Author Topic: Welcome new users!  (Read 5568 times)

Offline HauntingShade

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Welcome new users!
« on: October 08, 2013, 05:43:34 PM »
Welcome dear new users!  :)

Did you ever wanted to ask questions about crypto currencies to which most of us already know the answer to and might consider "noobish"?
Well, this section of the forum is the place for you to be!


Please make a new topic for each question.

When making a new post, be sure the title is relevant to your question. For example:
"I have a question" is not a good title.
"How do I install the Litecoin Wallet" is better.
"How do I install the Litecoin Wallet on a Mac" is even better. The more info you share the more we can help!



Guides will be made and posted in this section as well.

Have good times!

Regards,
The Litecoin Forum Staff


New User FAQs

Basics:
Q: How many people are using Litecoins?
A: Nobody knows for sure, but probably hundreds of thousands.

Q: How do I get Litecoins?
A: When you download the Litecoin software, it generates an "address" for you. People can then send coins to that address.

Q: Where can I buy Litecoins?
A: This is a little challenging right now. First you have to buy Bitcoins from a seller such as coinbase.com and then you have to exchange them for Litecoins at another website like Cryptsy.com, then you can tell them to send your Litecoins to your address (which is also called your wallet). As Litecoin becomes more popular, you should eventually be able to buy Litecoins directly from Coinbase or another site. There is even talk about creating Litecoin ATMs!

Q: How much is a Litecoin worth?
A: At the time of this writing (1/29/14), one Litecoin is worth about $20. Ultimately, like anything else, it depends on supply and demand. As Litecoin becomes more popular and widely accepted, its value will probably rise.

Q: How do I get started using Litecoin?
A: Download the litecoin-qt software from litecoin.org, install the software and let it update (this may take a few days, because there's a lot of data to download), and then you are ready to send and receive money.

Q: Why should I use Litecoin? What are the advantages?
A: A big advantage is that it’s cheaper. PayPal charges fees of nearly 3%, and other services such as Western Union may charge fees in excess of 10%, depending on the payment. The transaction fee for Litecoin is 0.001 LTC, or approximately two cents. You can send a $5 payment or a $5,000,000 payment for the same price—two cents.

Q: How does Litecoin protect my privacy? Doesn’t my bank do that?
A: Sure, your bank protects your privacy from ordinary people, but not from the government or hackers. Litecoin is known as pseudo-anonymous. While a transaction can be backtraced to an originating address, there is no way to know who owns that address unless they tell you (or the post the address publically). Litecoin also uses “change addresses” which are a little complicated to fully describe here. Basically, every time you spend Litecoin, your wallet address changes. This makes you even more anonymous.

Q: I don’t buy drugs or hire hitmen, why do I care about privacy?
A: Imagine that you’re supposed to be on a diet, and one day you slip up and go to Pizza Hut. Let’s say your significant other happens to be looking at your online banking site or your credit card statement and sees a charge from Pizza Hut…not good! But let’s go a step further. Let’s say your health insurance company has been hit with a lot of claims for obesity-related illnesses. Let’s say that they access your Visa bill and see that charge from Pizza Hut and decide to raise your premiums because you have become a greater risk. Is this far-fetched? Probably. But it could happen. Several years ago I lost my credit card and called Visa to have it cancelled and reissued. In order to verify my identity, I was asked the usual questions such as social security number, mother’s maiden name, etc. But then I became really surprised when they started asking my height, weight, hair color, eye color, license plate number…turns out, they had pulled me up in the DMV database and were looking at my driver’s license right there on the screen!

Q: I’ve heard of Bitcoin; how is Litecoin different?
A: According to Charles Lee, the creator of Litecoin, it is supposed to simply be a “lite” version of Bitcoin. Litecoin retains all the key features of Bitcoin that make it so popular, but makes two big changes. First, transactions are processed four times as quickly as with Bitcoin, which means that there will ultimately be four times as many Litecoins in circulation. Secondly, Litecoin uses as different system for mining, called scrypt. The advantage of this is that Bitcoin and Litecoin miners don't compete directly with each other. It is more difficult to design specialized mining computers (called ASICs) for scrypt than Bitcoin's SHA256 algorithm.

Q: Isn’t Litecoin just another Bitcoin clone?
A: Yes and no. Litecoin offers the benefits of faster transactions and a mining algorithm that resists the centralization of mining power, which can be dangerous for the network. I personally think that Bitcoin will always be king, but that there is definitely room for a prince as well. Charles Lee himself often refers to Litecoin as “silver to Bitcoin’s gold.”

Q: Does Litecoin have intrinsic value? Isn’t it just pretend money?
A: What many people don't realize is that the U.S. dollar doesn't have any intrinsic value either. It is not backed by gold, like it used to be. It is backed "by the full faith and credit of the United States." It only has value because the vast majority of people believe it has value, and are willing to use it as a medium of exchange. If people ever changed their mind about the value of a dollar, for instance due to a major economic crisis, it could very quickly become worthless. That's not the only problem. The Federal Reserve has the power to literally create dollars out of thin air. They don't even have to fire up the printing presses--they can simply type a number into a computer, and suddenly their bank account has trillions more dollars in it. Nobody can do that with Litecoin, because the network won't allow it. I'll explain what I mean by "the network" a little later on.

Q: I don’t really care about inflation and things like that—I own gold so I’m protected. Why should I use Litecoin?
A: Even if you own an asset like gold, silver, or real estate that is resistant or immune to inflation, you’re still likely to find that it’s hard to spend that asset without converting it to dollars first. After all, you can hardly go to Wal-Mart and give them a gold coin in exchange for groceries! Of course, right now you can’t pay them with Litecoin either, but as more and more merchants jump on the wagon that may be possible in the future. Distance payments are also more easily solved. If I ship a gold bar to somebody for something I bought on the internet, I have to insure the package and wait for it to arrive. If I pay with Litecoins, the transaction is sent immediately and is “confirmed” approximately 15 minutes later. Rather than waiting days for my gold to arrive, the merchant gets my Litecoin almost instantly and can ship my item to me. Litecoin is also “fungible” which means that it’s easily exchanged, unlike real estate or some other stores of value.

Q: This is nice and all, but where’s the revolution? If I accept some privacy risk and I’m not worried about the government printing more money, why should I use Litecoins?
A: Litecoin cuts out the middleman, which saves money and increases privacy and security. Let’s say that you want to order something from David’s Vitamin Shoppe. Right now you would put all your items into a cart, go to the checkout screen, put in your credit card information, and hit submit. Your credit card info would be encrypted by your computer and sent to the merchant. The merchant would then forward it to a payment processor. The payment processor aggregates all the credit cards transactions from many merchants and then sends them on to the credit card company. The credit card company then communicates with the bank who issued the card, letting them know you’ve spent money. In the meantime, the credit card company verifies that you have available credit, and sends the money to the payment processor, who then forwards it to the merchant. Whew, that’s complicated! Even though your card information is supposed to be adequately encrypted every step of the way, you probably see news reports nearly every month about how somebody’s credit card information was stolen. Your financial information is just going through too many hands, and that’s not good. But up until now, that’s been the only choice you had. Now let’s say that David’s Vitamin Shoppe decides to start accepting Litecoin. The website lists a price, in Litecoins, and you go through the checkout process like you usually would. Once you’ve filled out all your shipping information, you’re taken to a page that displays a Litecoin address. You send Litecoins to that address, and in approximately 15 minutes the merchant will “confirm” that your transaction is valid, and he’ll send your vitamins to you. No payment processors, no middlemen, nobody snooping on your transactions, and virtually nonexistent fees.


Technical Stuff:
Q: What is the block chain?
A: It's basically a ledger of all the transactions that have ever occurred, including Litecoins being created (through mining) and being transferred (through spending). The block chain exists on the computer of everyone who uses the litecoin-qt software, which means there are hundreds of thousands of identical copies out there. When somebody transfers coins, the network checks numerous copies of this block chain and verifies that the person actually owns the coins he is trying to send.

Q: What is mining?
A: Mining is how the network processes transactions. In order to get people to dedicate their processing power to the network, one lucky miner is chosen to create the next block, and in doing so he receives a reward of 50 Litecoins. This lucky person isn't selected purely by chance. Litecoin uses a function called "proof of work" in order to give better odds to people with more computational power. The network asks all the miners to solve an extremely difficult math problem, and the first person to submit the correct answer is allowed to publish that block and collect the 50 Litecoins. (The network must verify that the published answer is correct, which is extremely easy to do.) So if there are hundreds of thousands of computers mining, how likely is it that yours will get the right answer and collect the reward? Not very. That's where mining pools come into play.

Q: What is a mining pool?
A: Most miners choose to "pool" their resources (and their luck!). Essentially, they direct their computers to follow the instructions of a certain server run by the pool. This server sends out little pieces of work to each miner, and once the miner solves that piece of work (called a "share"), they send it back to the pool. Eventually, one of the miners will solve the puzzle and solve the block, at which time the pool will receive 50 Litecoins as a reward, and will then distribute those Litecoins to all the workers who helped, based on how many valid shares they submitted.

Q: Why is mining good for the network?
A: Mining creates a fair way to reward new coins. The more computing power a miner has, the more likely they are to be rewarded. This is important because the network needs a large amount of computing power to secure it from attack. The network is designed to accept the first valid block that a majority of nodes (users) agree on. It doesn't matter where that block came from or who solved it. That means if somebody has a large enough amount of computing power, they could actually submit many blocks in a row. That's not necessarily a bad thing in itself, but what if the person running all that computing power decides to undermine the network? He could essentially take over the network by squeezing everybody else out. (The actual technical stuff is complicated, look up "51% attack" on Google for more information.) An attacker who was economically motivated could execute a double-spend attack. This involves spending money, and then using your computing power to rewrite history and convince the network that the first spending record was actually an error. This is possible because the network automatically accepts the longest block chain as the legitimate one, so if the attacker can add more blocks to his alternate-reality chain than the rest of the network can add to the "true" chain, the network will eventually recognize the attackers chain as the correct one and disregard the other. The problem gets even worse with a non-economically-motivated actor (such as a hostile government). Such an attacker could simply refuse to process transactions on the network, broadcasting gibberish instead. As long as he is able to submit more blocks to the network than all the legitimate miners can, then the network will continue to see his version of the block chain as the accurate one. This is why people get really concerned when one individual or pool approaches the 51% mark, because they could attack the network if they chose to do so. (This has happened with Feathercoin, for instance.) It's actually even possible to successfully attack the network, at least in the short-term, with as little as 40% control of the network, due to the random nature in which blocks are solved. Consequently, the more power miners contribute to the network, the harder it is for an attack to succeed.

Q: What is "the network" that you keep talking about?
A: The network is essentially in two parts: the nodes (individual users who run the Litecoin software on their computer) and the miners. As a miner is trying to solve the block and get his 50 Litecoin reward, he is also collecting a list of all the transactions that are being sent across the network. Once he solves the block, he bundles all the transactions together, along with the correct "answer" that he's calculated, and sends the completed block out on the network. At this point, all of the nodes pick up that block, verify that it is legitimate (that he actually solved the "problem") and add it to the block chain that they store on their computer. Once enough nodes verify that the block is legitimate, it is universally accepted by the network. So essentially the network consists of miners who collect transactions, try to solve a puzzle, and upon successfully solving the puzzle, broadcast the newly-created block to the nodes. The nodes then verify that everything is copacetic, and accept the new block as legitimate.

Q: Why can't someone just broadcast fake blocks.
A: The Litecoin software is programmed to only accept blocks it can prove as legitimate. Since all the nodes run the same software, you can't slip a "fake" block past it.


Additional:
Q: What is cryptography
A: Digitally scrambling the data so only the intended recipient can read it.

Q: What is a block chain
A: The blockchain is the ledger that publicly records all transactions in the network. Every transaction that has ever taken place is recorded there. Full explanation of blockchain and mining: https://litecointalk.org/index.php?topic=827.0

Q: What is Scrypt
A: Scrypt is the way data can be encrypted. Bitcoin uses SHA256 (just a different way).

Q: But isn’t money backed by gold
A: Fiat currencies: USD; EUR; GPB; YEN; etc. are not backed by anything! This is the very definition of "fiat currency." Seriously. A dollar is only worth a dollar only because people believe it's worth a dollar; i.e. faith.

Q: How many people are using litecoins
A: Tens of thousands. More and more everyday!

Q: How can a computer generate money while reading a scrypt
A: Mining is the process of guessing the correct "hash" that will encrypt the next block in the blockchain. Scrypt is the way this process is encrypted. More about the blockchain and mining: https://litecointalk.org/index.php?topic=827.0

Q: Who has the coins and gives them out
A: Coins are distributed via mining. Guessing the correct hash is a difficult process. When you successfully do so, you are rewarded by the Litecoin network with a reward of a certain amount of coins called a block reward. All coins in existence are generated via mining.

Q: How much could I earn from mining
A: Mining could be a full time job or a side hobby. You can make a living at it, but it takes a tremendous amount of work and the equipment costs can be very high. Please remember: an individual does not need to mine to receive and spend Litecoins.

Q: How much is a coin worth
A: Just like all money, Litecoin's purchasing power goes up or down over time. Unlike fiat currencies, the track record has generally been up. Currency exchanges have the most up-to-date info.

Q: How could this be used in everyday life
A: Very easily. The Android wallet app allows you to load some coins on your phone to take with you. Transactions could be as easy as scanning a QR code.

Q: What information do you have to give Litecoin to get started
A: To get started: you need a wallet. Next get some coins by mining, selling thing, working for them... the same way you'd earn any other kind of money.

Q: Do you have to pay tax on it
A: You have to check with your local laws. In most jurisdictions, if you make an income, you are probably going to pay a tax somewhere.

Q: Where can I go if I need help what support is there
A: Come to these forums and post a question in the New Users section. You can also join IRC chat on Freenode in the #litecoin channel.

Q: What do I do if my coins go missing
A: The freedom that Litecoin gives you is also a weakness. You are responsible for securing your own coins. Accidental deletion of certain wallet files on your computer could mean the deletion of your coins! If your wallet is hacked, your coins can be hacked. Make backups and secure your wallet properly. Transactions are irreversible--if you send coins to someone by mistake (or they cheated you) the only way to get them back is if they choose to send them back.

Q: Will it slow my computer down
A: The Litecoin wallet is a program that uses RAM, CPU, and disk space like any other software program. After the initial sync, the system resources used are hardly noticeable on up-to-date computers. However, mining is a separate process that is intended to completely devote your computer or device to solving the correct hash.


FAQ Authors: David Dinkins and Eric Mihalik.
« Last Edit: May 12, 2014, 09:22:34 PM by Carnth »