In the last hours the value of Litecoin is soaring that even its creator has had to go to social networks to ask us not to do crazy things. But despite the warnings, the reality is that the cryptocurrency has been shooting for two days, and only in the last 24 hours has its value increased between 70 and 80 percent.
But what exactly is Litecoin and what is behind this low-cost alternative to Bitcoin? Both are open-source cryptocurrencies, the one heir to the other, and while Bitcoin aims to become a substitute for digital gold, Litecoin wants to be silver. But there are some differences in terms of its philosophy and the algorithm that marks its operation that should be reviewed.
The Litecoin is a decentralized P2P cryptocurrency created by Charlie Lee in October 2011. It was created as an open source project inspired by Bitcoin, so it is virtually identical in most of its technical aspects. In the end, what is involved in both cases is to allow a person to send money to another without intermediaries such as banks and anonymously and safely.
However, there are at least four fundamental differences between Litecoin and Bitcoin: its speed, its number of coins, its market capitalization and changes in the algorithm. They are not big differences, but they are enough to change their philosophy slightly.
To begin with, the first big difference is the speed at which transactions are made. The Litecoin network performs the processing of a block every 2.5 minutes instead of every 10 minutes, which means that it generates the blocks of its chain four times faster than Bitcoin. This serves to confirm the transactions that are carried out at a higher speed.
Second is the amount of coins you plan to generate. One of the things that gives Bitcoin more value than conventional currencies is that it generates a fixed amount of new currencies every year, and that its number is finite. Bitcoin will stop creating new units when it reaches 21 million coins, while Litecoin will stop at 84 million.
Then there is the fact that the Litecoin was the first coin that changed the hashing algorithm and used scrypt. The first benefit of this change is that it makes any PC able to dedicate itself to mining, turning its back on professional miners and democratizing a bit the creation of the cryptocurrency. In addition, verifiers are more distributed than with coins based on SHA-256.
And then we have its market capitalization, which is a measure by which its economic dimension is measured. For those of us who do not know economics, this measure may be a little ambiguous, but you can get an idea if we tell you that the Bitcoin right now is 288.687 million dollars, while the Litecoin is only 17.842 million. Despite that, the Litecoin is now the fourth cryptocurrency with more value in the market, which is not bad either.
Why is it growing so much?
This is the big question that everyone is asking, why suddenly the value of the Litecoin has started to shoot. Some media suggest that it may be due to the exaggeratedly high value of Bitcoin, which is causing many to see their little brother as an interesting opportunity to get on the crypto currency with another that has the same potential. to start growing
This interest has in turn a so-called effect, since when you begin to notice the increasing inertia of the value of the cryptocurrency there are other people who take positions so as not to be left behind in the event of a massive escalation in value such as the one has seen in the Bitcoin.
This escalation in the value of Litecoin is making many of the platforms that, like Coinbase allow their purchase, begin to warn their users to take the necessary precautions when investing. Even Charlie Lee himself, the creator of the cryptocurrency, has warned users of the dangers of going crazy and we are aware that their price can collapse as has happened before.
“Buying LTC is extremely risky,” he said in a tweet. “I hope we have a year of ups and downs in the market like the one we just had, where the value of the LTC dropped by 90% (from $ 48 to $ 4). So if you can not afford a fall of the LTC to $ 20, do not buy ! ”
In another tweet he has also said that when a cryptocurrency goes too fast it exceeds its real value, which can cause the market to start going down to normalize it. It will be interesting to see how the events are happening in the coming days and how the value of the new success cryptocurrency evolves.