What Is Litecoin/Bitcoin/altcoins?
Bitcoin and Litecoin
Intro/Overview of Litecoins
Litecoin is a form of money, or currency. It’s like the money you use right now, except not at all. It encompasses everything you want in a currency, but you may be wondering - what do I want in a currency? You may have never thought of that. Most things are passively accepted until something disrupts the norm.
Disclaimer & Brief How It Works
I want to preface this by saying that litecoins are an off-branch to Bitcoin. Bitcoin was one of the first digital currencies created that has gained popularity due to its promising functionality. Now I’ve just confused you mentioning that there is more than one form of digital currency; Well, there are a lot based off of the original, Bitcoin, because the code that forms the program is what constitutes the public ledger (everyone with the code downloads proof of transactions, for everyone) is open source, meaning anyone can read, copy and create their own based off of the original. This creates diversity and continued growth and protection to the currencies. If one alternative currency finds an implementation that would largely benefit another, the developers can implement it. There are developers for the code that makes specific aspects of the functionality, not the currency itself.
The next question that comes to mind is: how does the currency get made if no person makes it? I’ll tell you the label and then explain what it means, because the analogy isn’t great.
Mining is simply running the program made by the developers which solves insanely complex math problems. These math problems are the mediator that confirms a transaction between one person and another and is in competition between other people running the program. Because this program takes a lot of computer power, the program’s code tells it to reward the person who successfully solved the math problem with a set amount of litecoin, bitcoin or whichever currency program you’re running. As technology and time progress, the complexity of the math problems and reward amount change. Those are the basics of how litecoins and other digital currencies, based off of Bitcoin, are “made.”
If you are confused and don’t know what to think, don’t worry, most people haven’t even heard of the concept - which is why it’s a daunting subject. Hopefully I can inform you of at least the basics. Because Litecoin is relatively new, the prices are unstable. They are currently raising in value because there are more people wanting them than are being created. I want to mention that I am by no means an expert on Litecoin or any currency. I’m not a financial adviser and everything I learn and mention is speculative and aimed to educate.
What Is Bitcoin?
Bitcoin Is The Internet For Finances
Accept Bitcoin At Your Store!
Part 1 - Grasping The Concept
The video to the right is the Today show's cast discussing the internet - that thing you're connected to most of the day. The concept of this open-sourced monetary system is similar to that of the internet except these digital currencies are currently focused on finances. If I sent money from my private address (think of it as a password) to someone’s public address (think of it as a username), it is processed by the method I mentioned earlier and recorded within the software. When you download the original software, with it comes a list of every transaction that has occurred, so it can take a long time and a lot of computer memory to store it. This information is read and uploaded to websites so it can be more easily read through the use of graphs (such as Bitcoinity). This idea of hosting public information to the public is known as the Blockchain - just a fancy name for a list, or chain, of the successful math solutions, or blocks. This provides, more or less, proof of the solved transactions.
Part 2 - Pros and Cons
Now that you understand the fundamentals of digital currency, I think I should elaborate on why Litecoin is great and, later, when someone would want to use it instead of bitcoin.
Deflation & Inflation
Dollars can be printed - literally created just because someone (usually a government) ran out. This will usually lower the value of the dollar, even if more people around the world are wanting to use them. Bitcoin and Litecoin have a maximum amount that will ever be made, but are divisible to many decimal places - meaning that once the capacities are reached, they can only change value with popularity, not quantity.
Anyone who has ever sold an item or service will be the first to tell you that credit card and other payment services take a large amount of money for transacting the fees for your goods and services. This can take a large portion of what little profit you might be trying to make. Now you might understand why some businesses don’t accept credit cards. In fact, "55% of the nation's 27 million small businesses do not accept credit cards" (Forbes).
Identity theft is a huge problem and affects hundreds of thousands of people in the U.S. With all this personal information being thrown around when using credit cards, it’s rather easy for a criminal to steal someone’s information with the right gear and motivation. Digital currencies require little connectivity, zero personal information, and are encrypted - which just means they are secured with astronomical amounts of numbers and math.
You can store your private key - the password analogy I used earlier - anywhere that numbers can be stored. In theory, that could even be your own memory. Yeah, you could store your wallet in your brain, but that’s obviously out of the question in most instances because many don't trust their own memory. Most people use an online storage - a popular one in the U.S. is called Coinbase. But if you have an amount that you are fond of keeping, it’s a good idea to do what’s called cold storage. In it’s simplest form, this is just printing your private and public keys to a piece of paper. This is to avoid any of the problems computers can bring, such as viruses, keyloggers or nasty people who decide to steal your money directly or hack the website that you store it on. Many people have lost insane amounts of money from malicious people. If you feel like getting yourself some litecoins or bitcoins, read up on best practices for cold storage.
Part 3 - Scepticism
Scepticism is a popular outlook on digital currencies, too. A lot of people are afraid of change, which is fine, but at the same time, keeping an open mind in an ever-changing world is crucial to stay afloat.
A Ponzi scheme is controlled by a central entity who persuades others to invest only to sell and scam those investors. Just because there was a creator of the code that is Bitcoin doesn't mean there is a central authority by any means. The open source code started at a point in time and was public from that day forward.
Are you interested in owning Bitcoin (or an altcoin)?
The Future Of Digital Currency & Wrap Up
Litecoins are magical internet money that people have placed a value on and are, therefore, valuable. They are one of many alt-coins to the popular, open source, bitcoin. Why use Litecoins instead of bitcoin? Well, I certainly wouldn’t replace the usage of bitcoin with litecoin, but instead think they should be used together. Litecoins’ transaction-confirmation math problems are still super complex, but not nearly as difficult as bitcoins’ and can be solved much faster. They are largely appealing for this reason. Many merchants don’t want to have to wait for (at least) 10-15 minutes for a transaction confirmation which is required for Bitcoin.
Again, I want to highlight that this is a new topic to a lot of people, including myself. I’m not an expert, but I think some people can find this information useful. If you didn’t find this information useful, then just disregard it, although I don’t know why you read this far. But if you did find it useful and are interested in learning more, check out bitcoin.it, the Bitcoin wiki. Reddit forums are also a great source of new information and innovations happening in the digital currency world. Try reddit.com/r/bitcoin or reddit.com/r/litecoin. If you do happen to trade your dollars or services/goods for a digital currency, do it because you believe in the innovative technology, not because someone told you it was a good financial move. The prices are not stable by any means, so only invest what you're willing to lose.
If you feel so inclined, my tipping address is: 1Ce5S5LkL1MzMphb91dMBRBdLDBY4HGthc
Thanks for your time!
In-Depth Video Resources On Digital Coins (Bitcoin, Litecoin, altcoins)
Digital currencies are new and many people are sceptical about them. If you believe you understand the basics of it and certainly all the securities of it, consider spreading the word. The guy in this video has been making many videos over every aspect of digital coins and Bitcoin specifically. If you like the lecture-based format from an intelligent person and you'd like to know more about specific subjects regarding digital coins, I highly recommend watching more of his videos.