Introduction
When considering the question of what litecoin is used for it should be emphasized that Litecoin is a transactional cryptocurrency. In this subsection of the Leo Finance Litecoin Coin Guide, we will provide you with the ultimate answer to the question at hand, and then provide an explanation behind this answer.
What is Litecoin (LTC) used for? - The Ultimate Answer
Litecoin is an open-source decentralized platform that has as its primary purpose permitting its users to transact payments in the absence of third party intermediaries. To accomplish this use case, Litecoin was created to be an improvement to Bitcoin - in fact it is often stressed that Litecoin was never intended to be a competitor with Bitcoin, but rather, a complement to Bitcoin.
That being said, stay tuned as next we investigate just how Litecoin was intended to improve Bitcoin.
What is Litecoin (LTC) used for? - The Explanation
Bitcoin was innovative, but it became slow and expensive. The creator of Litecoin, Charlie Lee, recognized the potential in Bitcoin but wanted to develop a project to address the Bitcoin deficiencies and create what in effect would be digital cash.
To achieve this result, Lee forked the Bitcoin source code and implemented three major changes to the protocol:
- Cryptographic Algorithms: Bitcoin employs the SHA-256 hashing algorithm whereas Litecoin employs the newer Scrypt hashing algorithm. This was done to remove the dominance of ASIC miners permitting the CPU and GPU miners to compete. The addition of more available means to mine Litecoin was intended as an improvement to the security of the protocol. Furthermore, use of the Scrypt algorithm is more energy efficient.
- Block Times: Lee wanted to prioritize transaction times. As such, while Bitcoin processes a block approximately every 10 minutes, Litecoin can process a block every 2.5 minutes. Because of this improved block processing time, Litecoin can handle more transactions than Bitcoin and is about four times faster than Bitcoin.
- Total Coin Supply: The total maximum supply of Litecoin is capped at 84,000,000 LTC whereas that of Bitcoin is capped at 21,000,000 BTC. Lee desired a higher maximum supply of Litecoin to keep the price low enough to support everyday transactional use.
So from its initial design, Litecoin was intended to prioritize its use as an everyday transactional cryptocurrency, improving on the original Bitcoin concepts.
Several Ancilliary Uses Worthy of Mention
While over time Bitcoin has transformed itself into a store of value, Litecoin has retained its transactional emphasis. Nonetheless, while being transactional is the main associated use of Litecoin, some users utilize the coin for other purposes, to wit:
- Day Trading: As Litecoin has a large 24 hour trading volume, some users possessing a short-term belief in LTC day trade the currency.
- Long-Term Investors: Those possessing a positive long-term outlook on the price potential of Litecoin may buy the coin and hold it as an investment asset.
- Hardcore Enthusiasts: Some old-school blockchain enthusiasts (as Litecoin was around long before smart contracts) may want to hold the coin as they believe the underlying blockchain technology may reshape DeFi's future.
- Portfolio Diversification: Some users find the utilization of Litecoin as a clever way to reduce portfolio risk by investing in an established different asset.
Final Thoughts
Clearly, Litecoin was designed to be, and in fact exists primarily as a transactional cryptocurrency. Litecoin may not exhibit all the flash surrounding all the new DeFi investments present in today's market, but Litecoin is well established and is a workhorse in the area of use for which it was intended.