People around the world are learning about Bitcoin. As I write this, the current price of one bitcoin is $95. Not many investment opportunities have gone up 700% in less than a year. Some of the early adopters of Bitcoin are cashing out and there are already Bitcoin millionaires. There are also sad stories from people who had 400 bitcoins on their harddrive and formatted it because they figured they’d be worthless. (Today it’s worth $37,450!) Other people have dug up old backups and found they can buy a new car with their bitcoins. People in forums and chat rooms have said: “I heard about Bitcoin in 2011 but, didn’t buy any.” These people (myself included) are kicking themselves and paying high prices to get bitcoin now.
Bitcoin Price since October 2012
Some people predict that Bitcoin will keep going up. Eventually, the average person might buy fractional bitcoins like we do with gold. But, not many people know that Bitcoin has a lesser-known cousin called Litecoin (abbreviated LTC). Litecoin is sometimes described as: “the silver to Bitcoin’s gold”. Like Bitcoin, Litecoin is decentralized (meaning that it isn’t reliant on a central entity like the Federal Reserve) and there is a finite supply of coins that are being released over time through a process called “mining”.
There are actually quite a few crypto currencies besides Bitcoin. Litecoin is currently the most popular of the “alt coins” in terms of adoption and market share. There is some hatred towards Litecoin from certain members of the Bitcoin community. But, the future of crypto currency will be large and varied. There will be room for many different systems. Think about cars: the market is huge and there are many players. The market decides which manufacturers rise to the top. But, even today, it doesn’t stop the Ford guy from hating on Chevy (and vice versa). The smart investors are looking at a variety of different crypto currencies besides Bitcoin.
Top 5 Things You Should Know About Litecoin:
1.) Litecoin in the early stages
If you got in on the ground floor of Bitcoin you could have tens (or hundreds) of thousands of bitcoins. All the early adopters have done very well. The next wave of adopters will pay a bit more for bitcoins but will still get a relatively good price. Once the mainstream market notices bitcoin it will be too late for the little guy to get involved at an affordable level. Corporations will use their vast resources to corner the market and control the system, forever shutting out the “little guy”. By some estimations, Litecoin is currently where Bitcoin was 2 years ago (in terms of development). There isn’t much out there yet that you can buy with Litecoin. But, the same was true for Bitcoin in 2011. Litecoins are currently trading on the btc-e.com exchange for .71 cents. There are also many people who are “mining” Litecoins with high-end graphics cards using special graphical processors, or GPU’s. You can get started over at: http://litecoin.org
2.) Litecoin uses a different type of encryption
Both Bitcoin and Litecoin use encryption to process transactions. Bitcoin uses the SHA-256 algorithm whereas Litecoin uses an algorithm that is based on scrypt. The scrypt algorithm was selected because it makes it very costly to perform large scale custom hardware attacks due to the amounts of memory required. The scrypt algorithm that Litecoin uses won’t work with the specialized hardware being developed for Bitcoin mining. One of the aims of Litecoin was to provide a mining algorithm that could run at the same time, on the same hardware used to mine bitcoins. With the rise of specialized ASICs for Bitcoin, Litecoin continues to satisify these goals. It is unlikely for FPGA or ASIC mining to take over Litecoin until the currency is widely used.
3.) Litecoin transactions are faster
The Litecoin blockchain differs from its Bitcoin counterpart in that it has more frequent blocks which at the beginning will have less transactions per block but will later support more transactions on the network without further modification. This means faster confirmation times for merchants. There are some cases where Bitcoin transactions can take over an hour. Litecoin transactions are instantly seen by your wallet and full confirmation of transactions typically occur within 15 minutes or less.
4.) There are more Litecoins available
Litecoins as a currency unit are created over time at a diminishing rate, and there will never be more than 82 million of them in existence (though they are highly divisible). Miners will generate 50 coins per block and the average Litecoin block takes 2.5 minutes – which is about one quarter of Bitcoin’s 10 minutes-per-block.
5.) Bitcoin miners are switching to Litecoin
One of the aims of Litecoin was to provide a mining algorithm that could run at the same time, on the same hardware used to mine bitcoins. With the rise of specialized ASICs for Bitcoin, Litecoin continues to satisify these goals. It is unlikely for FPGA or ASIC mining to take over Litecoin until the currency is widely used. Using Litecoin results in distributing mining power to more players in the game thus fostering a stronger currency base
Litecoin has seen a big surge in growth lately. This is mainly because the difficulty of solving Bitcoin problems increased dramatically a few weeks ago. This means that all the people who were using video card (GPU) based hardware have pretty much been made irrelevant. Mining Bitcoin is starting to become more and more a professional operation where people are using massively expensive hardware. Many of the miners are switching to Litecoin because it’s easier to mine and there is more of it. Just yesterday, Litecoin broke the $1 USD threshold. So, if you have a mining rig that can mine 10 Litecoins per day, you can acquire 70 a week! As the price of Litecoin continues to rise this will only make mining more lucrative.
The easiest way to get started with Litecoin is to buy some Bitcoin via a reputable source like Bitstamp or Bitfloor (or even locally!). Then, send your bitcoin to the BTC-e exchange. Once there you can click the “LTC/BTC” button and purchase Litecoin using bitcoin. The initial cost is pretty low and you have the potential to make quite a bit as Litecoin continues to grow. There are even (unsubstantiated) rumors that Mt. Gox is considering adding a Litecoin index. The future for Litecoin is looking bright and the Google trends report shows that interest in Litecoin is growing quickly.
UPDATE: Since I published this, Litecoin has gone up to $2.19 USD. Another thing I should clarify is that there will be almost 4 times as many Litecoins as Bitcoins. There will be 21 million Bitcoins total and 82 million Litecoins.