Before investing in any cryptocurrency it is always important to ask yourself whether or not its a scam, to read over the white paper and see if it makes sense to you. But I understand that many people out there simply do not have the time to be doing extensive research on every crypto out there that they think might be a good investment. Because of this I’ll sharing with you some of my knowledge on the coin and my opinions.
Litecoin is one of the biggest cryptocurrencies to date and will more than likely stay in the top 20 rankings for the forseeable future. But much of the market evaluation are based on hype and speculation rather than performance. So even though it is a large and widely adopted cryptocurrency its still important to do some research before getting involved.
In this short post I’ll be giving an overview of what exactly Litecoin is, how it differs from Bitcoin, the creator behind it, and some problems that it has or is going to have in the future. And of course I’ll be answering the question that many of you are asking yourselves…. Is Litecoin a scam?
What is Litecoin?
Litecoin is a decentralized peer-to-peer cryptocurrency that is based off of the bitcoin blockchain technology. It was first released in 2011 by its creator, Charlie Lee (who I will talk about later). The coin runs on an open source cyrptographic protocol which means that it will be able to evolve over time. In addition, because it is open source, anyone can go into its code and see how it is operating. Its not like some secretive cryptographic coin that no one know how it works.
The purpose of Litecoin was to be the silver to bitcoin’s gold. So if bitcoin were gold, Litecoin would be silver. Charlee Lee’s vision of Litecoin was that it would be able to be used for everyday purchases, such as grocery shopping, buying clothing, etc.
Differences From Bitcoin
The two coins are extremely similar. Most of Litcoin is based on what Bitcoin brought to the table. However there are differences, some of the most notable difference between the two crypo’s being:
Litcoin is supposed to a “ligher”, faster cryptocurrency that is more suitable for small everyday purchases…. and it is. While each block of the blockchain is processed about every 10 minutes, Litecoin’s blocks are processed around every 2.5 minutes, making it 4x faster.
You don’t need to know about block processing and all of that. The takeaway here is that Litecoin is about 4x faster.
Silver is cheaper than gold right? So this all makes sense. The price of Litecoin is significantly lower than Bitcoin and should always stay this way unless unforeseen complications come to Bitcoin in the future.
The main reason it is cheaper and should stay this way is due to its total supply. Bitcoin will only ever release a total of 21 million coins into the market. This “total supply” is a way to combat inflation. Litecoin on the other hand has a total supply of 84 million. Because of this increased supply the price of a single Litecoin will remain less.
Bitcoins and Litecoins are produced and transactions are processed through a process called mining. This mining process is performed all across the globe which is what makes these 2 cryptocurrencies decentralized. Miners are nothing more than people that have computers that run software which connects to the blockchain performing and perform the tasks.
I’m not going to get too into this here but what you should know here is that bitcoin and litecoin are run on different algorithms. Bitcoin is run on SHA-256 and Litecoin on Scrypt. Originally Litcoin was much easier to mine than bitcoin, which allowed for many people to be able to join the process of mining and help secure the network, process transactions, and earn Litcoin. However this is becoming less and less true due to increasing difficulty and new mining hardware that makes it hard for people to compete.
Problems Facing Litecoin
Does It Have Practical Applications?
The truth is that it doesn’t really have practical applications. What we are seeing happening with Litecoin (and bitcoin) is that they cannot even come close to competing with other forms of digital payment like Mastercard or Vista that can process thousands of transactions per second.
If Litecoin is going to become a widely used crypto then there needs to be a fix to this. There is room for Litecoin to evolve over time…. but this is definitely something worth considering.
What About Power Consumption?
Litecoin’s mining process consumes and insane amount of electricity. It is based on a Proof of Work (POW) protocol, which basically makes miners’ computers do a ridiculous amount of work to keep the network up and running.
Mining is essential to keeping the Litcoin network running and I don’t see how this can grow too big with the amount of power it consumers… same goes for bitcoin.
There are other cryptos that use a Proof of Stake (POS) protocol which is much less costly and ultimately does the same thing, which is keeps the network safe & working.
Scale-ability Is The Real Problem
The overall problem here is the ability for Litecoin to scale. Both the power consumption that is required to keep the nework running and the fact that it is nowhere near as fast as Mastercard or Visa, make this unlikely to scale to the masses. Its just not practical at this point to actually use Litcoin as a way to pay for ordinary things.
And as of now most people that are buying Litcoin and other crypo’s are just holding them as an investment. They aren’t buying them to actually use. If Litecoin were to be used for everyday transactions the network would have some serious problems.
A Look Behind Litecoin
So as I mentioned, Charlie Lee is the creator of Litecoin and he is who I want to talk about here.
Pretty much all I have to say about Mr. Lee is good. He is a very intelligent man that has a background in software engineering, having worked at Google for almost 6 years. Since then he was also the director of engineering at the popular US based cryptocurrency exchange Coinbase.
Mr Lee is very transparent with his work and the Litecoin project. He knows that Litecoin is far from perfect and doesn’t avoid talking about its shortcomings. He has even come out publicly before when he felt that Litecoin was overvalued.
Personally I trust him and believe he is a good guy.
Conclusion on Litecoin – Good Opportunity?
I hope you see that Litecoin is no scam. Sure it has its share of problems but these problems where unforeseen when it was created and it does posses the potential to overcome these (hopefully it will).
Due to Litecoin’s open source code and the transparency of its creator, I don’t really see how anyone can call it a scam. I know there people comparing it to somewhat of a ponzi scheme because of how the price increases with increased adoption, but this is just due to the necessary total supply that is meant to protect against inflation.
Something else worth pointing out is that Litecoin was not pre-mined by developers, meaning that its creators did not stock up on a bunch of Litecoin before it was released to the public, which is a major concern with coins like Ripple.
Where to Buy Litecoin?
If you are going to buy Litecoin I would suggest either Coinbase or GDAX. Coinbase, as I mentioned, is based in the US and is probably the most trustworthy exchange out there. Because it is in the US it is subject to regulation to protect customers which is nice. It also has an insurance policy as a plus side.
GDAX is actually owned by Coinbase. They are both owned by the same company but GDAX is more for professional traders and people looking to dump tons of money into cryptocurrency. GDAX has much lower fees but is a bit less user friendly and more confusing.
Anyways… you are going to have to open a Coinbase account first even if you use GDAX. If you want to get a $10 bonus in Bitcoin when joining you can use my referral link here www.coinbase.com/join. This will give you $10 to join and me as well for referring you.
Be sure to leave any comments or questions below and I’ll get back to you soon 🙂