Asif is a cryptocurrency enthusiast and journalist who's been writing on the subject since 2014. He also has a keen interest in social engineering and cybersecurity. When not busy writing about cryptocurrency, he can be found reading books and listening to music. He holds an M.Sc in Life Science and an MBA in Finance & Banking.
Although Bitcoin is the most talked about cryptocurrency, it’s definitely not the only one and sometimes not even the best choice.
This is a fact that most newcomers to crypto investing find out quite soon, particularly if they’re trying to invest on their own as opposed to doing it through a financial institution.
As soon as they ask anywhere about investing in Bitcoin, other members of the community will start suggesting either altcoins or other cryptocurrencies, often touting them as the better alternatives.
Needless to say, you need to be careful who you take investment advice from - but Litecoin is one of the most commonly recommended altcoins.
It's often described as the "silver to Bitcoin's gold". It's proponents tend to focus on it's increased scalability and better usability when talking about it, although most of these reasons are quite difficult for a newcomer to understand.
This leads newcomers to wonder: What is Litecoin? Is it the same as Bitcoin? Should I invest in it?
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What is Litecoin?
Litecoin isn’t Bitcoin, although it’s one of the closest cryptocurrencies to it. You could think of it as an off-brand Bitcoin of sorts, and you wouldn’t be too far off the mark.
Litecoin is one of a handful of 'altcoins' that often outperforms Bitcoin. An altcoin is the name given to all cryptocurrencies that aren’t Bitcoin, although the term is more specifically tied to cryptocurrencies whose development came directly from Bitcoin’s.
In this case, Litecoin is an altcoin because the Litecoin network is based on the Bitcoin implementation, although it has been optimized and receiving ongoing support and input from its founder and the Litecoin Foundation.
It is not the only coin of this type – there are plenty of altcoins, both from independent groups trying to make Bitcoin better and from discussions inside the Bitcoin community that lead to schisms and hard forks in the way a digital currency works.
The Bitcoin community is very reluctant to changing anything about the blockchain, so the only way for an update to happen is through a fork.
The thing to note about these off-brand Bitcoins is that several of them have found decent market shares. However, all of them are cheaper than Bitcoin due to the lack of brand recognition, while most of them are actually more viable as general-use cryptocurrencies than Bitcoin, thanks to the updates and optimizations they have undergone.
How does Litecoin work?
One of the main issues Bitcoin has is that it is limited in scope– that is, the Bitcoin blockchain exists only to support its tied crypto.
This issue is one Bitcoin shares with Litecoin, and with most of its forks: Litecoin also exists for the sake of itself, its only goal being creating a more viable Bitcoin.
In fact, Litecoin’s specs are basically the very same as Bitcoin’s. However, that doesn’t mean they’re the same, as the cryptocurrency does have a couple improvements over its base Blockchain.
Regardless of improvements, Litecoin works exactly the same way as Bitcoin does. It’s a blockchain-based cryptocurrency that can be used to send money to anyone, anywhere, in a secure and mostly anonymous way.
You can obtain Litecoin both by purchasing it or by mining it, and its mining algorithm uses a proof-of-work algorithm. There are no other uses to Litecoin, or its blockchain, besides that of existing as a cryptocurrency.
Litecoin vs. Bitcoin
Litecoin does tackle two of Bitcoin’s biggest problems: That of scalability and the amount of wasted work resulting from Bitcoin’s proof-of-work algorithm for mining.
Today, a decade after Bitcoin’s launch, it’s obvious the changes Litecoin brought to the table aren’t enough to sustain a worldwide, common use cryptocurrency, but back in 2011 when it launched, it was seen as a huge improvement over the original blockchain.
The scalability problem, although far from solved, is to some, better and improved upon. Unlike Bitcoin - which has a transaction confirmation time of 10 to 11 minutes on average - the Litecoin blockchain can confirm transactions in 2.5 minutes barely – a massive improvement over Bitcoin’s.
This dramatic change in speed is caused by a change in the proof-of-work algorithm. This also has the result of making Litecoin much faster to mine, allowing those who would rather mine than buy to have a good alternative.
Although some of Bitcoin’s protagonists argue that the script used by Litecoin is unsafe, neither blockchain has ever been hacked – and therefore the claims so far remain unproven.
Another difference between Bitcoin and Litecoin is in its coin cap. Many cryptocurrencies, these two among them, were designed to allow for a maximum number of tokens to ever exist.
Bitcoin’s cap is 21 million tokens, and although it might seem small it’s not expected it will be mined out in several decades. This means a long time before peak market capitalization is reached.
Litecoin’s cap is 84 million coins, although thanks to its faster block processing they are also doled out faster than Bitcoin. Still, neither blockchain is expected to be mined out anytime soon.
One notorious advantage of Litecoin’s higher cap, however, is the lower price per token. Even if both LTC and BTC were equally popular, LTC’s tokens would be cheaper simply because it will have more tokens in circulation.
4 Reasons to invest in Litecoin
Mining it is still profitable
Here’s the deal: Cryptocurrency mining is still huge, even in 2019 when proof-of-stake is quickly growing to become the default method for obtaining crypto.
Mining has, for many people, advantages over staking since you can mine without having any cryptocurrency at all and not be at a disadvantage.
The fact that it is still profitable to mine Litecoin and is an activity many take part in is important. This is because the number of miners can be directly tied both to its value and its future prospects.
It might sound counterintuitive, but part of the reason Bitcoin is so expensive is that there are still people mining it. If any mineable crypto lost its miners, its value would take a nosedive.
Mining might not be responsible for Bitcoin’s absurdly high value (a lower market cap and being the poster child for cryptocurrencies is) but it’s one of the things keeping it, and all mineable cryptocurrencies, healthy.
Faster transaction speeds, lower fees
We have already mentioned the faster transaction speeds. However, with these speeds (1/4th of the Bitcoin transaction time) also come lower fees, thanks to the lower amount of work required to authenticate a block.
This translates into Litecoin transactions costing as little as 10% of Bitcoin transactions cost. For an investor, this means several things.
First, if you were to choose to spend your Litecoin you’d have to pay much less for the transactions. But more importantly, if you’re thinking of short or mid-term trading rather than holding crypto, this means you’ll spend less money on transaction fees every time you exchange your currency either for fiat or for another cryptocurrency.
It’s an even more important detail if you plan on exchange hopping, as said tactic requires many crypto transactions to work.
And while waiting a few more minutes for the transaction to clear might not bother you, knowing you could have saved up to 90% of your crypto trading fees.
Added scalability makes the blockchain more resilient
Although blockchains getting hacked is unheard of, there are ways both to hack them and to bring them down. Hacking them is almost impossible, as the “easiest” way would require a single malicious entity to take over more than half the nodes in the chain, which in turn would require an investment so big the earnings would be worthless by comparison.
Bringing down a blockchain, however, is a little bit simpler. It’s not easy either, but it has been done. The Bitcoin blockchain went under due to a DDoS-style attack in 2015, where the network got flooded with spam transactions, leading the system to slow down to a halt and eventually go down.
More recently, the Ethereum network fell under another attack – this time a targeted DDoS attack towards its main identified nodes.
Litecoin might not be invulnerable to attacks, as no network ever is, but it is much harder to bring down than Bitcoin. And yes, the reason is the same one behind faster transactions and lower fees: Shorter transaction times.
Bitcoin was attacked and brought down in 2015 because the amount of spam transactions was too big for the network to process in a decent amount of time, leading the network to overflow.
Litecoin isn’t immune to these attacks, but the shorter transaction times means such an attack against Litecoin would require four times the effort to work.
Cheaper cryptocurrencies tend to be more stable
Historically, Litecoin has followed the price patterns, but not in terms of the valuation of Bitcoin. This is common among the Bitcoin-based altcoins, where the movements of their parent cryptocurrency are mimicked.
One small detail, however, is that while the prices aren’t the same and the peaks aren’t as high for altcoins as Bitcoin’s, neither are the valleys.
Lower price fluctuations imply a smaller risk, which is ideal for newer investors or for people whose goal is to maintain value rather than gain it.
As such, Litecoin can be seen as a preferable alternative to Bitcoin simply because you run a smaller, although still considerable, chance of losing your investment.
How To Invest In Litecoin
Investing in cryptocurrencies is more than just purchasing them and keeping them (known as holding), although that’s certainly a valid approach depending on your specific goals.
Just as there are many valid ways to invest in the stock market, there are many ways to invest in cryptocurrencies. Some tokens are better suited for certain types of trading, but they all can be traded and invested in as long as you know what you’re doing.
Buy and Hold
Let’s get the basic method out of the way: You can indeed buy Litecoin and keep it, hoping that it will appreciate in value over time.
Buying and holding is the most common investment method, particularly among people who aren’t trying to use cryptocurrencies as get-rich-quick schemes.
The method is simple, since you just have to follow its own namesake: Purchase as many tokens as your investment money allows you to, then let them sit there until whenever you feel the time is right to either jump ship or diversify your investments.
That’s about it. There are no secrets, nor are there any special methods to follow if you’re playing the long game, and the “buy and hold” method is certainly that simple
Results will vary, of course, and it’s recommended that if you choose to follow this path you keep a close eye on the crypto market just in case things start going sideways.
Investing money and never checking the market is, after all, a great way of losing your investments. Still, since you’re playing the long game, reacting to small market shifts isn’t wise – and often riding through the relative peaks and valleys will be the better option.
Of all methods, this one will take the longest to produce any income – however, if played properly and with a bit of luck, it might also return the highest income.
After all, those people who became overnight millionaires during the Bitcoin bull market of 2017 had mostly purchased their tokens many years before, in some cases for under $1 each. When buying and holding, patience is key.
Investing in your IRA is another common reason to purchase cryptocurrencies. This one is a lot like buying and holding – in fact, in many cases you’ll want to act as if you were doing just that – since it’s a long-term investment without the expectation that you should be on top of the market 24/7.
The difference with IRA investments and the “buy and hold” method is that when investing for your IRA you might not care about making a large profit as much as a crypto holder would.
While certainly turning a profit on your retirement investments is great, the main goal for you with said investments is to keep your savings from losing value to inflation.
This means that markets that might be considered too slow to buy and hold might be great for your IRA, provided you have already invested in a spread that stand a better chance to turn a profit.
One reason why IRA investments in crypto in general can be great is their semi-liquid status: Cryptocurrencies can be sold quickly and easily, so converting them into fiat is a much less painful process than doing the same with company shares or real estate holdings.
They’re a great way of keeping some of your IRA money in a manner that you might be able to move quickly if the heavens fall.
Short-term trading is the riskier investment method, but also the one that’s the most likely to produce an income in the short term.
The income money won’t be as big as that of long-term trading, but for people who need the money for their everyday lives, that’s often the only way of investing, and some people can indeed manage to make a living out of these earnings.
There are two types of short-term trading or, to be specific, two types of short-term. The first one simply consists on buying and selling cryptocurrencies based on relative highs and lows, usually waiting a few days between movements as the market corrects itself.
It’s a slow process, but if you know the market enough and can spot patterns in prices it can work. The second, extreme one is also the most common short-term crypto investment method: Day trading.
Day trading gets its name from the general guideline that you buy cryptocurrencies early in the day and sell them before the day is over.
It’s all about knowing how to spot which token is likely to go up during the trading day and buying enough of it to get at least some earnings.
The earnings in these methods, particularly in day trading, are paper thin and won’t ever make anyone a millionaire. Moreover, day trading is difficult to the point where many investment experts don’t recommend it as it’s almost the same as playing the Forex market.
It’s not that it’s impossible to make a living from it, but that it requires perfect precision to turn a profit - and you have to be aware that losing money rapidly is a possibility with any volatile or risky investment.
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How to Buy Litecoin
If you decide that Litecoin is a good investment, it can be bought and traded in many exchanges as it is one of the most supported altcoins in the market.
Even cryptocurrency exchanges known for only trading a few tokens tend to have Litecoin among them. For this guide, we’ll use Coinbase, since it is one of the oldest, most-trusted exchanges in the market and a place where newcomers to cryptocurrencies can perform operations safely and easily.
Step 1: Sign-up to Coinbase
First, register for a Coinbase account. This can be done by visiting coinbase.com and clicking on the “Sign up” button. You’ll only need an email and password for the registration, although you’ll have to verify your identity with Coinbase before you’re allowed to properly use the exchange.
Step 2: Verify Your Information
The verification process consists of three steps, two of which you’ll want to take as they’re essential for purchasing and selling cryptocurrencies.
These two steps require you to verify your phone number and submit your proof of residence, the latter in the form of a utility bill.
The third step isn’t necessary for most people, although it is required if you plan to move your cryptocurrencies outside of Coinbase. That third step consists on providing a photo ID.
Step 3: Add Payment Method
If you’re going to pay by bank account, you must add the account to Coinbase. Do this by clicking Payment Method -> Add new account from your dashboard.
You’ll have to verify your account, and then deposit the funds. For credits and debit cards, select the card option on add payment method.
Step 4: Buy LTC
Trading pairs are listed on the “Buy/Sell” part of the site. In this case, since you’re purchasing using fiat, look for the LTC trading pair tied to the fiat of your choice, usually USD/LTC.
Once you’ve looked at the Litecoin price and selected it, input the amount of Litecoin you wish to purchase, then go through checkout.
Credit and debit purchases are instant, while bank accounts might take a few days. Prices are locked once you go through checkout.
Step 5: Selling LTC
To sell, follow the same process but instead, choose the opposite trading pair, where you can exchange your Litecoin for USD.
Step 6: Withdrawing Litecoin
If you’ve gone through the third verification step, you’ll also be able to withdraw your Litecoin to crypto wallets and keep it in cold storage, spend it, or move it to other exchanges.
If not, you’ll only be able to withdraw fiat currencies to your bank account, card, or PayPal.
Step 7: Using Coinbase Wallet
You can actually spend your crypto from the Coinbase wallet. However, this isn’t advised since the exchange is known for closing accounts if the node, you’re sending money to is flagged for participating in illicit or immoral activities.
Should You Invest in Litecoin?
Is Litecoin a good investment? It's hard to say and depends on your risk appetite - but when it comes to cryptocurrencies, you can do much worse than Litecoin.
In general, it should be thought of as a cryptocurrency for those who might want to try their luck without the rollercoaster that Bitcoin investment has become.
Since Litecoin prices have historically followed Bitcoin prices in ups and downs, the current market is ideal for investment since crypto prices in general have been going up most of the year.
However, one thing you should be aware of is that Litecoin, just as Bitcoin investments, are purely investments. Litecoin is one of the safer cryptocurrencies since it’s been around for long (since 2011) and it has managed to keep a relatively high value, with its current outlook judged to be promising.
There might come a time when most altcoins, particularly Bitcoin offshoots, will lose their value if they fail to find any actual use in the real world and suffer in the cryptocurrency market.
But that time isn’t today, and it won’t be in the near future. For now, Litecoin remains one of the preferred crypto investments available.
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