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What is Litecoin?

Litecoin is a cryptocurrency that was founded in 2011, two years after bitcoin, by a former Google engineer named Charlie Lee. Measured by market capitalization, Litecoin is the ninth-largest cryptocurrency.

Initially, it was a strong competitor to bitcoin. However, as the cryptocurrency market has become more saturated in recent years with new offerings, Litecoin's popularity has waned.

Litecoin has always been viewed as a reaction to bitcoin. In fact, when Lee announced the debut of Litecoin on a popular bitcoin forum, he called it the "lite version of Bitcoin."1 For this reason, Litecoin has many of the same features as bitcoin, while also adapting and changing some other aspects that the development team felt could be improved.

KEY TAKEAWAYS

  • Litecoin is a cryptocurrency that was founded in 2011, two years after bitcoin, by a former Google engineer named Charlie Lee.

  • Litecoin can be used as an avenue for paying people anywhere in the world without an intermediary having to process the transaction. 

  • Measured by market capitalization, Litecoin is the ninth-largest cryptocurrency.

  • There will never be more than 84 million Litecoins in circulation.

  • On April 17, 2021, the value of one Litecoin was $310.73.

Understanding Litecoin

Like other decentralized cryptocurrencies, Litecoin is not issued by a government, which historically has been the only entity that society trusts to issue money. Instead of being regulated by a central bank and coming off the press at the Bureau of Engraving and Printing, Litecoins are created by an elaborate cryptocurrency procedure called mining, which consists of processing a list of Litecoin transactions.

Unlike traditional currencies, the supply of Litecoins is fixed. There will never be more than 84 million Litecoins in circulation. Every 2.5 minutes, the Litecoin network generates a new block–a ledger entry of recent Litecoin transactions throughout the world.

The block is verified by mining software and made visible to any system participant (called a miner) who wants to see it. Once a miner verifies it, the next block enters the chain, which is a record of every Litecoin transaction ever made.

There are incentives for mining Litecoin: the first miner to successfully verify a block is rewarded with 12.5 Litecoins.4 The number of Litecoins awarded for such a task reduces with time. In August 2019, it was halved, and the halving will continue at regular intervals until the 84,000,000th Litecoin is mined.

Mining cryptocurrency at a rate worthwhile to the miners requires a huge amount of processing power, courtesy of specialized hardware. The central processing unit in most personal computers isn’t fast enough to mine most cryptocurrencies. However, Litecoin can be differentiated from the majority of other cryptocurrencies because it can be mined with personal computers.3 Although the greater a machine’s capacity for mining, the better the chance it’ll earn something of value for a miner.

Any currency–even the U.S. dollar or gold bullion–is only as valuable as society thinks it is. If the Federal Reserve started circulating too many banknotes, the value of the dollar would plummet in short order. This phenomenon transcends currency. Any good or service becomes less valuable the more readily and cheaply available it is. The creators of Litecoin understood from the start that it would be difficult for a new currency to develop a reputation in the marketplace. But by restricting the number of Litecoins in circulation, the founders could at least allay people’s fears of overproduction.

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