BlockchainAPI Logo
You must enable Javascript to continue to use this website.

BlockchainAPI is now a fully FREE Bitcoin API. We will continue to run this service free of charge for users to use our Bitcoin API.

What is a Litecoin and how does it work?

There are almost more than 170 internationally recognised currencies in circulation, ranging from American Dollar to Chinese Yen.Just like regular currencies, there is the multiple numbers of cryptocurrencies are also in circulation. Bitcoin was the first cryptocurrency, which came into publicity, but it competes again many of aspiring alternatives, Litecoin is one of them. It is a peer to peer internet currency, which enables instant payments to anyone in the world. Litecoin is an open-source of global payment network which is fully decentralised without any central authorities. If it is measured by market capitalisation or the amount of currency in the market, Litecoin stands third in the list of largest cryptocurrency after Bitcoin and XRP. Litecoin works like its contemporaries in one sense as an online payment system. Users can transfer currency to one another, which is similar to Paypal or a bank's online network. But rather using US dollars, litecoin conducts transactions in the unit of litecoin. This is the reason where litecoins similarity to the most traditional currency and payment system ends. But still holds the place in the five most critical virtual currencies other than bitcoin.

How is Litecoin made?

Like all other cryptocurrencies, litecoin is also not issued by the government, which historically has been the only entity that society has faith to issue money. Rather than being regulated by the Federal Reserve and coming off the press at the Bureau of Sculpting and Printing, These cryptocurrencies are created by a detailed procedure known as mining, which consists of processing a list of litecoin transactions. Unlike other traditional currencies, the supply of litecoin is limited. Altogether, there will ultimately be only 84 million litecoins in circulation and not even a single more. The litecoin network generates a block in every 2.5 minutes ( Bitcoin makes it in every 10 minutes), which is done to get a ledger entry of recent litecoin transactions across the world and this is where litecoin's inherent value derives. This block is verified by mining software, and it is made visible to any "miner" who is enamoured to see it. Once it is verified by a miner, the next block enters the chain, which is a record of every litecoin transaction ever made.

How is mining done for Litecoin?

The stimulation for mining is that the first miner who successfully verifies a block is rewarded with 50 litecoins. But the number of litecoins awarded for such a task reduces with time. In the month of October in 2015 it was halved, and the process will continue until the 84 millionth litecoin is mined. But there is a question which always arises in mind, Can one unscrupulous miner change the block, enabling same litecoins to be used or spent twice? The answer is "NO". Because the scam would be detected without making a delay by some other miner, anonymous to the first. The only way to truly game this system is to get a majority of miners to agree to the process of false transaction, practically, which is not possible at all. Mining of cryptocurrency at a rate worthwhile to the miners requires some ungodly processing power, courtesy of specialised hardware. To mine most cryptocurrencies, your Central Processing Unit is not close enough anywhere to complete this task. Which brings us to another point of difference for litecoins, they can be mined with ordinary off the shelf computers more so than other cryptocurrencies can. Mining depends on the capacity of the machine, the higher a machine's capacity for mining, the more chances of getting something of value for miners.

What is the worth of litecoin?

Any of the currency that is currently in circulation, whether it is US Dollar or Indian Rupee, is only as valuable as society thinks it is. If the Federal Reserve started circulating too many banknotes, then the value of the dollar would decrease in short order. This phenomenon transcends the cost of any currency. Any goods or service becomes less valuable the more quickly and cheaply they are available in the market. Thinking about all these things, the creators of litecoin understood from the beginning that it would be very difficult for a new currency to develop its reputation in the marketplace. But by producing litecoins in a limited number and restricting the number of litecoins in circulation, the founders could at least get the worth that a litecoin deserve by allaying people's fears of overproduction.
There are much more advantages inherent to litecoin over bitcoin. Litecoin can handle more transactions than bitcoin, given the shorter block generation time. Litecoin also has a barely direct transaction fee. It just costs 1/1000 of a litecoin to process a complete transaction, regardless of its size. Contrast that with Paypal's 3% fee. In this physical world, when it's an event of crisis, the most reliable stores of value becomes the main currency of choice. In the era between the late 1990s and early 2000s, A country named "Zimbabwe" became synonymous with hyperinflation. When the rate of inflation in Zimbabwe reached almost 90 sextillion per cent (It may be a little high or low) and made the Zimbabwean dollar worthless, which wiped out the fortunes of so many people who were unfortunate enough to have held liquid assets. People had no other choice except using something more stable currency, primarily the American dollar and South African rand for daily commerce. Litecoin's inherent scarcity makes itself free from hyperinflation, but there is still some challenge of garnering general acceptance and getting more and more people to use this cryptocurrency.

Once this currency reaches its critical mass of users, who are confident enough to trust that the currency is indeed what it is representing in the marketplace and probably won't lose its real value and it can sustain itself as a method of payment, Litecoin is nowhere universally accepted, as because its own founders reckon that the number of users of litecoin is less than 1 lakh (even Bitcoin has probably less than half a million users). But as nowadays cryptocurrencies become readily accepted and getting more values, one or two of them possibly including litecoin too, will emerge as the standard currencies of the modern world.