What is Litecoin? In October 2011, a former Google employee released a new digital currency. This so-called altcoin had to form an alternative to the existing bitcoin (at that time the only cryptocurrency). The new currency had to be four times as fast as bitcoin and four times as many coins had to be put into circulation.
We know this cryptocurrency under the name litecoin. The project aims to be a digital form of money. Just like the bitcoin Litecoin uses blockchain technology.
What is Litecoin and how does it work?
What is Litecoin?
According to the official website: “Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world.” If you are familiar with bitcoin as a digital currency, the above definition may sound similar. That's because the Litecoin project is based on Bitcoin's open source codebase, but with a few technological differences. Litecoin (LTC for short) was never intended to replace bitcoin, but to complement it, just as gold and silver complement each other.
How does Litecoin work?
The great thing about open source software projects like Bitcoin is that anyone in the world can supplement the original codebase with new features they want. The value assigned to each digital currency is determined by the community of users who decide to hold and use it. While Bitcoin is currently the largest digital currency by market capitalization, it doesn't mean there isn't room for other digital currencies to coexist or serve a specific use case or community.
The founder of Litecoin, Charlie Lee, wanted to change Bitcoin's rules in ways he saw fit. In particular, Charlie wanted to reduce the amount of time it takes to confirm a new transaction as well as reduce the Bitcoin mining algorithm (the way new coins are generated) to ensure everyone could participate in the network. Bitcoin's transaction confirmation time is 10 minutes, while Litecoin is only 2,5 minutes. Litecoin can process a higher number of transactions due to the faster transaction confirmation time.
Bitcoin mining uses the algorithm SHA-256 which is processor intensive while Litecoin mining uses scrypt which is more memory intensive. Early on, bitcoins could be mined using regular computers (CPUs) and later more powerful gaming computers (GPUs). Due to the increase in mining difficulty, the only way to mine profitably is
Due to an increase in mining difficulty, it is only possible to mine profitably with Application Specific Integrated Circuit (ASIC) miners. ASICs are expensive machines built specifically for mining and cannot be used for anything else. Since only a few people have the resources to buy and use ASICs, Charlie did not want Litecoin mining to be dominated by ASICs. So he created Litecoin with a more memory intensive algorithm to make mining litecoins less efficient for ASICs and accessible to everyone.
Is litecoin interesting?
An important aspect of Litecoin is that its creator, Charlie Lee, is publicly known and actively participates in the cryptocurrency community. Bitcoin's anonymous creator, Satoshi Nakamoto, who has since disappeared, is unavailable to provide guidance and leadership on Bitcoin's technical direction. Having the founder available is important when it comes to helping others understand and find out about LTC's vision.
Charlie Lee often brings the cryptocurrencies community together and is partly responsible for the integration of Segregated Witness (SegWit). The technical improvement was first added to Litecoin and was considered an example case for Bitcoin. SegWit is also paving the way for other technical advancements such as Lightning Networks (LN), where transactions can quickly alternate blockchain, meaning not all transactions have to go through the ledger. This upgrade applies to both Bitcoin and Litecoin.
Charlie wrote a letter to the Litecoin mining community to convince them to support SegWit. The advantages of decentralized currencies is that the creator cannot implement things alone. However, there are benefits to having a vocal leader to guide technological advancement within a community, especially at a time when it is clear that a change is needed or that there is a major difference of opinion. The exciting part is that Litecoin could serve as a way for Bitcoin to see how these changes go.