Blockchains 101: Litecoin

By TradingBull | TradingBull_articles | 5 Mar 2021

Bitcoin’s Light Brother

Introduction:

Litecoin (Ticker: LTC) was developed in 2011 by Charlie Lee, a former Google employee. Lee’s initial motivation and purpose was to create a “lighter” version of Bitcoin. Because bitcoin was the starting place of Lee's innovation, there are several similarities between the two cryptocurrencies. Litecoin is based on the Bitcoin protocol and also validates transactions through the process of 'mining' (Proof of Work).

The Litecoin network is exclusively dedicated to the support of the LTC peer-to-peer cryptocurrency and is an open-source software project released under the MIT/X11 license.

Litecoin is often referred to as “Digital Silver” in a similar way to how bitcoin is often considered as “Digital Gold.”

Description:

Litecoin is an early spinoff, or ‘fork’ from the Bitcoin protocol. Though Bitcoin initially served as the starting place for Litecoin, there are notable changes that have made Litecoin a unique and valuable cryptocurrency in its own right.

Litecoin has been modified and upgraded to include some technical improvements beyond bitcoin. One such differentiator is Litecoin’s lower blocktime. Blocks of transaction data are mined every 2.5 minutes on the Litecoin blockchain, as compared with bitcoin’s 10 minute blocktime. This makes Litecoin a faster payment method than BTC, and therefore, more functional as a true currency rather than just a store of value. Litecoin also has a lighter GUI as well as a higher hard cap on total supply. While there will only ever be 21 million bitcoin in circulation, this has been increased to 84 million for the Litecoing blockchain. Finally, Bitcoin uses a scrypt cryptographic function which requires more memory than Bitcoin’s SHA-256.

Litecoin has been the first to successfully implement the Lightning Network in 2017 by transferring a micro-transaction from Zurich to San Francisco in under one second.

Privacy:

Litecoin is in the process of integrating Mimblewimble, a privacy-focused protocol aiming to improve blockchain privacy, scalability, and fungibility. It achieves this by combining transactions in a CoinJoinas well as by obscuring transactions to any third party monitoring the network.

Mining:

The Proof of Work consensus algorithm of Litecoin is very similar to the one first utilized by Bitcoin. However, the Scrypt algorithm allows GPU mining of Litecoin, something that is not possible with Bitcoin, which requires specialized hardware (ASICS). The initial block reward of Litecoin was 50 LTC per block. It halved for the first time in 2015 to 25 LTC per block and a second in August 2019 to 12.5 LTC per block.

Storage and Wallets:

As with Bitcoin, there are plenty of ways to store Litecoin. The safest method is to store it in a cold wallet (offline wallets such as paper wallet or hardware wallets) or hot wallet (such as mobile or desktop wallets). Asset holders can also use a custody service that will store their tokens on a centrally managed cold wallet/vault (but thus limiting the benefit of decentralization by involving a third party).

Keeping cryptocurrencies on centralized crypto exchanges and other selling platforms is considered the riskiest option since the large volumes of bitcoin stored may attract hackers’ interest.

Official LTC core wallet: https://litecoin.com/en/individuals/wallet/desktop/litecoin-core

Technical specificities:

Type: Native Coin

Total Supply: 84,000,000

Subunit: 10–9 (Litoshi)

Consensus: Proof of Work (PoW)

Encryption algorithm: Script

Privacy: Pseudonymous (Low)

Smart contracts: no

Blocktime: 2.5 minutes

Coding languages: C++ / Go (Java, Python)

Open source: Yes