Litecoin in May 2022.
Investing In Litecoin
Litecoin has existed for over a decade and is one of the top 20 cryptocurrencies in the market. The cryptocurrency offers several unique advantages, making it an excellent investment.
Supply Cap
Litecoin and Bitcoin are often the subjects of intense comparisons because of their history. However, the key difference is that Litecoin has a supply cap of 84 million, compared to Bitcoin’s 21 million, meaning if there is a spike in demand, there will be a larger number of LTC in circulation to meet it.
Mining
Litecoin and Bitcoin both use the same Proof-of-Work consensus mechanism. However, the algorithms used by each are quite different. Litecoin uses far simpler mining algorithms, meaning it can be mined on regular, less powerful computers and consume less energy. Considering the fact that Bitcoin mining operations consume a huge amount of electricity and require powerful and expensive graphics cards, Litecoin miners could have a huge advantage moving forward unless Bitcoin mining becomes more sustainable.
Scalability
Litecoin is far more scalable than Bitcoin, with a block propagation time of 2.5 minutes, four times faster than Bitcoin, allowing it to achieve far greater throughput.
Transaction Speed
Litecoin is capable of processing 56 transactions per second. In comparison, Bitcoin can process only around 7-10 transactions per second. Litecoin is also faster regarding block propagation times, requiring only 2.5 minutes to add a block to the Litecoin blockchain, compared to Bitcoin’s 10 minutes.
Transaction Fees
Litecoin has an average transaction fee hovering between $0.03 and $0.4, compared to Bitcoin’s average transaction fee of $7.60.
Decentralization
As mentioned earlier, Litecoin’s Proof-of-Work consensus mechanism is powered by Scrypt, which significantly lowers the entry barrier for mining. This greatly improves the platform’s decentralization, ensuring that mining is not concentrated among bigger players with expensive equipment.
Widespread Adoption
As of January 2022, Litecoin is accepted by over 3000 businesses. Thanks to its quick adoption by businesses and merchants, it has become one of the most popular cryptocurrencies to invest in. In November 2020, the Litecoin Foundation announced the rollout of its Visa debit card, meaning LTC will be accepted wherever Visa is. BitPay, NOWPayments, CoinGate, Alliant, and CoinPayments are examples of crypto-native payment processors accepting Litecoin as payment. Additionally, online retailers and merchants can also accept LTC as payment through e-commerce gateways such as Shopify and WooCommerce.
Major Developments
Another aspect for investors to consider is the major milestones achieved by Litecoin over the past couple of years. In 2021 the protocol introduced the OmniLite token creation platform, allowing developers to create their own NFTs and bespoke cryptocurrencies on the Litecoin Network. 2022 saw the launch of Liteverse, the Litecoin Network’s first NFT marketplace. Developers also announced a Litecoin-based Lightning Network mobile wallet and MWEB-integrated mobile wallets.
Is Litecoin A Good Investment?
So is Litecoin a good investment? Currently, the cryptocurrency is the 14th largest by market cap and, at its peak, was a top-10 asset. However, the recent crypto winter has seen its price plummet considerably from its all-time high of $412 to its current price of $66. The drop was in line with the rest of the market, as high-interest rates to curb inflation took their toll on the market. With its price considerably lower at the moment, now would be an excellent time to purchase LTC before the markets recover since the cryptocurrency has shown significant growth potential.
Another factor that makes Litecoin a good investment is the fact that it has a limited supply. The cryptocurrency’s maximum supply is capped at 84 million. This effectively makes LTC a deflationary asset.
Risks Of Investing In Litecoin
As with any investment, there are some risks when investing in Litecoin. While businesses have begun accepting Litecoin, the current number is quite low, limiting its utility as a mode of payment. This could make it risky because a lack of adoption would mean it lacks utility. Additionally, Litecoin was launched as an alternative to Bitcoin, offering faster and cheaper transactions. However, many other cryptocurrencies have been launched since its inception, offering faster and cheaper transactions. Litecoin’s success as an investment also depends on it becoming a store of value in the future.
In Closing
While Litecoin may not currently be the first cryptocurrency that comes to mind, let’s not forget that it has been a top-ten cryptocurrency. It has also shown considerable technical advancements and innovations, making it a viable investment. Those that invested in Litecoin earlier on made huge profits when its value soared.
If you wish to purchase or learn more about Litecoin, head over to CoinSmart, Canada’s most trusted cryptocurrency exchange.
Disclaimer: The content of this email is strictly for information purposes only. All of the opinions expressed in this email are not connected to CoinSmart and are not intended to provide you with investment advice. It is important that you do your personal research and/or consult an investment advisor to determine what is right for you.
