Litecoin is a fully decentralized, open-source digital currency that originally sought to improve on Bitcoin. Like Bitcoin, it is highly attractive for users who want instant, near zero costs payments all over the world.
The Litecoin blockchain enjoys a robust industry, trading volume and liquidity, and is considered a proven payment medium and a counterpart to Bitcoin. In fact, the coin soared to a whopping high of $370 in December of 2017, a year-on-year increase of over 4,500% as listed on CoinMarketCap.
Among most online exchanges, Litecoin is a major contender, offering great liquidity and a relatively easy cash exchange process. The coin’s popularity is so widespread that Litecoin debit cards are available alongside Bitcoin debit cards.
Acting as “digital silver” (as opposed to Bitcoin’s “digital gold” stance), Litecoin is deemed a suitable asset to own for a diversified crypto portfolio. Financial advisors worth their salt will always encourage such a strategy, as risk mitigation is a primary concern in a volatile market.
Since the Litecoin network would never allow more than 84 million Litecoins to be produced, the cryptocurrency is a non-inflationary coin, similar to Bitcoin. This also ensures scarcity and the ability to store value, similar to precious metals like Gold or Silver. In fact, Litecoin’s goal is to serve as “digital silver”.
Its creation triggered an eruption of altcoins with various technological features, some offering a fair launch, while others arriving on the market with some pre-mining from the development team.
Who invented Litecoin?
A former Google employee by the name of Charlie Lee created Litecoin back in October of 2011. After his brief stay at GitHub, Lee moved to work with Coinbase between 2013 and 2017, after which he chose to go back to his original creation and continue development on Litecoin as it rose in popularity.
How is Litecoin different to Bitcoin?
When it comes to differences between the two, it largely comes down to the mining approach, which includes different algorithms that lay out working constraints in the network. Users are able to notice the impact of the different protocols mainly on the speed of the transactions, for which current figures show Litecoin to be superior.
The Scrypt algorithm
In attempting to address concerns of centralisation in relation to the trifecta Bitcoin phenomenon, where developers, miners and venture capitalists represent three major stake holding communities, Litecoin mining is technically differently.
While the hashing process for confirming transactions on the Bitcoin network is an SHA 256 algorithm, Litecoin uses what is called the “Scrypt” algorithm, which was originally based on the same code but still constituted an entirely separate blockchain.
Back in 2009, Bitcoin transactions could take around 10 minutes to complete, and Litecoin’s algorithm sought to solve that. In fact, according to data from BitInfoCharts.com, Litecoin takes 2.5 minutes to confirm a transaction. Another problem addressed by Litecoin was the mining process, which involves using computer GPUs (graphics processing unit) to solve complex cryptographic algorithms, and in so doing creating new blocks on the Blockchain.
Once Bitcoin began being traded for fiat money, mining quickly transformed into an arms race as miners bought computer parts in their thousands to beat the competition. By contrast, Litecoin’s algorithm was designed to mitigate this inflationary response, such that simply throwing more processing power in the mix have much of an effect.
While Bitcoin circuits use ASICs (Application Specific Integrated Circuits) systems focusing on raw GPU power, the Scrypt algorithm is more memory-intensive. More specifically, Scrypt is a “memory hard problem”. This means that users can make use of CPUs and GPUs more effectively in solving memory intensive problems.
To give you one point of comparison, the Bitcoin network currently has over 7m Terra hashes per second whereas Litecoin is a mere 23 Terra hashes.
As with its Bitcoin counterpart, Litecoin also implemented the SegWit update into their protocol earlier last year. Essentially, this splits out the witness (signatory data) from the rest of the transaction data, making the transaction speed faster.
This implementation was also backwards compatible, which is to say that previous blocks already written on the chain were still valid. Of course, the next highly anticipated update is the Lightning Network, which promises instant payments, scalability, lower costs and cross-blockchain support. This project was initially proposed by the Bitcoin team but has now been taken up by the Litecoin developers as well.
The Bottom Line
While Bitcoin and Litecoin may be the gold and silver of the cryptocurrency space today, history has shown that the status quo in this dynamic and changing sector can adjust significantly in just a couple of months. As such, it remains to be seen whether the cryptocurrencies with which we have become familiar will retain their dominance in the months and years to come.
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