Investing in Litecoin and How it works
How Litecoin was Formed
Litecoin (LTC) is open-source software that facilitates Peer-to-Peer transactions at nearly zero cost to anyone in the world.
Litecoin was an early alternative to Bitcoin (BTC), which has been performing excellently since with a 100% uptime since its debut in 2011. Technically, Litecoin is so identical to Bitcoin.
LTC is commonly referred to as the digital silver of Bitcoin, of which BTC itself is the digital gold, and it was developed by Google and Coinbase former engineer, “Satoshi Lee”.
Litecoin trails strongly behind the alpha coin, Bitcoin. It has retained a spot amongst the top ten cryptocurrencies revving the market by market capitalization.
Like most cryptos, the transfer of coins depends on a cryptographic protocol and is managed by no central unit.
Litecoin is a highly volatile altcoin, and it is still maintained by Lee and other members of the Litecoin Foundation.
The Litecoin Foundation is responsible for the development and use of Litecoin as its recent adoption by the Ultimate Fighting Championship (UFC), thereby becoming its official cryptocurrency.
Litecoin’s major advantage is that it has very low transaction costs. However, it has a fixed supply with about 66.59 million LTC in existence today which controls its circulation and regulates its price.
With these fixed supply terms, Litecoin has recovered over 70% from its bearish lows. This shows that LTC is likely to have a higher risk to reward ratio compared to other digital assets due to the need to go further before catching up with others in the market.
The potentials for increased financial reward is on the upside when we look at its recovery from an all-time high of over 400 dollars per LTC.
How Does Litecoin Work?
Litecoin technically functions the same way Bitcoin does. The online payment method was inspired by Satoshi Nakamoto himself and the release of Bitcoin’s protocol.
Charlie Lee, Litecoin’s developer started his Litecoin project by sourcing the main code from BTC. He later created several crucial modifications to the protocol.
One of such upgrades Charlie Lee introduced was the cutback of the block approval time from 10 minutes down to 2.5 minutes. These blocks held the next batch of transactions that weren’t yet approved.
Other Modifications to Litecoin
Reduction in the Block Time
The block time cutback gave Litecoin increased scalability making it 4 times faster than Bitcoin when we look at the speed of transactions per second.
Surprisingly, a transaction costs only 1/1000, and the fees despite small don’t change regardless of transaction size.
You get to pay the same amount for every transaction done through Litecoin. This is a huge upgrade to current holders of the coin.
Total Supply of Litecoin
One of the reasons why cryptocurrency enthusiasts are drawn to Litecoin is because of its finite supply.
Litecoin is only produced at specific intervals after the acceptance of a block of transactions to the network, unlike fiat currencies.
With 66.59 million Litecoins in circulation today, the total number of Litecoins that will ever be in existence will not exceed 84 million. This sum was derived from calculations done by developers.
In essence, this fixed amount of coins will regulate Litecoin’s price and deter inflationary pressures.
Investors and traders of LTC view it as a very sustainable cryptocurrency within the market because it frequently experiences less volatility, faster transaction speed at a very low cost.
SEE ALSO: 5 Best Bitcoin Wallet Providers in 2020
How Do I Buy Litecoin
Investing in Litecoin is simple, you can take two major actions as it regards Litecoin and they are:
1. Buy and Hold
The Buy and Hold strategy requires that users first purchase the cryptocurrency from a cryptocurrency exchange or broker and then transfer it to a Web or hardware wallet for safekeeping and future use.
Trading can be divided into two methods –
Spot trading and Derivatives trading
It involves the use of financial instruments staked for a quick return in the market. Several assets contain a “spot price” and futures price.
In common terms, a derivative exists as a contract between two or several people that relies on a base financial asset or number of assets.
It is a way for traders to predict the price movements of a base asset in the future.