How to Buy Litecoin (LTC) - 2020 Guide
Litecoin is one of the most exciting projects out there. Founded and championed by ex-Google employee Charlie Lee, Litecoin serves as the silver to Bitcoin’s gold. However, that statement just doesn’t do Litecoin enough justice. Time and again, Litecoin has proven itself to be a trailblazer in the crypto space. Litecoin is one of the forked protocol Bitcoin’s original code. So, should you invest in Litecoin? How would you go about it if you wanted to buy Litecoin? Let’s explore that in this article.
Litecoin and Altcoins: Why You Shouldn’t Invest Just in Bitcoin
One of the broadest generalizations of cryptocurrencies is “Bitcoin and Altcoins.” In other words, Bitcoin and coins that are not Bitcoin. So, if Bitcoin is the leader of the crypto-economy, why would you want to invest in any other coins? Well, it turns out that there are a lot of reasons:
Bitcoin is Expensive
How does a cryptocurrency get its value? Well, there are two parts to it. A crypto’s value is made up of its:
- Intrinsic value: The value that the token gains from the credibility and utility of its project.
- Speculative value: The value that the token gains from speculative traders who expect its price to fluctuate in the near future.
Speculative investors are a valuable part of any ecosystem. However, it is hazardous for a token to be priced purely on its speculative value. For real sustenance, a token needs to be heavily dependant on its intrinsic value. So, how does a token gets its intrinsic value? The intrinsic value is created by the underlying project and how much percentage of this value is captured by the token.
As of right now, a majority of Bitcoin’s price is based on pure speculation and hence can be overvalued. In the near future, when Bitcoin gets more utility, their price will be made more of intrinsic value. However, for now, Bitcoin’s price tends to get inflated based on pure speculation. As such, it is difficult for investors who are not that well-to-do to make a meaningful investment in Bitcoin.
Bitcoin is Full of FOMO Investors
Fair or not, being the most popular cryptocurrency, Bitcoin gets a lot of attention. As such, a lot of naive and newbie investors enter the space who have no better reason to invest other than “I don’t want to be left out.” The problem with this is that they don’t have any real knowledge of the blockchain. They are not buying Bitcoin because they are interested in the blockchain technology and its potential, they are doing so because someone told them to invest in it. The moment someone famous criticizes Bitcoin or cryptocurrencies, these investors will sell all their assets, crashing the market in the process. Now, we are not saying that Litecoin is free form this phenomenon, however, the fact is that since it is less popular than Bitcoin, it has comparatively less number of FOMO investors.
Altcoins are Cheap(er)
Altcoins trade for very low prices when compared to Bitcoin. This is great for two reasons:
- It is much more affordable than Bitcoin, meaning an average investor can still make a pretty substantial investment with the altcoin. Eg. $10,000 won’t buy you 2 BTC but it will buy you 125 LTC(litecoin).
- Because these coins are so cheap, they have tremendous upside potential. The price of litecoin increased by 7,291% from the beginning of 2017 to November 2017! In comparison, bitcoin “only” increased by 1731%.
If the altcoin of choice has good quality and potential, then there is every chance that the price will appreciate significantly soon.
Technological Advances of Litecoin
Litecoin’s working process is similar to Bitcoin. Both of them leverage the blockchain technology to enable payment transfer between two entities without the need for a third-party. However, the reason why many people hold Litecoin in high regard is because of their willingness to experiment with potentially disruptive technologies. Litecoin works on the following technologies:
- Lightning Protocol: Using hash timelock contracts (HTLCs) to create off-chain payment channels to exchange multiple micro-transactions without going through the blockchain. This is a scalability technique that many coins like Bitcoin, Litecoin, Decred, etc. are looking to use to increase their throughput.
- Atomic Swap: Atomic swap enables a cross-chain exchange of coins without the need of a third party. Eg. If Alice had 1 bitcoin and she wanted 100 litecoins in return, she would normally have to go to an exchange and pay certain fees to get it done. This technique also utilizes HTLCs.
- SegWit: Segregated Witness is the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. The signature data is kept in extended blocks which are attached to the main blockchain via side-chain.
Privacy and Fungibility
One property that Litecoin has recently looked into adding is “fungibility.” On January 28, 2019, Lee tweeted the following:
“Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy. I am now focused on making Litecoin more fungible by adding Confidential Transactions.”
So, what is fungibility? Investopedia defines it as follows:
“Fungibility is a good or asset’s interchangeability with other individual goods or assets of the same type.”
Suppose you borrowed $20 from a friend. If you return the money to him with ANOTHER $20 bill, then it is perfectly fine. You can even replace the money to them in the form of 1 $10 bill and 2 $5 bills. It is still fine. The dollar has fungible properties (not all the time though).
However, if you were to borrow someone’s car for the weekend and come back and give them some other car in return, then that person will probably punch on the face. If you went away with a red Impala and came back with another red Impala, then even that is not a done deal. Cars, in this example, are a nonfungible asset.
Cryptocurrencies use a transparent open ledger system to log their transactions. Everyone who is part of the blockchain’s network can observe the transactions in it and more importantly, everyone can see the trail of those transactions. So, suppose you own a bitcoin which once was used in some illegal transaction, eg. buying drugs, it would forever be imprinted in the transaction detail. What this in essence does is that it “taints” your bitcoin.
In certain bitcoin service providers and exchanges, these “tainted” coins will never be worth as much as “clean” coins. This kills fungibility and is one of the most often used criticisms against bitcoin. After all, why should you suffer if one of the previous owners of your bitcoin used it to make some illegal purchases?
Using privacy functions could mitigate this and give cryptocurrencies some much-needed fungibility. Litecoin is looking to integrate the MimbleWimble protocol to implement privacy.
MimbleWimble is a privacy protocol which uses elliptic-curve cryptography and requires smaller keys than other cryptography types. It only needs 10% of the data storage requirements of the Bitcoin network. This makes Mimblewimble highly scalable and efficient. The problem with other privacy protocols is that they are incredibly bulky which compromises on its scalability.
Alright, so now that you know why you should invest in Litecoin, let’s move onto how you can go about your investing/trading.
How to Buy Litecoin
Buying LTC is relatively easy. You can either find an exchange that converts any cryptocurrency to LTC, or find an exchange that deals with fiat (normal money).
Step 1: Get a Litecoin Wallet
You’ll need a safe place to store your Litecoins. Popular choices include Coinomi, Atomic Wallet, Exodus and others. As with all cryptocurrencies, exercise caution in choosing a wallet and in your security measures. Look for wallet solutions that include 2-factor authentication, which will alert you via mobile or email if someone has your password and attempts to open your wallet. Hardware wallets like Ledger are also available.
Step 2: Choose an exchange
First option is simply to go to SimpleSwap.org and exchange your other cryptos (e.g. BTC) with Litecoin. there is no need to sign up for SimpleSwap, and every transaction takes less than 30 minutes to complete.
Second option is to choose a fiat exchange that supports Litecoin, like Coinbase.com or Kraken. Coinbase or Kraken will allow direct purchases of LTC, if you wish to pay with credit card. Coinbase is the most established for buying cryptocurrency with fiat, including LTC, BTC, ETH and others. Unlike SimpleSwap, you will have to go through identity verification at Coinbase.
Be aware of transfer fees (if applicable) before trading with any exchange. Fees can affect your cost of trading or investing. Most exchanges take around 1-2% in commission for every trade.
Hopefully, now you should have all the information necessary to go about your trading. Don’t just buy Litecoin just because we are telling you to do so. We request you to do thorough research and read up more about the project.