Litecoin Mining, Value and Transactions – How Do They Work?
There are hundreds of cryptocurrencies on the market, and many more emerge almost every day, but Bitcoin is the most popular among them, perhaps because it was the first. However, the first cryptocurrency competes against dozens of aspiring alternatives, one of which is Litecoin (LTC).
Measured by market capitalization, Litecoin is among the top 10 almost at all times and functions in one sense as an online payment system. Like PayPal or a bank’s online network, users can transfer the cryptocurrency to one another – however, instead of U.S. dollars, Litecoin performs transactions in units of Litecoin.
How Litecoin is Made
Like all cryptocurrencies, Litecoin is not developed and issued by a government. Still, it is created by a comprehensive procedure called mining, which consists of processing a list of Litecoin transactions.
Dissimilar to regular currencies, the supply of Litecoins is fixed, with no more than 84 million Litecoins to ever be in circulation. Every 2.5 minutes, the Litecoin network produces what is known as a block, which is a ledger entry of recent Litecoin transactions across the world. Here is where Litecoin’s native value derives.
The block is verified by mining software and made noticeable to any ‘miner’ who wants to see it; once it is verified, the next block enters the chain, which is a record of every Litecoin transaction ever made.
Mining for Litecoin
The first miner to successfully verify a block is rewarded with a few Litecoins; the number of awarded coins reduces with time.
A question those unfamiliar with how the process works ask is, ‘Could a corrupt miner change the block, allowing the same Litecoins to be spent twice?’ The answer is no. The scam would be noticed immediately by other miners, which are anonymous to the first. The only way to trick the system would be to get a majority of miners involved to process the false transactions, which is impossible.
Mining cryptocurrency at a rate that’s profitable for the miners asks for extreme processing power, which can be achieved with specialized hardware. To mine most crypto coins, the main processing unit in a regular computer is nowhere near enough to complete the task.
This brings us to another element of differentiation for Litecoins – they can be mined with ordinary computers more so than other cryptocurrencies can. Even though the greater a machine’s capability for mining, the better the chance it will get something of value for a miner, mining Litecoin is slightly easier than mining most crypto coins.
What Is Litecoin Worth?
Any currency, even the U.S. dollar or gold, is only as valuable as people think it is. If the Federal Reserve starts issuing too many banknotes, the value of the dollar will drop significantly almost immediately. This phenomenon cannot be applied to currencies only, but any good service becomes less valuable if it is more accessible and cheaper.
The creators of Litecoin understood this from the start, and by restricting the number of coins in circulation, they managed to ease people’s fears of overproduction. There are also advantages intrinsic to Litecoin over Bitcoin. For instance, Litecoin can handle more transactions, considering the shorter block production time, and it also has an incredibly low transaction fee in comparison to other cryptocurrencies or even PayPal or banks.
The Bottom Line
As soon as a currency reaches a pivotal mass of users who are positive that the currency is indeed what it represents and won’t lose its value, it can sustain itself as a payment method.
Litecoin is not as universally accepted as regular currencies, but as crypto coins become more readily accepted and their values stabilize, some or even most of them could emerge as the standard currencies of the digital world.