Cryptoradar's Beginners Guide to Litecoin | What is Litecoin?
Feb 19, 2021
One of the most popular cryptocurrencies outside of Bitcoin and Ethereum is Litecoin. If you have never heard of it, this guide will explain what Litecoin is and guide anyone who wants to buy, sell, store and trade in Litecoin.
What is Litecoin?
Litecoin is a peer-to-peer digital currency that was launched in 2011 by Charlie Lee, a former engineer at Google. Litecoin is a fork of Bitcoin - meaning that its core algorithm is the same as the one that powers Bitcoin. By itself, it aims to solve some of the problems inherent to Bitcoin such as slow speeds when processing transactions.
Litecoin seeks to provide trustless transactions between parties without counterfeiting, fraud, percentage-based transfer costs, holding fees and no single point of failure.
The major differences between Litecoin and Bitcoin are the number of total tokens that can be created and the speed of transactions.
What’s special about Litecoin?
One of the main differences between Litecoin and Bitcoin is that the two utilize different proof-of-work algorithms. While Bitcoin uses SHA-256, Litecoin developed an algorithm called Scrypt. With Scrypt, the system can mine a Litecoin every 2.5 minutes compared to Bitcoin’s SHA-256 which takes 10 minutes to mine one Bitcoin. As a result, Litecoin transactions are much faster compared to Bitcoin transactions. Furthermore, Scrypt allows miners with regular CPUs and GPUs to mine coins, making Litecoins more accessible.
Advantages of Litecoin
Litecoin transactions are faster – compared to Bitcoin, Litecoin is four times faster, an impressive feat considering they are based on similar technology.
Litecoin is open source – Litecoin is open sourced, meaning that everyone can contribute updates and changes. This flexibility has enabled easy integration with SegWit and Lightning Network (LN) technologies.
Low transaction fees – Transaction fees of Litecoin trasactions are quite low compared to Bitcoin and other cryptocurrencies.
Challenges facing Litecoin
Loss of uniqueness – in its beginnings, Litecoin was amazingly different due to the improvements it had made upon the Bitcoin technology. Over the years, Bitcoin has also improved in terms of speed and scale, especially with the adoption of the SegWit update.
Falling credibility – Charlie Lee, the founder of Litecoin, recently let go of all his LTC holdings citing conflict of interest. This made interested parties question his faith in the project.
How to buy Litecoin
Being one of the longest standing major cryptocurrencies, there is a large number of marketplaces that allow you to buy Litecoin directly using fiat currencies. Just follow these four, simple steps to buy Litecoin in no time:
- Choose a Litecoin exchange
- Sign up for a Litecoin exchange
- Buy Litecoin using fiat currency
- Store Litecoin securely
1. Choose a Litecoin exchange
Choosing a digital currency exchange or broker can be a daunting process considering that there are hundreds of them. Factors to consider when choosing a cryptocurrency exchange or broker include:
- Security: the selected platform should have a good security track record and offer best-practice security features such as cold storage or two-factor authentication.
- Payment methods: the exchange service of your choice should ideally support your preferred payment methods (e.g. bank transfer, credit card payment, Skrill, etc.).
- User experience: for the average digital currency investor, the user interface and functionalities of an exchange or broker service is crucial. An intuitive user interface enables you to be more informed and efficient with less chances of making errors.
- Fee structure and rates: transaction fees and fee structures vary widely and can range from 0.1% per transaction to up to 10% per transaction. Choosing a cryptocurrency exchange with low fees can save you money, but sometimes comes with trade-offs such as hard-to-use user interfaces or a very limited number of accepted payment methods.
- Trust: Last but not least, you should check if the marketplace is trustworthy. You can read reviews to get valuable experiences from other users.
How to use Cryptoradar to choose a cryptocurrency exchange
Cryptoradar helps you cut through the clutter by providing you a compact overview of marketplaces that sell and buy Litecoin.
By default, exchanges on Cryptoradar are sorted by price, which always gives you the cheapest option for buying cryptocurrencies. The listings also provide you a quick overview of important factors to consider, such as ease-of-use, verification times and fee structure.
To further narrow down the list, you can also use the filters in the sidebar. This way you can, for instance, filter exchanges based on your preferred payment methods or exclude exchanges with a bad rating.
2. Sign up for a Litecoin exchange
Creating an unverified account is easy. Simply enter your personal details on the signup form of the desired exchange. However, before being able to perform actual purchases, you’ll need to verify your account and this can be a bit more daunting. Depending on the exchange, the process will require you to either upload your identification documents (usually a copy of your passport and a recent utility bill as a proof of legal residence) or to start a video chat with a support agent who will verify your identity using above mentioned documents.
Hint: Look for exchanges offering instant verification via video-chat (such as Bitpanda) or requiring no verification at all to save time.
3. Buy Litecoin using fiat currency
If your desired exchange is not supporting direct purchases, then another prerequisite is to deposit money on the exchange first. You can deposit money using instant payment methods (such as by credit cards or Skrill), or via a regular international bank transfer, which may take a day or two. Once your payment is received by the cryptocurrency marketplace, you can finally go ahead and buy Litecoin. After jumping through these hoops, performing the actual purchase is actually the easiest part of the story. On most marketplaces it’s as easy as selecting the purchase amount (in US dollars or euros) and clicking the buy button.
4. Store Litecoin securely
After finalising the purchase, your Litecoin will be credited to your wallet on the exchange. Nevertheless, we strongly encourage you to store cryptocurrencies in your own wallet. The Litecoin Project recommends several wallets. Make sure to adhere to the guidelines provided by the wallet providers to securely setup and backup your wallet.