The Complete Guide to the Litecoin

• History
• Litecoin Founder
• What Is Litecoin?
• How to Buy Litecoin
• Litecoin Storage
• Litecoin Forks
• Halving
• Mining
• Security
• Pros and Cons
• Conclusion

Launched in 2013, Litecoin is one of the most widely used Bitcoin forks. It is a decentralised system made up of interconnected blocks containing transaction information. Since it was created to be Bitcoin’s light version, the developers also nicknamed it the easy coin. Both Litecoin and Bitcoin share some similarities, but they are driven by different technologies.

The Litecoin community consists of individuals who collectively use their computing power to generate blocks and process transactions. As of this writing, CoinMarketCap data indicates that Litecoin is trading at $49.69 USD with a market capitalisation of $3,263,082,031, placing it in the 10^th position on the cryptocurrency market.

History

Like every other popular cryptocurrency, the creation of Litecoin started with the idea of tying up the loose ends faced by Bitcoin. The developer of Litecoin, Charlie Lee, worked with Google for five years as a software engineer. He found out about Bitcoin as a Google employee and researched further about the concept due to his disbelief in the Federal Reserve System. To this effect, he looked to take advantage of the Blockchain technology and enhance its functionalities.

Litecoin was created out of Lee’s first failed attempt, Fairbrix, which did not last up to a month due to mining and bug problems. The failure of Fairbrix made the crypto community demand for a token that an average person could mine while also serving as an alternative to Bitcoin. Litecoin’s development team learnt from their mistakes, copied Bitcoin’s source code, and made certain adjustments to the hashing protocol and block creation. With this, they were able to create a better system that could process transactions faster than Bitcoin. Currently, the block generation span of the Litecoin blockchain is 150 seconds per block, making it four times faster than Bitcoin.

The project got its first big break in June 2013 when Mt. Gox, a prominent altcoin exchange, threw in its unwavering support by promising to list the project on its platform. Also, the Economist, a reputable financial magazine, also referred to Litecoin as a Bitcoin alternative, making the price of Litecoin to skyrocket. In November 2013, Litecoin witnessed a historical price increase, including a 100% upsurge within 24 hours. The value of the token rose from $0.07 USD in January 2013 to $23 USD by December 2013, achieving a 32,800% increase in value. On top of that, Litecoin attained a one billion dollar market capitalisation by the end of 2013, making it one of the most successful coins in the crypto space.

In April 2014, the development team launched another version of the coin after receiving several complaints from investors. This release eliminated various errors while also adopting a technology associated with the Heartbleed security bug. In May 2017, the developers scaled Litecoin by adopting the SegWit solution. With the adoption of SegWit, the Litecoin team eliminated the risk of having a transaction altered by a third party before confirmation. Also, the adoption aided in the transmission of non-essential data off the blockchain while also expanding Litecoins’ block size to some extent. SegWit also made it possible for the developers to integrate Lightning Networks, enabling Litecoin holders to make instant payment. Before then, this feature was considered impossible for major coins in the crypto ecosystem.

The activation of SegWit also led to the adoption of Litecoin by many exchanges, including Coinbase. This was another success for Litecoin, thereby leading to an increased interest in the cryptocurrency, as well as price growth. The Litecoin-related events that happened in 2017 drove up its value from $4.36 USD in January 2017 to hit its record high of $255.42 USD in December 2017, making it the most successful year for the token.

However, Litecoin's value started to nosedive during the decline of the cryptocurrency market in the first quarter of 2018. Although Litecoin has never gone back to its days of glory, it is still amongst the top 10 cryptocurrencies in the global market.

Litecoin Founder

Litecoin is the brainchild of Charlie Lee, a computer scientist and developer. Lee has become a prominent figure in the cryptocurrency industry due to the various influential roles he played towards its growth. He has a Bachelor’s and Master’s degree from the Massachusetts Institute of Technology (MIT). Over the years, Lee has acquired a ton of experience in the tech and crypto industries, including during his time working for Google.

Charlie Lee’s Professional Experience

• Kana Communication: Software Engineer. 2000 to 2003 (three years).
• Guidewire Software: Senior Software Engineer. June 2003 to July 2007 (four years, two months).
• Google: Software Engineer. September 2007 to July 2013 (five years, eleven months).
• Coinbase: Engineering Manager and Director of Engineering. July 2013 to June 2017 (four years, one month).
• Litecoin: October 2011 to present.

What Is Litecoin?

Litecoin is one of the first tokens to be created in the cryptocurrency market. It is a peer-to-peer system made up of a string of interconnected blocks containing transaction information. Being one of the most adopted currencies worldwide, Litecoin has also grown to join the league of cryptocurrencies with the highest market cap in the global market. Similar to other major cryptocurrencies, Litecoin runs on a decentralised blockchain technology. This means that the tokens are not generated or issued by a principal authority. Rather, a cryptographic protocol is used to generate the coins.

Although Litecoin has not returned to its glory days after the cryptocurrency market crash, it is still one of the most valuable cryptocurrencies in the global market. As a result of Litecoin’s enormous potential, numerous small-scale businesses, established companies, and exchanges who wish for a global reach have adopted it as a payment medium. Statistics have shown that businesses who have adopted the Litecoin peer-to-peer payment system have gained an advantage over their counterparts with respect to brand value and revenue. The relatively low transaction fee has increased the adoption of Litecoin as individuals want to avoid the outrageous transaction fees charged by banks.

How Does Litecoin Work?

For newbies in the crypto ecosystem, it is easy to liken cryptocurrencies to fiat currencies because they perform the same functions. Investors can purchase, sell, and trade cryptos in the global exchange like their fiat counterparts. They also have storage systems that are slightly similar to those used by traditional banks. However, the difference between fiat currencies and cryptocurrencies is that the latter are not generated or governed by a central authority. Instead, the Blockchain protocols and mining activities are used to generate cryptocurrencies used worldwide.

Also, anyone who has an understanding of how Bitcoin works will easily understand the functions of Litecoin. Litecoin and Bitcoin are known to have similar functions since the former is a Bitcoin fork. That being said, Litecoin has its mode of operation and protocols just like every other cryptocurrency. The millions of coin holders, miners, and users who offer their computing power for the support of the Litecoin network have protected its existence. In return, these users earn Litecoin rewards as the network uses their computing power to process and authorise transactions. It is also worth noting that the Litecoin network rewards users based on the computing power offered. In essence, no one is cheated because a governing algorithm designed to treat every user fairly shares the profits evenly.

The algorithm is also designed to produce only 84 million tokens, meaning that no one can alter the code or illegally generate Litecoins for personal benefits. However, with continuous mining, the system will reduce the rewards received by miners, and mining will stop when all the tokens generated by the system have been mined. This has helped to build trust in the system while also making Litecoin popular because the users have a guarantee that the network does not cheat them. In addition to this, the fixed amount ensures that the value of Litecoin increases over time as it will not be affected by inflation.

Furthermore, the block approval time modifications made during the creation of Litecoin has set it apart from other cryptocurrencies because the approval of a Litecoin block takes only 2.5 minutes. The developing team further increased the transaction speed by adopting the SegWit protocol, enabling them to integrate the Lightning Network feature. The Litecoin network was the first to use this feature after carrying out a Lightning Network transaction from Zürich to San Francisco. Also, the fee structure was remodelled to become more suitable for coin holders. This fee structure is one of Litecoin’s major points of attraction, as users only have to pay a low rate of 0.0001 LTC per kilobyte to process their transactions. Therefore, the fees charged per transaction is not dependent on the volume.

Another important thing to note about Litecoin is its limited supply. The Litecoin network generates tokens at regular intervals after a block of transactions have been confirmed. As mentioned earlier, the Litecoin network is set to generate only 84 million tokens, and the developers arrived at this figure with a simple calculation. Since the processing speed of Litecoin was four times faster than Bitcoin, the developers also decided that it would be best for the number of tokens to be four times larger than that of Bitcoin.

It is worth noting that the limited supply helps to maintain a steady demand for the token while also increasing its overall value. Currently, there are 65,678,353 LTC in circulation, and token generation will stop once it reaches 84 million. Over the years, Litecoin has become a less volatile cryptocurrency, making investors consider it a better investment option than other major tokens. The Litecoin blockchain also offers transparency and an advanced security level for its users. With this, the developing team has been able to cut down the incessant rate of cybercrimes that can hamper the integrity of the system.

Litecoin developers designed the token to be used and traded by anyone who has a Litecoin wallet. This wallet features both private and public keys, enabling users to buy, sell, and store their funds. Some widely used Litecoin wallets include Exodus, Jaxx, and LoafWallet, and users are required to fund them before any transaction can occur. Investors can buy Litecoin tokens from online exchanges, including Coinbase, OKCoin, BitBay, CoinGate, etc. Likewise, coin holders can sell their tokens on these exchanges if they wish to.

Litecoin vs Bitcoin

Being the most popular Bitcoin fork, Litecoin shares certain similarities with Bitcoin. In fact, Charlie Lee’s inspiration to create Litecoin was driven by the Bitcoin protocol released by Satoshi Nakamoto. Although both cryptocurrencies are technically similar, they still have some key distinctions. The subsequent part of this section will shed more light on the primary similarities of the two cryptocurrencies while also highlighting the various differences between them.

Algorithm and Blockchain Protocol

A cryptocurrency's algorithm is of utmost importance to miners because it determines the profitability of the mining activities on the blockchain. The algorithms governing the Litecoin and Bitcoin networks are somewhat similar, but they share a major difference as well. Both cryptocurrencies feature PoW (Proof of Work) blockchain protocol on their network; however, the PoW algorithms are entirely different. The PoW algorithm is used to generate new blocks and authorise transactions within the network. Miners use the PoW algorithm to compete amongst themselves and process more transactions within the network. As a miner confirms more transactions on the blockchain, his token rewards keep growing.

Bitcoin created the PoW’s initial framework to serve as a tool for the production of tokens and confirmation of transactions. The Litecoin development team created the Scrypt PoW for its blockchain while the Bitcoin network employs the SHA-256 hashing algorithm. During Litecoin’s launch, Charlie Lee stated that it was a logical move for the development team to use an algorithm different from Bitcoin’s. He also pointed out that the decision was made after identifying the major problems faced by miners of other altcoins when they compete with Bitcoin miners. Bitcoin's hashing algorithm has brought about so much competition between miners on the blockchain. Therefore, miners can only remain profitable when they utilise robust and highly efficient mining tools.

It is worth noting that the Scrypt PoW is a less complex algorithm; therefore, it does not require high processing power. To this effect, block processing and transaction confirmation are faster on the Litecoin blockchain compared to that of Bitcoin. Conversely, SHA-256 is highly complex and significantly harder to compute, leading to the slow confirmation of Bitcoin transactions. In addition, Scrypt uses a large amount of memory, whereas SHA-256 is run by raw processing power.

Another significant distinction between Scrypt and SHA-256 is that the former carries out its functions in a parallel manner due to its simplistic algorithm. As a result, the mining process on the Litecoin blockchain is considered more democratic, meaning that it is open to the average person. All the miner needs is a bunch of affordable memory cards instead of the costly ASIC (Application Specific Integrated Circuit) devices used by Bitcoin miners. However, reports also show that the ease of access for which the Litecoin network is known might reduce as companies are currently developing ASICs for Litecoin mining.

On the other hand, the complexity of the SHA-256 mining algorithm prompted Bitcoin manners to create mining pools, enabling them to complete mining tasks faster with the help of parallel processing. The miners achieved this by employing powerful but costly mining hardware, popularly known as ASIC (Application Specific Integrated Circuit) devices. Thus, BTC mining is only available to individuals and companies who can afford the ASIC devices or pay to be part of a mining pool.

Total Supply of Tokens

Charlie Lee and his development team programmed the Litecoin blockchain to produce 84 million LTC. On the other, the Bitcoin network can only generate a total of 21 million BTC. As mentioned earlier, there are 65,117,880 LTC currently in circulation, representing approximately 77.5% of the entire Litecoin quota. Conversely, about 18,522,075 BTC is currently circulating, meaning that about 88.1% of the entire Bitcoin allocation has been mined.

Block Time

Block time is the speed at which the block of a cryptocurrency is produced, and it is considered the most significant difference between Litecoin and Bitcoin. It is widely known that the Litecoin blockchain confirms transactions four times faster than the Bitcoin network. As mentioned earlier, it takes an average of 2.5 minutes for the Litecoin network to produce a block of the cryptocurrency.

Over time, Bitcoin has experienced highly volatile block times in the region of about 10 minutes. In a worst-case scenario, it takes about 15 minutes for a Bitcoin block to be produced. The slow transaction time within the Bitcoin network has been a persistent problem, and it has, in turn, affected Bitcoin's scalability.

Additionally, the integration of the Lightning Network has reduced the problem to an extent; however, it arises again when there is network congestion. This shows that the Litecoin network outshines the Bitcoin network in terms of block generation capacity, enabling it to keep up with higher transaction volumes.

Current Market Price and Capitalisation

According to CoinMarketCap data, one Litecoin costs about $49.69 USD while the price of a Bitcoin is $11,396.56 USD. Also, the market capitalisation of Bitcoin currently places it in the first position. Litecoin, on the other hand, is in the 10^th position with a market cap of $3,263,082,031, coming in after Bitcoin, Ethereum, Tether, Ripple, Bitcoin Cash, Binance Coin, Chainlink, Polkadot, and Cardano.

Transaction Fees

Statistics indicate that Litecoin’s transaction fees have always been less than that of Bitcoin. They also show that Litecoin’s average transaction fee was about $1 when it reached its peak, whereas Bitcoin recorded a transaction fee of close to $55 at its peak. Since the decline of the cryptocurrency market in 2018, the highest transaction fee recorded by Litecoin is $0.504, and its average fee ranges from $0.2 to $0.35. The low transaction fees have attracted more investors and traders to the cryptocurrency. It is also worth noting that the minimum fee for Litecoin transactions is 0.0001 LTC per kilobyte.

In contrast, Bitcoin transaction fees witness fluctuations because they are dependent on the transaction size, thereby attracting numerous criticisms to the network.

Difficulty Retarget

A cryptocurrency’s difficulty measures the level of difficulty involved in finding a hash that is lower than the target given by the system. Both Litecoin and Bitcoin share a similar retarget frequency of 2016 blocks, meaning that the network difficulty changes after every 2016 blocks. However, Litecoin’s difficulty retargets every 3.5 days because the block time is four times faster than Bitcoin’s. This also implies that it takes approximately two weeks for Bitcoin's difficulty to retarget.

There have been cases whereby the computing power within the Bitcoin blockchain diminishes drastically because the number of miners on the network is insufficient. When this occurs, block time will be slower until the next retargeting date. Unlike Bitcoin, the Litecoin network is less affected in this situation because it has a faster difficulty retargeting.

On the other hand, the difficulty retargeting or adjustment in the Bitcoin network is more stable because it takes a longer period. For instance, if a miner links a highly powered CPU to the Litecoin blockchain on a particular day and removes it, the absence of that same CPU power during the remainder of the 3.5-day window will alter the difficulty of the network.

An unstable difficulty will spell doom on the Litecoin blockchain if its hash power is eventually affected. If the difficulty is lower than the CPU power in the network, blocks will be produced faster, leading to inflation and low security. Also, having a low difficulty compared to the CPU power will slow down block production, leading to slow transaction speed. The instability may also lead to chain hopping, whereby sophisticated cybercriminals can move funds from one cryptocurrency to another via online exchanges.

The table below shows a summary of the various differences between Litecoin and Bitcoin.

How to Buy Litecoin

Before any Litecoin purchase, the buyer will be required to have a wallet where he will store the coins. It is not advisable to store coins on exchanges because of hack attacks. There are various Litecoin purchase options, but the buyer’s option is dependent on certain factors. One of the major factors is the buyer’s area of residence, as different countries and states may have laws that do not favour cryptocurrencies or Litecoin in particular. Other factors that affect buyers' choice are payment method and fee payment.

Directly from Litecoin

Investors can use credit or debit cards to purchase tokens on the official Litecoin website. The website provides some data fields where buyers can input the number of tokens they wish to purchase, the amount in USD, and their Litecoin wallet address. After completing the form, the buyer should click on Buy to proceed to the payment gateway. He will then be taken to the next page, where he will be required to fill in his card and personal details. Next, he must check a box to agree to the payment gateway’s Term of Use, after which he must click on Pay Now to continue. The gateway will verify his details and finally authorise the transaction.

From Crypto Exchanges

A buyer who prefers to deal with a third party can purchase Litecoin from any exchange of choice. He can make payments with credit or debit cards, bank transfer, cash, or crypto. However, the payment option he uses will depend on the exchange with which he decides to deal. In addition, buyers who purchase Litecoin through exchanges must note that the transaction charges may be higher, and their tokens might be at the mercy of hackers. Some notable exchanges from which to buy Litecoin include Coinbase, Binance, BitPanda, and so forth.

Litecoin Storage

There are numerous storage options for Litecoin holders to consider. Low-volume investors and traders prefer to store their coins in exchange wallets, but this is the least safe method of saving funds. Below are the safest methods of storing Litecoin.

Hardware Wallets

This storage option is the best way to store Litecoin holdings, and it is mostly used by major exchanges and high-volume investors. Hardware wallets come in the form of physical devices, including hard disks and USB flash drives; however, the latter is the most common. Since hardware wallets are designed to operate offline, they are not easily hacked, and many users see this as a major advantage. The only way to gain access to this category of wallets is via private keys.

While this may be the safest way to store coins, it still has some downsides. A fraudulent wallet provider may store all the private keys of customers and eventually use them to steal customers’ funds. Also, hardware wallets are incredibly costly to maintain, making it accessible to a particular class of investors. Some examples of reliable hardware wallets include Ledger Nano S and Trezor.

Desktop Wallets

These types of wallets are designed to work online. Any interested Litecoin holder can download and install the wallet on his computer. However, it is worth noting that he can only access his wallet from that particular device. Desktop wallets are considered the most secure online wallets, but users may experience some inconveniences because they can only access their funds from a specific device. In some cases, it may be difficult to recover funds when the operational device is stolen; therefore, investors are advised to weigh their options properly before choosing this storage method. Litecoin-QT and Exodus are notable examples of reliable desktop wallets.

Mobile Wallets

Mobile wallets are the easiest and handiest type of crypto wallets to use. The wallet application can simply be downloaded on a smartphone, and the user is good to go. Most crypto traders prefer this storage option because of its high levels of security, as well as the ease of access that it offers them. Some popular mobile wallet options include Coinomi, Abra, Jaxx, and Edge.

Paper Wallets

This is another offline method of storing Litecoin. Here, the coin holder will print his private and public keys and keep it safe. Most paper wallets store assets with QR code, making it easy for the user to scan and access his funds when needed. Using paper wallets is a good choice because it eliminates the risks of hacking attacks, but the user must ensure that the paper does not fall into the wrong hands. Liteaddress.org provides reliable paper wallet services.

Litecoin Forks

In the cryptocurrency industry, a fork refers to the divergence of a blockchain into two distinct parts. In essence, forks split a blockchain network, and this happens when all or some users of a blockchain network decide to adopt a new protocol – ways of doing things within the network. There are two types of forks in the blockchain industry, including the hard forks and the soft forks.

A hard fork occurs when the nodes of the latest protocol of a network refuse to accept the older nodes, creating an irreversible divergence from the older protocol of the blockchain. In addition to this, hard fork occurrence requires an upgrade in all the nodes within a blockchain. The nodes and users must be upgraded to the latest protocol to remain active on the blockchain and failure to upgrade the older nodes will leave them on a different network with different functionalities.

Conversely, soft forks require all nodes to be upgraded; however, failing to carry out the upgrade does not render the nodes invalid. They can still be used to confirm transactions on the same network. But the difference is that the different sets of nodes will function differently on the same blockchain.

As stated previously, Litecoin is a Bitcoin fork created in 2011 with the aim of improving upon the transaction speed of Bitcoin, thereby earning it the nickname, faster Bitcoin. Somewhere along the line, users of the Litecoin blockchain considered it important to develop new cryptocurrencies to serve various needs and purposes. Below are the numerous Litecoin forks that are in existence:

Junkcoin (JKC)

Junkcoin, which is the first-ever Litecoin fork, was launched in May 2013. The features added to the cryptocurrency were designed specifically to increase its mining capabilities. During its launch, the development team stated that the new addition is a random coin size per block, making it possible for miners who are late to join the pool to still make profits.

It is worth noting that Junkcoin has been performing poorly in the global market. Over time, its usage, network activity, and market capitalisation have all declined. According to CoinMarketCap data, Junkcoin currently has a market capitalisation of $1,331.64 USD.

Monacoin (MONA)

In December 2013, some users within the Litecoin community decided to create another coin through a hard fork, and this process birthed Monacoin. The cryptocurrency was named after the famous ASCII (American Standard Code Information Interchange) cat, Mona. Monacoin was designed for the sole purpose of peer-to-peer payments, and it is widely used in Japan.

Monacoin has also remained active in the global market. In December 2017, the coin reached its peak price of $20.23 during the crypto market boom. However, its value declined in early 2018 when the cryptocurrency market crashed. CoinMarketCap data shows that the current market capitalisation of Monacoin is $81,837,928 USD.

Litecoin Cash (LCC)

Litecoin Cash is one of the most recent and successful Litecoin forks in existence. The Litecoin Cash developing team was not part of the main Litecoin team; therefore, its blockchain is entirely different from Litecoin’s. The creators of the cryptocurrency worked to improve upon the transaction speed while also adding a more lucrative mining system.

Furthermore, Litecoin Cash has been showing gradual improvements since it was launched. The coin currently trades at $0.002680 USD, with a market capitalisation of $1,862,138 USD, according to CoinMarketCap data.

CloakCoin (CLOAK)

Launched in 2014, CloakCoin was developed to solve the issue of privacy in the crypto ecosystem. The cryptocurrency features an advanced privacy algorithm known as ENIGMA. The development team integrated ENIGMA into the CloakCoin blockchain to enhance the anonymity of transactions. They were able to achieve this by adding extra layers of encryption and employing off-chain coin mixing protocols.

The CloakCoin mining process was designed to accommodate everyone, making it possible for miners to carry out their activities with computers or smartphones. CoinMarketCap data indicates that CloakCoin currently has an average daily trading volume of $17,031.98 USD, with a market cap of $874,712 USD.

Einsteinium (EMC2)

Usually, forks are created to either enhance the profitability of miners or increase the transaction speed of a particular network. However, the case was different with Einsteinium, whose purpose was to generate funds for science development through the Einsteinium Foundation. Here, the network taxes miners’ rewards to help fund scientific research worldwide.

Miners are required to donate 2.5% of the funds generated from every mined block, and these donations will be sent to innovators involved in viable scientific projects. It is worth noting that only projects within the Einsteinium community are eligible to receive donations. According to CoinMarketCap data, Einsteinium currently has a market cap of $10,011,666 USD.

Feathercoin (FTC)

Just as Litecoin was created to improve upon the loopholes seen in Bitcoin, Feathercoin was also developed to offer better features than Litecoin. The objective of the Feathercoin development team was to create a cryptocurrency that is more stable, secure, and faster than its Litecoin counterpart.

Mining is also another major focus of Feathercoin as the developers designed the network to allow easy mining processes while also speeding up transactions. Feathercoin currently has a market capitalisation of $2,028,186 USD, according to CoinMarketCap data.

Litecoin Halving

Litecoin's total coin supply is 84 million, and the network currently rewards miners with 12.5 LTC for every block found, but the reward was much higher before now. Halving reduces the tokens generated per block to ensure an equitable distribution of the cryptocurrency. The first Litecoin halving happened in August 2015 at 840,000 blocks, reducing the reward per block from 50 LTC to 25 LTC. Then, another halving occurred in August 2019 at 1,680,000 blocks, decreasing the reward from 25 LTC to 12.5 LTC.

Halving is an integral part of Litecoin’s PoW algorithm, and it is evident in its market price. The halving process is straightforward; it simply slashes the rewards earned per mined block by half. To calculate the potential earning of a PoW extraction, the miner must use the value of the hash rate to divide the sum total of coins mined in a day. It is also important to note that the profitability of the mining process can be affected if the hash rate within the network is changed. Further, there is a tendency that some miners could abandon the mining process if the market price of Litecoin does not increase to a level where they can receive a satisfactory compensation for future reduction.

During Litecoin’s launch, the developing team stated that miner rewards would be reduced by half after every 840,000 blocks. The network generated about 576 blocks per day because the cryptocurrency has a block time of 2.5 minutes. Therefore, halving happens once in four years on the Litecoin blockchain. Halving events have significant effects on every Proof of Work cryptocurrency, and below are its unique effects on Litecoin:

• Reduction in Profitability: Since the reward per block is cut by half, miners’ profitability will be reduced by 50%.
• Loss of Miners and Increased Security Risk: As stated before, halving can make some miners lose interest in the network and quit the mining process. On top of that, reward halving has a tendency of pushing miners towards certain pools that make use of ASIC devices because it increases their profitability. When this happens, it diminishes the security of the blockchain because the hashpower will decline.
• Reduces Inflation: Proof of Work cryptocurrencies face constant inflation because their market prices are determined by the block time of the network. After the first halving in 2015, Litecoin’s annual inflation rate was about 8.4%. However, the 2019 halving reduced the inflation rate to about 4%, and analysts predict a lower inflation rate after the next halving event.

Litecoin Mining

With the increasing popularity of the cryptocurrency, many individuals have been investing their resources to participate in Litecoin mining. Litecoin makes use of the PoW algorithm, and the current reward for every block found is 12.5 LTC. To mine this cryptocurrency effectively, the miner must use a GPU computer, but he can increase his profitability by employing ASIC devices. Currently, there has been an increasing need for ASIC miners because using GPU computers have become less lucrative. In addition, the more mining devices a miner has, the higher his earning potential. Miners must connect a software with the ASIC or GPU devices to start mining. There are only three major mining options on the Litecoin blockchain, and here they are:

Solo Mining

If a miner decides to purchase all the necessary mining equipment while also carrying out all the responsibilities by himself, then he is engaging in solo mining. One major advantage of this mining type is that the miner keeps all the rewards for himself, meaning that he has higher profit potentials. Also, solo miners are not charged any fees. However, any miner who wishes to go solo must note that he will invest a huge amount of money into buying the required equipment while also bearing the cost of electricity alone.

Solo mining is incredibly expensive; therefore, the miner must be sure that he can afford to bear the costs before venturing into it. Also, there is a possibility that a miner will not earn any reward for days or weeks due to volatility and competition involved in the mining process.

Mining Pool

This option is best for those who want to share the mining investment risks with other individuals. In mining pools, miners share resources, including electricity and computing power, thereby increasing their chances of earning more block rewards because they can collectively generate more power. By joining mining pools, miners also tend to earn consistently, unlike solo mining. This is because any time a pool wins, the participants are entitled to a percentage of the overall reward, depending on the computing power provided. In most cases, miners are also required to pay a fee before they are admitted into a mining pool.

Cloud Mining

Cloud mining is the most cost-effective of the three options. Here, the miner only needs a normal computer, meaning that he doesn’t need to spend money on expensive hardware. Beginners mostly explore this option because all they need to do is to find a profitable mining rig and pay the registration fee, and the entire mining process will be carried out on their behalf. A mining rig is a set of interconnected computers assembled for the sole purpose of mining cryptocurrency. The higher the number of computers in a rig, the higher the effectiveness of that particular rig.

Also, the number of coins earned by the miner is dependent on the amount of money invested in the rig. However, miners are advised to conduct thorough research before making any investments because there are many fraudulent websites on the internet posing to have a mining rig.

Litecoin Mining Equipment

Whichever option a miner chooses to go with, he must buy some devices and software to mine effectively. They both work hand in hand to enhance profitability. At the inception of Litecoin mining, miners could easily make good profits by utilising GPU (Graphics Processing Unit) and CPU (Central Processing Unit) devices. These devices were not expensive, meaning that they could invest a small amount of money to purchase the devices and make money from Litecoin mining.

Along the line, companies and big investors introduced ASIC miners into the network, making it extremely difficult to earn with CPU and GPU computers. This is because ASIC miners have more computing power compared to GPUs and CPUs; therefore, they tend to beat the older devices in mining competitions. The most widespread and powerful mining hardware used on the Litecoin network is the Antminer L3+.

This device is produced by a prominent hardware manufacturer, BitMain, and no other mining hardware can compete with it on the Litecoin blockchain. The AntminerL3+ device features a 504MH/s hash rate, meaning that it can decode mining puzzles faster than any other mining device. One of the advantages of the Antminer L3+ is its easy setup process. This is so because the manufacturer attaches an installation file to the product package while sending it to the buyer. A miner who is in possession of this device can choose to either engage in solo mining or be part of a mining pool.

To set up the BitMain device, he must first open an account on the BitMain official website. Then, he should long-press the IP Reporter button on the hardware controller for five seconds until it beeps. The miner’s IP address will be displayed on his screen, and he is required to input it on the BitMain website. After that, he must finally input the wallet address to which his Litecoins will be sent. To join a mining pool, the miner should click on Miner Configuration in his BitMain account. After that, he must click on General Settings and input his worker ID, password, and mining pool URL. The system will automatically attach him to a mining pool.

Security

The decentralised system of the Litecoin network offers security advantages, which is lacking in centralised systems. For instance, most banks use centralised servers, and if a hacker gains access to their servers, he can steal as many funds as he wants. Users of centralised systems are forced to entrust third parties with their protection. However, decentralised systems like Litecoin do not suffer the same fate.

A hack attack can only happen on the Litecoin blockchain if the hacker is in control of more than 50% of the network. This will only be possible if the hacker can generate a computing power that surpasses 51% of the network. However, this can never happen because the Litecoin network is too large for any hacker to control. Pulling off a successful hack attack on the Litecoin blockchain could cost billions of dollars, making it pointless because the hacker can only have access to the system for a short period. Another important aspect of Litecoin security is storage systems. Like the Litecoin blockchain, these storage systems feature advanced security tools, making it nearly impossible for anyone to steal users' funds.

Pros and Cons

Litecoin has been incredibly popular due to the many advantages that it offers. However, it does also come with some disadvantages, and as we will be evaluating both sides in this section, we’ve outlined both the pros and cons of the coin, below.

Pros of Litecoin

• Total Coin Supply: The limited supply of Litecoin helps to improve its demand. Even with the limited supply, there is enough for the Litecoin community to mine.
• Transaction Speed: This is one of the reasons for which the cryptocurrency was created. Litecoin’s block time is four times faster than that of Bitcoin. In addition, the sophisticated open-source technology of the coin allowed the integration of useful features like the SegWit and Lightning Network, ensuring that it confirms transactions faster.
• Atomic Swaps: This system allows the transfer of tokens across exchanges without making use of third parties. For example, if an investor wants to swap 4 ETH for 1 BTC, the normal method requires him to use an exchange, thereby incurring charges. However, he can easily swap his token with another willing investor by using the atomic swap process while also avoiding paying any fees.
• Market Capitalisation: Although Litecoin seems to have an uncertain future, its large market cap enhances liquidity and profitability for traders and investors. Litecoin is among the top 10 cryptocurrencies in terms of market capitalisation.
• Accessibility: Litecoin owes its rapid growth to its accessibility. This helped to enhance its adoption, making individuals and companies to use it as an investment tool.
• Transaction Fees: Litecoin holders enjoy cheaper transaction fees compared to their Bitcoin counterparts and other crypto communities.
• Easy Mining Process: The Proof of Work algorithm used by Litecoin ensures that the mining process is straightforward, compared to other cryptocurrencies.
• Stability: Unlike most major cryptocurrencies, historical data shows that Litecoin has remained somewhat stable during market corrections.

Cons of Litecoin

• Strength: Most cryptocurrencies bounce back almost immediately after major corrections; however, Litecoin has proven to take a longer period before it does so.
• Anonymity: Litecoin’s anonymity has somewhat created a negative image for the coin because criminals have taken to using the currency to carry out illegal transactions online.

Conclusion

Overall, Litecoin is and will continue to be one of the most prominent cryptocurrencies in the global market. This is because the Litecoin blockchain is driven by advanced technologies, enhancing the cost-effectiveness and speed of transacting on the network. Due to the consistent improvements made by the developers of the blockchain, more investors have been adopting Litecoin as a means of increasing their portfolios. Like every other cryptocurrency, the future of Litecoin is not cast in stone. But its past trends show that Litecoin has a high tendency to be stable and will be more successful as we wade into the uncertain and exciting future of cryptocurrencies.

Numerous factors affect the market price of digital assets, including financial, political, military, economic, regulatory, and terrorist events. Whether positive or negative, these events have the tendency of creating high volatility in the market, leading to extreme losses or devaluation of a cryptocurrency.