Bitcoin has more than proven itself as an investment and speculative vehicle and a store of value at this point. It’s not perfect, though, and it can’t be all things to all people. Bitcoin doesn’t, for one, do what many early adopters hoped for. In practice, it isn’t great as an everyday payment method. High fees and slow transaction speeds have a lot to do with that.
If you’re looking for a faster, cheaper, and equally reliable way to send small payments, maybe because you want to grab a cup of coffee or send a favorite content creator a donation, you have other options. Litecoin is one of those.
It aims to be the digital cash that Bitcoin and many other cryptos haven’t been able to become so far — to invoke the famous cliché developer Charlie Lee came out with, if Bitcoin is gold, Litecoin is meant to be silver. (It’s a pretty good analogy, because while silver is indeed much more liquid than gold, it’s not exactly everyday tender, either.)
Has Litecoin caught your attention recently? You’re right to be curious, because Litecoin is among the most interesting cryptocurrencies out there. You may even have some great reasons to add some to your wallet.
So, What Is Litecoin? What Makes It Different?
Litecoin — created by former Google engineer Charlie Lee — was launched in 2011. It’s the first-ever altcoin! While the story gets a lot more complicated, Litecoin was purposely designed to be a lighter (hence the name), faster, and cheaper alternative to Bitcoin.
Both of those parts matter. The “lighter, faster, and cheaper” goal shines through in every aspect of its design, but so does “alternative to Bitcoin” — BTC was clearly the main inspiration behind Litecoin.
We’ll look at the technical stuff more closely in a little while, but for now, let’s look at how both of these aspects express themselves:
- Litecoin generates blocks in 2.5 minutes, while Bitcoin takes around 10.
- At 84 million, Litecoin has a much larger supply cap (maximum number of coins that can be mined) than Bitcoin. That means you can make payments without having to wrap your head around very small decimal points.
- Bitcoin uses SHA-256. Litecoin uses a different hashing algorithm, Scrypt. The idea was to make Litecoin less suitable for ASIC mining (which takes expensive and specialized chips — and is usually done as part of a massive business operation) and more suitable for CPU and GPU mining. This aspect is largely irrelevant now, because ASIC systems for mining Scrypt now exist.
All those things have an impact on how Litecoin is and can be used. Beyond its goal of being a payment method, Litecoin has also, however, become something else — a playground for testing new ideas in the real world, and on the open market, before Bitcoin adopts the same changes. Litecoin got on the Lightning Network before Bitcoin, for example, and its success was part of what made Bitcoin do the same. In that sense, Litecoin impacts your crypto trading even if you never invest in any.
A Look Under the Hood: How Does Litecoin Work?
Although Bitcoin impacted every aspect of Litecoin’s initial design, it’s far from a copy. Litecoin took the intended use it had in mind (a fast and cheap payment system suitable for everyday, practical use). From there, it kept the bits of Bitcoin that worked for this purpose, and replaced those that make Bitcoin sluggish with options better suited to this use case.
Scrypt + PoW
Litecoin uses a Proof of Work (PoW) consensus mechanism, just like Bitcoin. That’s where miners do complex math problems to keep the integrity of the blockchain intact and verify transactions. The actual inner workings are a bit different, though. With Scrypt, the difficulty of the puzzles computers need to solve is automatically tweaked to make sure the 2.5 minute deadline can consistently be met but not exceeded. The first miner to solve the problem is rewarded with one Litecoin.
Transaction Speed
Litecoin’s Proof of Work mechanism is already much faster than Bitcoin’s — but even 2.5 minutes is a little long when you’re trying to perfect a fast payment system for practical transactions. That’s where layer 2 solutions, which are built on top of the main blockchain, take over to process transactions. By moving those off the blockchain and only using the main network for entry and exit, transactions can actually be completed in seconds. That makes Litecoin scalable — but it also keeps the costs of your transactions down.
Atomic Swaps
Exchanging one cryptocurrency for another is traditionally quite a process, but Litecoin is among the cryptos that support atomic swaps. This allows for trustless crypto conversion between two parties, allowing you to avoid both centralized and decentralized exchanges.
MimbleWimble Extension Blocks
Cryptocurrencies have a reputation for being anonymous, but that’s not generally true. They are pseudonymous, meaning no name is associated with transactions, but every transaction is stored on the blockchain for all to see. That can be a problem if you care about privacy. Dusting attacks, where criminals send tiny payments to figure out more about your wallet, are based on that publicly available data, too.
Litecoin supports something called MimbleWimble extension blocks, publishing only the first and final transaction in each block while hiding the others. This can help protect against attacks and make your transactions more private.
What Would You Want to Use Litecoin For?
Litecoin’s fast, cheap, scalable, and privacy-friendly design makes it a great choice for a massive range of use cases — in theory, anyway. Its larger supply cap helps with that, too, as paying 1 LTC feels a lot more understandable than paying, for example, 0.00120064039758 BTC.
You might, for example, want to use Litecoin to:
- Pay for your VPN subscription.
- Tip the server at a restaurant where you’ve just enjoyed a wonderful meal.
- Send your niece, who’s studying abroad, some birthday money.
- Make a donation to your favorite charity.
- Buy a new hardware wallet.
- Pay for your ride share.
These scenarios include micropayments, international transfers, and privacy-minded purchases, all of which Litecoin is designed to be used for. Beyond those practical uses, Litecoin is also great for investment and speculation — and can still have some use as a store of value.
How Does That Play Out in Practice?
That’s the kicker. Litecoin is one of the strongest cryptocurrencies of today, but it’s nowhere near as widely adopted as Bitcoin or Ethereum.
Some examples of merchants and organizations that currently accept Litecoin (through BitPay) and that you’re very likely to have heard of include the American Red Cross, the Electronic Frontier Foundation, Ledger, Twitch, Provident Metals, Namecheap domain registration, and ExpressVPN. There are more — and they might just include your favorite coffee shop, food truck, or fashion boutique, but they might also very well not. Even if those local retailers take Bitcoin.
You could lobby merchants to start accepting Litecoin — and if you’re serious about crypto, you probably should. As it stands, though, fewer businesses accept Litecoin than Bitcoin, and that fact gets in the way of its goal of being a digital cash system.
Having said that, the atomic swaps feature we mentioned earlier can be a way around that. If you have Litecoin, you can potentially use atomic swaps to arrange for your recipient to get Bitcoin or Ethereum.
So, Back to Speculation?
Yup! Litecoin is also interesting as a speculative investment. Here’s what you need to know about that in lightning mode — at the speed of Litecoin transactions. Litecoin is much more volatile than Bitcoin, so the ups and downs might make you feel a bit whiplashed. (Which can be an issue if you’re using it to make payments, too!)
Litecoin can sometimes perform better than Bitcoin (in a bull market scenario), but it can also do the opposite (for bear markets). On the whole, however, the two are linked pretty closely. When Bitcoin goes up, so will Litecoin. When it plummets, Litecoin follows. Litecoin is also less liquid, which means it is more vulnerable to market manipulation and value changes following large transactions.
Litecoin is suitable for both short and long term speculation, but if you’re less comfortable with taking risks to reap potential rewards, Bitcoin and Ethereum might both be better options for you — as are stablecoins like USDC or Tether.
How to Get Started with Litecoin
This assumes you’ve already dabbled in crypto a little. You’ve bought (and sold, and withdrawn) BTC and/or ETH before, and you have your basics down. If not, it’s usually better to wait a while start with those two major cryptocurrencies.
Look Into Litecoin Wallets
You’ll want to choose your wallet first, and you have a lot of options. For on-chain transactions, you can use the Trust Wallet for your Litecoin if you already have that. Electrum-LTC is designed especially with Litecoin in mind, on the other hand. It supports SegWit, which makes your transactions faster, and is easy to use. These are just two software wallet examples that work with LTC. There are others.
If you want to use Litecoin with the Lightning Network, you’ll need one specifically for LTC — the BTC Lightning Network is a separate thing. The Litewallet/Litecoin Core, HTLC.me, and Zap are all options.
Do your research and pick one or more hot wallet options. Consider cold storage for later.
Get Some Litecoin
A centralized coin exchange is the easiest way to do that, and you probably already have an account with one. This part speaks for itself. Next, withdraw LTC to your Lightning Network wallet’s on-chain address.
How to Use the Lightning Network
The Lightning Network is a built-in part of what makes Litecoin, in its current incarnation, fast and cheap to use. You’ll have to open a channel to get started with it. Some wallets automatically connect you to nodes, but others require manual entry. Once that’s done, you commit a certain amount of LTC to the network, which you can then use for interactions. From there, you can send and receive payments. Payments are possible even with people you don’t have direct channels with.
Getting Started with MimbleWimble Extended Blocks
If you’re a privacy enthusiast, you’ll be excited about this part. Litewallet (for Android) and Litecoin Core (for desktop), backed by the Litecoin Foundation, offer support for it. You have to peg your Litecoin into MimbleWimble Extended Blocks to get that up and running, from which point you can engage in transactions that won’t be visible on the blockchain.
Final Thoughts: How Does Litecoin Stack Up?
Litecoin is a one-of-a-kind crypto that continues to make an impact on the market because it fills a need.
It’s faster and cheaper to use than Bitcoin. It’s simpler and more user-friendly than Ethereum. It’s more stable and reliable than Solana, with a longer track record and far more serious than Dogecoin (which also uses Scrypt). It’s the original altcoin — and it’s survived through countless rough patches with its reputation and value intact.
All of those things go in Litecoin’s favor, but this crypto isn’t without its downsides. It has a smaller use base than Bitcoin, and probably always will. That makes it quite a lot less liquid. Because it’s designed as a payment system, Litecoin doesn’t integrate with dApps or smart contracts, which limits its growth potential. And despite its focus on transaction speed, Litecoin is still slower than Solana.
Litecoin isn’t for everyone. If, after doing your research, you think it’s for you, Litecoin still doesn’t quite live up to its goal of being an easy payment network — but it can absolutely be a wonderful way to diversify your crypto portfolio, and if you’re getting serious about crypto, Litecoin should definitely be on your radar.
