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How does Litecoin work?
A modification of the Bitcoin code, Litecoin has many similar features. So, if you know how Bitcoin works, you’re likely going to have an easy time understanding Litecoin.
Litecoin uses cryptography to enable ownership and exchange of its cryptocurrency, LTC, and its software places a hard limit on the amount of LTC that can ever be created at 84 million.
Like Bitcoin, Litecoin also uses a form of proof-of-work mining to enable anyone who dedicates computing hardware to add new blocks to its blockchain and earn the new Litecoin it creates.
The two main differences are that Litecoin aims to finalize transactions faster and that it uses a different mining algorithm. On Litecoin, new blocks are added to the blockchain roughly every 2.5 minutes (as opposed to 10 minutes on Bitcoin).
Litecoin’s mining algorithm originally aimed at reducing the effectiveness of specialized mining equipment, though this would later prove unsuccessful. (Today, it is still possible to mine litecoin with hobbyist equipment, though its market is dominated by large-scale miners.)
Litecoin has since proven a valuable test ground for more experimental cryptocurrency features.
In 2017, Litecoin adopted “Segregated Witness,” a technology that helps cryptocurrencies add more transactions into each block. Later that year, the first Lightning transaction was completed on Litecoin, a development that showcased how it could use a layered network design.
Why does LTC have value?
Litecoin is programmed to produce only a finite supply (84 million) of its cryptocurrency, LTC, and to periodically reduce the amount of new LTC it introduces into its economy.
Due to its predictable, finite supply, litecoin is popular among traders, who have relied on it to increase in value around supply reductions and to keep pace with Bitcoin’s growth during periods where its price appreciates.
Litecoin can also be used to pay for goods and services using payment processors that accept bitcoin and other cryptocurrencies on behalf of merchants.
It is also widely traded on most major cryptocurrency exchanges (including Kraken!), making its market one of the more liquid globally.
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