Litecoin (LTC)

What Is Litecoin?

Litecoin is a blockchain project that is a fork of the older blockchain protocol – Bitcoin. It functions as an open-source peer-to-peer (P2P) global payment network.

With its focus on faster transaction processing, a different hashing algorithm, and a larger supply of coins compared to Bitcoin, Litecoin offers an alternative for those seeking quicker and more affordable transactions. 

The blend of technical distinctions and innovative features has solidified Litecoin’s position as a significant player in the cryptocurrency landscape.

However, its ASIC-resistant setup was short-lived as a Litecoin ASIC miner was launched in 2016.

Who’s Behind Litecoin?

Litecoin was created on 13 October 2011 by a computer science graduate of the Massachusetts Institute of Technology (MIT) and former Google engineer Charlie Lee. 

He eventually took up a position with Coinbase in 2013 as its Director of Engineering. 

In 2017, Lee sold off his entire stash of LTC, explaining that his decision was meant to entirely reduce his influence on the project. That same year, Lee left Coinbase and has been heading the Litecoin Foundation – a non-profit organization in Singapore – ever since.

What is LTC?

Litecoin is powered by its native LTC coin. At its launch, about 150 LTCs were pre-mined in the genesis block – the first transaction recorded on a blockchain. Two other blocks were mined to validate their authenticity. Since then, all new LTC assets are created through the mining process. 

The cryptocurrency is available for trading in all top cryptocurrency exchanges worldwide. 

Key Features: What Does Litecoin Aim to Solve? 

As Bitcoin’s popularity grew in its formative years, more technology firms and affluent individuals began to mine its native cryptocurrency – BTC. This led to an increase in mining difficulty due to a large trove of mining nodes.

To sustain the mining process, application-specific integrated circuits (ASIC) miners were created to meet the demands of the growing hash difficulties of the Bitcoin network. The downside was that ASIC miners are quite pricey, even though they are efficient, with some selling for as high as $5,000. This cut out several small-scale miners with limited funds, making it unlucrative for them.

Litecoin’s initial hypothesis was to serve as the lite version of Bitcoin, enabling users to utilize the central processing units (CPUs) of their personal computers for transaction validation. This idea aimed to break the growing centralized monopoly within the Bitcoin network by discouraging ASIC mining.

Hence, when the blockchain was launched, it used a modified version of the Scrypt hashing algorithm. This change involved discarding the SHA-256 algorithm that Bitcoin relies on for cryptographic continuity, even though both networks operate on the same proof-of-work (PoW) mechanism.

As such, while Litecoin is a fork of the Bitcoin network, it is a unique project addressing unique concerns. Its major areas of focus are:

• Speed
• Scalability
• Decentralization

4X Faster Than Bitcoin

Bitcoin employs the proof-of-work (PoW) consensus algorithm and the high cryptographic SHA-256 for finding hash value. This approach ensures a thorough validation of all transactions before their inclusion in the blockchain. However, a drawback of this system is that it makes Bitcoin excruciatingly slow, as it records only 5 TPS. 

Bitcoin has a transaction finality that starts from 10 minutes to as much as an hour. 

To address this issue, Litecoin runs on the same PoW principle where miners compete to solve cryptographic puzzles. However, it uses a modified Scrypt hashing algorithm which is lightning-fast compared to SHA-256. This sees it boasting over 54 TPS with a transaction finality of 2.5 minutes. 

This is four times faster than the Bitcoin network and is commendable for a PoW system. 

Addresses Key Issue Around Scalability

Using a modified hashing algorithm like Tenebrix’s Scrypt instead of SHA-256 makes it easy for Litecoin to address the key concern of scalability.

Now, users can transfer value for a quarter of the time it usually takes on the Bitcoin network.

More Decentralized 

Litecoin’s choice of the Scrypt hashing algorithm also makes it more decentralized. This is because the hashing algorithm makes validating transactions and earning LTC easier. As a result, more users can engage in the Litecoin mining process using standard central processing units (CPUs) and graphics processing units (GPUs). 

This makes Litecoin mining more decentralized than Bitcoin, as mining power is not exclusive to big corporations with ASIC miners. This way, anyone can participate in Litecoin mining without the difficulty of becoming unattainable for small-scale miners. 

What Makes Litecoin Different From Bitcoin

Litecoin and Bitcoin share numerous similarities. To begin with, both were designed to enable trustless and permissionless P2P transactions. 

However, there are also underlying operational frameworks where it differs from the top crypto protocol. 

The Bottom Line

Litecoin is the lite version of the Bitcoin network. The peer-to-peer network makes it easy for anyone to transfer value in a permissionless manner four times faster than they would on the older blockchain.

Moreso, it has a larger total supply of assets but hinges its main idea on the PoW system. The difference lies in the Scrypt hashing algorithm it employs, which makes it a scalable distributed ledger technology (DLT) solution. 

While LTC is one of the top cryptocurrencies to watch in terms of trading volume, it does not have the same pull BTC enjoys. Nonetheless, the asset may be a potentially good long-term investment.