Litecoin (LTC) was established by Charlie Lee, a former Google employee, in 2011 as a peer-to-peer digital currency. It is similar to bitcoin and based on its original source code, but Litecoin was specifically created for cheaper and more efficient transactions for everyday use. Unlike bitcoin, which is often used as a store of value for long-term purposes, Litecoin has a higher coin limit market cap and a quicker mining process. This allows for faster and cheaper transactions, although they are typically smaller in size. Like bitcoin, Litecoin is a digital currency that utilizes blockchain technology to transfer funds directly between individuals or businesses, maintaining a public ledger of all transactions and operating as a decentralized payment system independent of government control or censorship.
How does litecoin work?
Litecoin operates through an open-source cryptographic protocol for the creation and transfer of digital coins, while utilizing blockchain technology to maintain a decentralized public ledger of all transactions.
WHAT IS THE BLOCKCHAIN?
The blockchain is a digital ledger that is shared and used to store a record of all Litecoin transactions. Miners group together recent cryptocurrency transactions into blocks, which are then cryptographically secured before they are linked to the existing blockchain. This same type of blockchain technology is utilized for several other cryptocurrencies, such as bitcoin and Litecoin.
WHAT IS MINING?
Mining is the process of securing each block to the existing blockchain using mining software. Once a block is secured, new units of cryptocurrency get released. Miners can inject these units directly back into the market.
What are the differences between litecoin and bitcoin?
While there are many similarities between bitcoin and litecoin, some of the subtle differences include:
TRANSACTION SPEED
While litecoin requires more sophisticated technology to mine than bitcoin, blocks are actually generated up to four times faster. Litecoin also processes financial transactions a lot quicker, and can also process a higher number of them over the same time period.
NUMBER OF COINS
Both bitcoin and litecoin have a finite number of coins in circulation. Bitcoin has 21 million coins available, while litecoin has 84 million available – four times more than bitcoin.
MARKET CAP
Litecoin has a much smaller market cap than bitcoin, but is still one of the most traded cryptocurrencies.
ALGORITHMS
Miners must successfully solve hash functions in order to add new blocks of a cryptocurrency to the blockchain. Litecoin and bitcoin use different mining algorithms, with Scrypt being the hash function used for litecoin, and SHA-256 the hash function used for bitcoin. Scrypt was initially chosen by the litecoin development team to avoid mining being dominated by ASIC-based miners. This would allow CPU and GPU-based miners to compete. The Scrypt mining algorithm is more memory intensive, and this was initially less suited to ASIC miners, giving other miners more opportunities. However, Scrypt-capable ASIC-based miners have developed over time. This means CPU and GPU-based miners no longer have valid mining tools due to the inferior computational powers, and ASICs are able to generate far more hashes per second.
How to trade litecoin
When you buy litecoin on an exchange, the price of one litecoin is usually quoted against the US dollar (USD). In other words, you are selling USD in order to buy litecoin. If the price of litecoin rises you will be able to sell for a profit, because it is now worth more USD than when you bought it. If the price falls and you decide to sell, then you would make a loss.
With CMC Markets, you trade litecoin via a spread bet or contract for difference (CFD) account. This allows you to speculate on its price movements without owning the actual cryptocurrency. You aren’t taking ownership of litecoin. Instead, you’re opening a position that will increase or decrease in value depending on litecoin’s price movement against the dollar.
Spread betting and CFDs are leveraged products. This means you only need to deposit a percentage of the full value of a trade in order to open a position. You won’t have to tie up all your capital in one go by buying litecoin outright, but can instead use an initial deposit to get exposure to larger amounts. While leveraged trading allows you to magnify your returns, losses will also be magnified as they are based on the full value of the position.
Why trade litecoin with CMC Markets?
Open a long or short position*
Spread betting and CFDs allow you to trade on both rising and falling prices. You don’t have to own litecoin in order to sell it (go short), which is not possible on cryptocurrency exchanges.
Efficient use of capital
Leveraged trading means you only deposit a percentage of the full value of a trade in order to open a position. With mainstream cryptocurrency exchanges, you would need to deposit the full value of the contract. Remember that both profits and losses will be magnified, and you could lose more than the amount you deposit to open a position.
No exchange account or wallet
Unlike trading the underlying litecoin, there is no need to open an exchange account or wallet to hold the litecoin you have bought. This means no waiting for approval from the exchange, no concerns about keeping your wallet secure, and no fees if you want to withdraw funds later.
Trade with an established provider
CMC Markets is a regulated provider. We have 29 years’ experience in the industry and offer support for all our clients whenever the markets are open.
Trade responsibly
Cryptocurrencies are still relatively new for most people and can be extremely volatile. We want our clients to have access to in-depth educational materials to support their trading.
What factors affect litecoin’s price?
Litecoin’s volatility is likely to be driven by similar factors to bitcoin, for example:
- Regulation: cryptocurrencies are currently unregulated by governments and central banks. There are questions about how this could change in the next few years, and what impact this could have on value.
- Supply: there is a finite number of litecoins available to be mined (84 million). Availability can also fluctuate depending on the rate at which the coins enter the market.
- Press: prices of litecoin can be affected by public perception, security, longevity, and the prices of other cryptocurrencies such as bitcoin.
- Adoption: litecoin hasn’t currently been adopted by businesses or consumers as a method of payment. But, some see potential in the blockchain technology and think this could become more widely adopted in the future.
Please be aware that Litecoin reserves the right to limit your ability to go short, at our sole discretion.
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Disclaimer: The information provided on this page does not constitute investment advice, financial advice, trading advice, or any other sort of advice and it should not be treated as such. This content is the opinion of a third party and this site does not recommend that any specific cryptocurrency should be bought, sold, or held, or that any crypto investment should be made. The Crypto market is high-risk, with high-risk and unproven projects.
Readers should do their own research and consult a professional financial advisor before making any investment decisions.
