Litecoin Payment System
Litecoin was set up to be similar to Bitcoin but has some differences including the fact that it can be used with hardware that is consumer grade. The transactions are confirmed extremely quickly, on average taking just two and a half minutes. The algorithm that it uses is designed to work with all common types of computers. The system has been set up to have 84 million units of currency. Litecoin can handle a higher volume of transactions than Bitcoin. This means that confirmation is quicker.
The aim of setting up Litecoin was to enable it to work on systems that work with bitcoins. Bitcoins is expanding to work with a selection of different ASICs and Litecoin ensures that it keeps up with this.
To get started with Litecoin you need to download a client. Ensure that you download this form a trusted site. You will then be able to encrypt your wallet to make sure that things are kept secure. You can then check transactions and the account balance but you will have to enter a password if you want to spend your Litecoins. This enables the currency to be protected from viruses and Trojans designed to steal from wallets but also means that you get a chance to think over your transaction and be sure that you want to go ahead with the purchase.
The system differs to other payment processors online and therefore fills a gap in the market. Many people like the security that they get with a payment processor because they do not have to reveal their secure banking details to each of their customers. However, all of these systems still needs a third party to manage the transactions and many people do not like this. This is because payments cannot be truly reversible and so they are based around trust. Although many people do start off trusting systems like this, they can tend to change their mind if they get in to a situation where they pay out money and do not get the goods or services they were expecting but cannot get a refund. Transactions are also expensive because the third party has to be paid for the service that they provide and many people are not happy about having to pay this fee. Bitcoin was set up so that a system could exist where trust was not a factor but cryptographic proof was used instead. This is also what is used by Litecoin.
The system works by making it impossible to reverse payments and therefore protecting sellers but there is an escrow system which protects both buyers and sellers. The solution to this was to provide a system that worked on a peer-to-peer basis that is time stamped so that transaction proof is available.
There is a chain set up of digital signatures which refer to the transfer of the coin. So a person owns a coin and then transfers to another who can then use it to pay someone else. There could be a lack of trust in that a person could use the same coin to pay two people, either by accident or on purpose. Some people have a mint set up that after each transaction the coin is changed so that it cannot be used twice, but this does need a central authority such as a bank to be involved. In order to make this not necessary time stamping is used. Transactions that take place on the system are visible for every user to see. They can then check whether the person who is paying them, has previous paid anyone and whether they had the means to be able to do this. This system has been set up to be extremely secure. There are complex mathematical equations which set up each transaction record so that it is almost impossible to cheat the system.
To mine a Bitcoin or Litecoin you will need to set up a system like this on your network and then you will be able to produce the currency. It sounds like money laundering but actually it is just the same as a bank issuing money. The security is set up so that there are blocks of transaction details. These blocks have to have the correct hash in order to be valid. There are miners out there who use opecilised software to check the hash and when they verify it, they get paid in BitCoins or Litecoins. These coins form the start of the chain of transactions. The value of each coin varies in the same way that any currency does according to supply and demand. Some people choose to invest by buying them when they are cheap and then selling them when the value goes up, in the same way that people trade FOREX.
Most people just use it as a way of buying and selling goods and services. They see it as a cheap alternative to payment processors that is safe as well.
Finding Out More
There is lots of information about Litecoin, so that you can find out a lot more about it before you decide whether it will suit you. There is a Litecoin Wiki page which has more information. There are also a number of Litecoin Forums where you can find out more about it and what people are using it for. You can start to decide whether you want to mine, develop, trade or use Litecoin as a currency.
Conclusion
It may all sound rather complicated, but you do not need to understand all of the details really. It is just important to know that it is a secure system for paying for goods and services online is cheaper than some other payment processors. As it grows in popularity there will be more people using it to trade online and more transactions taking place. It may therefore be important to find out more about it and consider using it.
