Making payments with intangible currencies used to sound like a scam. However, with the increasing acceptance of cryptocurrencies (digital money) Litecoin has become more prominent.
What is Litecoin?
Litecoin (LTC) is a digital currency (altcoin), released on October 7, 2011, that allows payments to individuals without the use of third parties like banks. It is an open source system without a central authority developed by Charlie Lee, a former Google employee, and released to the public on October 7, 2011.
Litecoin is incredibly similar to Bitcoin - no white paper for Litecoin was even produced in part because of its similarity to Bitcoin. Similar to Bitcoin, Litecoin is open-source and it is not government regulated. However, it is secure because each user has the ability to verify each transaction before a new block (a string of blocks is a blockchain) is formed, similar to how Bitcoin works.
Litecoin vs. Bitcoin
There are few key differences between Litecoin and Bitcoin that you should be aware of. These differences include:
4 times the number of coins: There will be 84 million LTC vs 21 million BTC
1/4 block confirmation time: 2.5 min for LTC vs 10 min for BTC, making the use of LTC faster for transactions (very desirable for something attempting to be the main transactional cryptocurrency)
Proof of Work (PoW) uses scrypt: Scrypt is a password-based key derivation function (KDF) that makes it (1) less practical to use ASIC devices for LTC mining and (2) to carry out attacks against the Litecoin network
The above changes stemmed in part from the fear that the Bitcoin network is too cumbersome and dominated by large-scale bitcoin miners using purpose-built ASICs to mine BTC. Litecoin's aim is to be "lite" in the sense that mining is easier for everyone, transactions are faster, and more LTC exists in circulation. In this, Litecoin is attempting to be the more transaction cryptocurrency and is considered by some to be the "silver to Bitcoin's gold."
Success of the Litecoin
Though not the first cryptocurrency, it has been very successful. In November 2013, Litecoin’s aggregate value experienced a 100% increase within 24 hours. As Bitcoin rises in value, reputable altcoins such as Litecoin have been able to ride Bitcoin's coattails to new highs.
Presently, Litecoin is among the top five cryptocurrencies in the world. It is praised for its speed as it takes about two minutes for transactions using the Litecoin network to go through.
How to Acquire Litecoin
You can get them by either mining them (similar to mining Bitcoin) or simply buying them. To buy, you can either use fiat currency or another cryptocurrency or cryptoasset (usually Bitcoin).
To mine means to contribute computer power to validating transactions on the Litecoin network and being rewarded for the exertion of this effort. The miner is required to solve complex mathematical problem/puzzle as part of the mining process. As with Bitcoin, the incentives paid out for mining decrease over time in order to maintain a stable supply of LTC.
Future of Litecoin
Litecoin is a rapidly growing cryptocurrency which has been described as the more transaction-friendly cryptocurrency. In this, Litecoin is able to differentiate itself from Bitcoin and argue that the value-add is in the transactional capabilities. Some in the cryptocurrency and cryptoasset industry believe that Bitcoin will over time be used for large-scale clearing transactions (more rare and large) while Litecoin will be used for daily transactions (far more numerous and relatively small). Time will tell if this dynamic plays out or if the Bitcoin network is able to improve over time to become more flexible and more accommodating to large numbers of small-scale transactions without requiring extremely large computing resources deployed around the globe.
When most people think of digital currency or cryptocurrency, they think of Bitcoin. Bitcoin is only one of many cryptocurrencies and cryptoassets available today, however. Among all of the new members of the cryptoasset scene (also called altcoins), none has made a bigger impact (both in terms of mindshare and in terms of market cap) than Ethereum.
Many people Ethereum akin to silver if Bitcoin is considered gold. However, many others in the crypto industry believe that Ethereum has the potential to overtake Bitcoin due to its inherent characteristics and capabilities that Bitcoin does not possess.
What is Ethereum?
Ethereum is a distinct blockchain platform different from Bitcoin - it was created by Vitalik Buterin and went live in the Summer of 2015 (read the constantly updated Ethereum white paper here).
Ethereum was designed as the ultimate blockchain upon which all kinds of blockchain-based applications including newer cryptocurrencies can be built. The Ethereum blockchain was designed with the target of fixing many of Bitcoin's problems/weaknesses as well as to enhance the efficiency of any application that is built on the Ethereum blockchain.
Ethereum has been one of the major reasons for the explosion in the number of initial coin offerings (ICOs) that are constantly happening all over the world due to the relative ease and reduced costs it now takes for a startup to release its own blockchain application or cryptocurrency. Effectively, many of the world's ICOs are build upon Ethereum.
Similar to Bitcoin, Ethereum uses a Proof of work (PoW) approach whereby computers solve complex mathematical problems in an attempt to receive a reward; this is also how transactions are validated around the world in a decentralized way. Ethereum used a slightly different hashing algorithm than Bitcoin and there are plans and discussions to transition Ethereum away from a Proof of work (PoW) approach to a Proof of Stake (PoS) approach - a Proof of Stake (PoS) approach is considered more sustainable and will likely require less intensive computing power.
Being a distinct blockchain platform, the creators of Ethereum recognized the importance of the platform having its own native currency with which transactions can be conducted on the Ethereum platform. This why the Ether token was created, which is the means of exchange on the Ethereum platform - users can use Ether (ETH) pay for the space to build their own applications as well as use ETH to make peer-to-peer payments in a decentralized way similar to Bitcoin.
But, Ethereum is more than just a means of exchange
Ethereum is touted as the biggest thing to happen in the crypto and blockchain scene since the creation of Bitcoin in 2009. This is because it brought about a number of new innovative features that have the potential to prove very useful. The main differentiating feature of Ethereum is the ability to engage in what are called "smart contracts" on the Ethereum platform - whereby Bitcoin is simply a means of exchange, Ethereum has the potential to be a lot more through the use of smart contracts.
A smart contract is a simple idea which made cryptocurrency payments safer for users all over the industry. It is a few lines of code (instructions) which dictate that a certain number of ETH should be transferred from one user of the Ethereum platform to another user upon the fulfillment of certain stated conditions and not otherwise. Smart contracts were designed to enable honest business between total strangers, in which the seller knows that as long as they deliver their part of the bargain, they will receive a full payment (or whatever else was bargained for). Additionally, buyers know that their payments remain safe until they receive the good or service they are paying for.
How to store your Ether
Ether and Bitcoin are completely separate things in the crypto space - they are built on different source codes and utilize different hashing algorithms. ETH and BTC cannot be stored on the same crypto wallet - a separate Ethereum wallet is required for the storage of ETH. In order to effectively and securely store your Ether, you'll need to find a reputable wallet that caters to ETH storage.
Bitcoin is a decentralized digital currency which is built on the revolutionary blockchain technology, the purpose of which is to provide people and organizations all over the world with an alternative peer-to-peer means of making payments that is fast, private, and doesn't require the modern financial system/infrastructure. Bitcoin allows for the potential eschewing of fiat money to perform financial transactions in favor of an immutable record (eg. blockchain) that is deeply decentralized and highly secure.
Bitcoin (BTC) came on the scene in January of 2009 - during the heart of the global financial crisis of the time. In a white paper published by Satoshi Nakamoto, Bitcoin's purpose and technical framework were articulated - although the purpose has evolved and continues to do so, Bitcoin has remained the most trusted and most popular digital currency to date.
General Characteristics of Bitcoin
Bitcoin when it first came online was an innovation the like of which has never been seen. Bitcoin has many distinct characteristics and features some of which include:
How are Bitcoin acquired?
Bitcoin can be created through a complicated and capital-intensive (the capital being computing power) process known as mining - miners receive a reward (akin to a fee) for providing the computer power needed to validate Bitcoin transactions. Alternatively, an individual can simply buy Bitcoin from a cryptocurrency exchange that is reputable using their fiat currency.
Bitcoin and Banking
Bitcoin can be created through a complicated and capital-intensive (the capital being computing power) process known as mining. Alternatively, an individual can simply buy Bitcoin from a cryptocurrency exchange that is reputable using their fiat currency.
Bitcoin is not accepted by any commercial bank for safekeeping as of this writing - banks traditionally only deal in the fiat currency realm with banks in each country primarily transaction and storing the fiat currency of that particular country under regulation from central banks and other governmental regulatory bodies. However storing Bitcoin is easy and convenient without a banking system because they can either be stored on exchanges (eg. Coinbase, Kraken, Poloniex, Xapo, etc.) or on a private Bitcoin wallet - each method has its own advantage and disadvantages, but both are generally convenient and reliable if done properly.
The world is abuzz with talk of Bitcoin and other cryptocurrencies and cryptoassets. Not long ago these revolutionary means of transacting were considered a fringe idea that was going to die a natural death or evolve into some niche part of a more broad product schema. Fast-forward to the present day, however, and you'll see that the cryptocurrency and cryptoasset industry has snowballed and has a market cap (the total value in USD of all material cryptocurrencies and crypto assets) that rivals the largest firms in the US (with little sign of things slowing down).
So, what is this new thing called cryptocurrency and what is all the commotion in the financial news related to it about?
What is a cryptocurrency or a cryptoasset?
A cryptocurrency or cryptoasset (these terms can generally be used interchangeably) in general terms can be defined as any member of the new blockchain-based platforms that are made specifically to enable people to make peer-to-peer payments in fast, highly secure, and private ways that requires no recourse to banks, payment providers, or third-party clearing firms. A cryptocurrency is generally a stateless borderless digital currency, the first example of which came into existence in 2009 with the creation of Bitcoin by Satoshi Nakamoto. The cryptoasset industry has since grown exponentially and presently has over 1000 distinct currencies - many of these are scams and useless gimmicks while others are potentially very useful and add capabilities beyond what Bitcoin originally possessed.
Cryptocurrency vs. Fiat Money
The following are a few key aspects of cryptocurrencies and cryptoassets that distinguish them from traditional fiat money (eg. USD, Euro, Yen, Yuan, etc.):
How do I store cryptocurrency?
Being a totally decentralized and boundary-less currency, cryptocurrencies don’t need the present banking infrastructure to be kept safe by their owner. They are stored in encrypted software known as “wallets”, which carry unique codified address with which the user sends and receives them. Additionally, cryptocurrencies and cryptoassets can be stored with third parties where the third party stores the key cryptographic information (eg. your private keys) that will allow access to your cryptocurrency or crypto assets.
Such third party services include Kraken, Poloniex, Coinbase, and Xapo. There is an inherent risk present when using third-party firms for cryptocurrency and crypto asset storage - you are trusting them with the proper maintenance of very key and unique information.
How can I acquire cryptocurrency?
There are two main ways in which to acquire cryptocurrencies or cryptoassets. The first is by following the technical process of creating them (which is generally known as mining), where computers are coupled with specialized hardware to solve massive mathematical puzzles with the chance earning a reward which is the cryptocurrency. The second method is by simply going the route of using your fiat money to buy the cryptocurrency of your choice from the nearest reputable exchange you can find (eg. those third-party firms referenced above).
Prices of cryptocurrencies and cryptoassets from one cryptoasset to another as each digital currency has its own distinct features and peculiar purpose it serves - these unique features and/or purposes influence demand and the addressable market, which in turn influences price. Currently, cryptocurrencies and cryptoassets have proven to be very volatile when compared to traditional financial instruments such as stocks, bonds, real estate, and commodities - this volatility makes it riskier when purchasing cryptocurrencies and cryptoassets because it is hard to know whether the price of a cryptoasset will move against you soon after purchase.
A cryptocurrency is a secured decentralized digital medium of exchange developed to facilitate secured peer to peer transactions. While many people have heard of cryptocurrencies and some are involved in the purchase and sale of cryptocurrencies and cryptoassets, only a few are aware of the history behind this potentially world-changing application of cryptographic technology.
As such, compiled below is the history of cryptocurrency. This history will be both useful for newcomers to the cryptocurrency and cryptoasset worlds as well as those that are more seasoned - understanding the history of a topic or technology almost always is useful in terms of adding context and grounding to one's understanding.
The late 1980s to Early 1990s - Foundations begin to Form
In the 1980s people began conceiving the idea of the creation of digital cash and/or virtual currency. These people then began to seek ways to bring this idea to fruition. However, none of their efforts and/or the results was reported.
In the year 1990, American cryptographer David Chaum invented DigiCash, the first form of electronic currency. This new "e-cash" gained tremendous publicity and sparked interests in various diverse intellectual quarters, including libertarians, anarcho-capitalists, and those interested in the applications of cryptography. Chaum's DigiCash was however later found to have some faults and subsequently, was no longer used.
1998 - A Precursor to Bitcoin
In 1998, Wei Dai, a computer engineer created and published an article on "b-money". Dai regarded b-money as an anonymously distributed electronic cash system which allows for senders to directly communicate with buyers over “an untraceable network”.
Also in 1998, computer scientist Nick Szabo, designed the mechanism for a decentralized electronic currency he termed "bit gold". To use bit gold, a person would have to solve cryptographic puzzles whose solutions would be sent to a registry and then assigned to a designated public key representing the solution provider. Each solution would then become a part of a subsequent challenge which would then help to create a growing chain of new property for the solution provider. This design was created to help validate new coins.
Although bit gold was never implemented, it is regarded as the precursor to Bitcoin - those who know anything about Bitcoin mining will see the somewhat shared intellectual DNA between Bitcoin and Szabo's bit gold.
2009 - The First Truly Decentralized Digital Currency, Bitcoin
The year 2009 can be said to be the year the concept of cryptocurrency became established. Although much work (both technical and non-technical in nature) had been done in the previous two decades pertaining to digital currency and the potential application of cryptographic methods to make them effective, 2009 can easily be considered the genesis of cryptocurrency proper.
In 2009, Bitcoin was established. This establishment and its subsequent use can be attributed to Satoshi Nakamoto, who is a pseudonymous individual (or more likely, a group) that developed Bitcoin. Nakamoto articulated the concept of Bitcoin in a white paper published in the same year. Per his white paper, Nakamoto called Bitcoin a peer-to-peer cash payment system - little did the initial readers of the white paper (and possibly Nakamoto himself/herself) know what Bitcoin would become over the course of the coming decade.
This system was able to actualize true decentralization which was a feature many before him/her could not achieve. He was able to achieve this such that there could be a consensus between parties without the need for a central authority (eg. a financial firm or a government). Additionally, Nakamoto's Bitcoin was able to seemingly solve the double spending problem, something that seemed unachievable without a proper centralized network or clearinghouse.
Bitcoin has since gone beyond being the first cryptocurrency to also be the most popular, most sought after, and most used cryptocurrency with over 16 million in circulation (out of a total of 21 million that will ever exist per Nakamoto's original design).
2009 to Present - Altcoins, Proliferation, and Investing
Since the creation of Bitcoin in 2009, over 850 cryptocurrencies (often referted to as altcoins) have been developed and are now in circulation. Some of these altcoins are Litecoin, Peercoin, Robocoin, Ethereum, Salt, Cardano, Iota, Viacoin, Siacoin, Bitcoin Cash, Ripple, and Dogecoin.
Many of the new cryptoassets or altcoins that are on the market today are not considered high-quality cryptoassets like Bitcoin but are instead considered frauds, scams, gimmicks, or schemes that allow the creators of the coins to make a quick profit (through the use of what are called initial coin offerings or ICOs).
Other cryptoassets or altcoins, however, seem useful and add capabilities beyond what Bitcoin is currently capable of. For example, Bitcoin is generally only used for payments while Ethereum has the capability for use in what are called "smart contracts" and Iota is created to assist with the creation of an internet of things (IOT) world.
The concept behind cryptocurrencies is now being researched by financial institutions and governments, its’ monetary value is on a steadily rising (in terms of fiat currency such as the USD or the Euro) and many are beginning to see cryptocurrency as an investment option.
Foggy Future - Where will cryptoassets go from here?
Given the past 30 years in cryptocurrencies, cryptography, and the concept of decentralized digital cash (and especially the last 10 years since the creation of Bitcoin), it's a fool's errand to try to predict in any meaningful way where things will go in the cryptoasset space. However, it is likely that many of the early trends seen today will continue on. Specifically, it is likely that cryptoassets will consume more mindshare globally, will break into Wall Street (eg. futures, ETFs, hedge funds, etc.), and that a broader infrastructure (both in support of and in use of crypto assets) will be built up over the coming years and decades.
And now, given the rise of cyrptocurrencies and crypto assets to quasi-mainstream financial assets, we're dedicated to providing quality, relevant, and interesting material on cryptocurrencies and cryptoassets. Articles on Bitcoin, Ethereum, Ripple, Cardano, and many more cryptocurrencies and cryptoassets can be found on Pennies and Pounds - all that in addition to a plethora of information on what cryptoassets are, how the entire crypto industry came to be, blockchain/immutable ledger technology, mining, proof of work, proof of stake, and how to prudently invest in crypto if you are so inclined (based on your risk tolerance and ability to withstand the volatility that will come with a crypto portfolio).