What is Litecoin?
Given its long-running history as one of the first altcoins, many people still look for ways to buy Litecoin.
Litecoin was designed in 2011 to enable faster and cheaper blockchain-based transactions by Charlie Lee, a former employee at Google. The Litecoin protocol experienced massive adoption and growth in 2013, reaching a $1 billion market capitalization shortly thereafter.
One of the main reasons that people buy Litecoin is that transactions take significantly less time to transfer than bitcoin, with a fraction of the transaction fees. This use alone opens up possibilities for everyday purchases where bitcoin may be prohibitively slow or expensive.
In May 2018, Abra announced native functionality for Litecoin, meaning Abra users can now buy Litecoin, or directly deposit Litecoin into the Abra app for another crypto wallet, make trades for other altcoins, and then make withdrawals again in Litecoin.
Why is Litecoin important?
The main advantage, and the main reasons many people buy Litecoin is that it makes day-to-day purchases possible with cryptocurrencies. When the price of bitcoin was low, purchasing something quickly and cheaply may have been possible, but at its all-time high in December 2017, buying a single cup of coffee with bitcoin would have cost you $30+ in fees. On top of that, the transaction would take at least an hour to process, maybe longer — not exactly ideal for everyday purchases. The cryptocurrency community is actively trying to solve this problem with technologies such as Lightning Network for bitcoin, but as of today, these protocols have not yet been fully implemented.
Litecoin, on the other hand, was designed to make payments instant, by enabling transaction verifications that take minutes rather than hours, which lowers transaction fees.
While the LTC price continued to surge year-over-year, it was still somewhat complicated to buy Litecoin until a little over a year ago. Once it became more widely accessible on popular crypto exchanges, Litecoin experienced a meteoric rise and wound up increasing in price by 6,000 percent in 2017 alone.
Another key distinction between Litecoin and bitcoin is the size of the market. As of mid-2018, bitcoin had 17,079,137 BTC in circulation. Litecoin, on the other hand, had 56,865,548 LTC available.
How does Litecoin work?
Many cryptocurrencies are created through a process called mining, which means that computers on the network are competing to solve computationally difficult puzzles, which serves the function of validating transactions. Miners are rewarded for their work, or for dedicating computing power to the network, by receiving newly issued units of the cryptocurrency.
This model of dedicating computing power toward maintaining a blockchain and creating a new cryptocurrency is called proof-of-work, or PoW.
Once the network reaches consensus (which is what the mining process is all about) and records a transaction to the blockchain, it’s very difficult to change or invalidate this work because making changes would require going back and redoing all the work that has already been done. The amount of computing power and energy it would take to undo confirmed transactions makes it practically and economically difficult to defraud a blockchain that is maintained by proof-of-work.
Bitcoin and litecoin both rely on proof-of-work, but they go about the process using different methods, which ultimately results in differences in transaction speed and cost. Bitcoin uses the SHA-256 hashing algorithm, requiring costly and sometimes hard-to-find ASIC (Application-Specific Integrated Circuit) equipment, whereas litecoin can be mined on the less expensive and more common GPU (Graphics Processing Unit) found in computer video cards.
Litecoin runs on what is called the Scrypt algorithm, which didn’t allow the jump to mining on ASIC setups, keeping the barriers to entry lower, at least at first. Today, litecoin mining (as well as mining other cryptocurrencies) is getting more complicated and expensive.
Abra users are able to buy Litecoin via Abra, and they can directly deposit and withdraw Litecoin from other wallets.
Abra also uses the Litecoin blockchain in the background, as one of the means of operating our synthetic asset model.