Litecoin is a cryptocurrency, but it is not new. It entered the market as an early competitor to bitcoin. As bitcoin grew, litecoin trailed behind, getting lost in the competition as new cryptocurrencies entered the market.
Bitcoin is still the leading cryptocurrency, and no current competitors pose a real threat to its dominance. But litecoin shows potential for gaining traction in the market.
How Does Litecoin Work?
Litecoin cryptocurrency is the native token on a decentralized network. It doesn’t have the oversight of a bank or government. Another way it differs from regular currency is how litecoin is tracked — via blockchain technology.
Blockchains store information in a way that:
If hackers can access the Litecoin platform, their steps are easily traced. A hacker might be able to remain anonymous, but any stolen litecoins have definite tracking through the blockchain. Once a hack is identified, the litecoin can be returned to its rightful owner.
How Blockchains Differ From Banks
If you have money in a bank or the stock market, there is a limit to when and how you can access your money. You may be limited by business hours or transaction types. Cryptocurrency is like a digital bank that is open around the clock.
Additionally, transfers via the Litecoin platform happen much faster than is usually possible at a traditional bank. Transferring money from your bank to another financial institution could take several business days. On the Litecoin network, most transactions happen within minutes or hours.
How Is Litecoin Different From the Competition?
Litecoin is one of the original cryptocurrencies. Bitcoin, however, is the most well-known. It still maintains a strong lead above other cryptocurrency platforms. Bitcoin offers more basic abilities and has been the jumping-off point for other cryptocurrencies — including litecoin, which is based on the same protocol — that try to improve on what bitcoin has to offer.
|Bitcoin||– Most valuable currency
– Shows consistent growth
– Wider adoption
– Scarcity due to low cap on supply
|– More basic network design
– Not affordable for buying whole shares
– Slower and more expensive than alternative platforms
|Ethereum||– Second most valuable cryptocurrency
– Completes complex tasks efficiently
– Supports smart contracts
|– Only one lane for completing transactions
– Charges for each task, so complex transactions add up quickly
– Uses relatively slow, expensive proof-of-work consensus
|Litecoin||– Transactions are processed faster and without delays
– Inexpensive transactions
– Additional security to address viruses and trojan horses
|– Not as much growth as the competition
– Investor doubts about future potential
– Market share decreasing
Why Are Investors Choosing Litecoin?
Litecoin’s platform boasts transaction times that are four times faster than Bitcoin’s. They’re also much cheaper — 2.6 cents vs. about $4.38 for Bitcoin, according to InvestorPlace.
Moreover, in 2017 litecoin was the first cryptocurrency to complete a Lightning Network transaction. The test transaction took less than a second to complete.
The Strategy Behind Choosing Litecoin
As cryptocurrency continues to grow in popularity and use, more upstarts are appearing on the market. There are more than 19,000 cryptocurrencies available today. Although competition has reduced litecoin’s market share from among the top 10 to number 18, litecoin has longevity some of the hotter coins don’t have.
Litecoin has a much higher supply than Bitcoin. It has a hard-cap of 84 million LTC. In addition, the Litecoin network generates new blocks in two and a half minutes, as compared to ten minutes for block creation with Bitcoin. Both of these factors make litecoin more appealing for cryptocurrency transactions, with bitcoin functioning primarily as a store of value.
Potential Benefits of Investing in Litecoin
Litecoin entered the market in April of 2013 at a value of $4.30. It quickly dropped to $1.50 and didn’t see much fluctuation in its first few years. Still, it proved to be competitive in 2017 when cryptocurrency began to take off in popularity. Five years later, it sells for over $70 and has weathered a recent cryptocurrency sell-off better than many of its competitors.
- The relative stability litecoin has demonstrated over the years is impressive.
- The coins are affordable but still priced significantly higher than most of its competition.
- Although all cryptocurrency investments are speculative, litecoin is less so than many of the newer coins.
Potential Risks of Investing in Litecoin
Investments always carry a risk. Here are some reasons litecoin may be a risky investment:
- It shows consistency but doesn’t have the type of growth that wows investors.
- Litecoin has a lower market cap than other cryptocurrencies and has lost market share.
- Litecoin is less scalable than competing blockchains, such as Stellar Lumens, which could limit its growth.
The Bottom Line
Litecoin could be a smart investment option for long-term investors due to its long track record and proven ability to ride out periods of high volatility. If you like to take risks, your investment could pay off in the future. As of now, however, the Litecoin platform has seen less innovation than competing blockchains that could, over time, leave Litecoin in the dust.
GOBankingRates’ Crypto Guides
- What Is Cardano? (ADA)
- What Is Chainlink? (LINK)
- What Is Bitcoin? (BTC)
- What Is Bitcoin Cash? (BCH)
- What Is Dogecoin? (DOGE)
- What Is Polkadot? (DOT)
- What Is Ripple? (XRP)
- What is Stellar (XLM)
- What Is Tether? (USDT)
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of May 17, 2022, and subject to change.