With the release of bitcoin in 2009, there has been a flood of cryptocurrencies on the internet as of now. Almost every other day a new altcoin arises, or an old one dies. Although bitcoin still bags the ‘de facto standard’ of cryptocurrencies, worthy participants have emerged and quickly garnered much prominence.
Meet Litecoin. He’s bitcoin’s brother, and definitely pleased to make your acquaintance.
From the several replicas that evolved and forked from the original open- source Bitcoin coding, Litecoin’s main intention was to be the ‘silver’ to bitcoin’s ‘gold.’
Litecoin was officially launched in 2011 by creator Charles Lee, who, unlike the mysterious Satoshi Nakamoto, is well known by the tech community as being a former Google engineer, and quite active on social media.
As the name suggests, Litecoin is used for much ‘lighter’ transactions involving everyday purposes, such as services of good. On the other hand, bitcoin is reserved as a store of value for longer terms. But, just like Bitcoin, Litecoin is a peer-to-peer virtual currency intended to be used for a global payment network. This generally means that one can transact directly instead of involving third party services, such as banks. Hence, instead of financial institutes processing payments, a network is responsible for carrying it out in a secure, inexpensive and efficient manner.
So, what sets Litecoin apart?
Well, for one, Litecoin’s designed to much faster. Where Bitcoin processes transactions in 10 minutes, Litecoin is designed to do so in just 2.5 minutes. This means Litecoin can not only validate transactions more quickly, but also has the capability to process a higher number of them, including charging low transaction fees!
Since the time between block creation is very small, it also ensures a greater variance of rewards to miners. Litecoin has also increased the number of coins that can be mined; compared to bitcoin’s supply of 21 million, Litecoin’s supply will be exhausted after a total of 84 million coins in circulation. This gives a psychological upper hand since people may prefer spending whole units of coins rather than in fractions.
Another significant difference arises with the ‘hashing algorithm’ (which is basically a method of encrypting data) that Litecoin utilizes, as well as the number of coins distributed to miners.
Litecoin uses a hashing algorithm called Scrypt which is a more memory intensive process, and so requires hardware that is widely available, thereby avoiding the concentration and influence of specific miners. This could be a reason why the altcoin still remains in popular use. Additionally, Litecoin awards miners with 25 new Litecoins per block.
In contrast to this, Bitcoin is built on the SHA-256 hashing algorithm (Secure Hash Algorithm 256) which is more complex, and therefore, involves greater pools of processing power instead. Miners receive about 12.5 bitcoins for each block verified, with the most powerful hashers getting the lion’s share.
Litecoin also has the advantage to be immune to flood attacks (spam transactions clogging the network) in an utterly simple manner: Charging the sender a small output fee. This discourages attackers from spamming the system. Litecoin also offers a cross- chain currency exchanges through its Atomic Swap feature, hence Alice can easily trade Bob’s bitcoin for Litecoin without the need of using exchanges or paying certain fees.
Over time, Litecoin is still implementing improvements to the network to fix glitches; consider the integration and adoption of features such as SegWit (increases block space) and Lightning Network (allows for faster transactions to take place).
However, the reduced block creation time does lead to a drain on the system through the formation of ‘orphan blocks.’ There have been instances where two miners comes up with the same block that could be added to the blockchain. The network then decides which block to incorporate, leaving the other to become orphaned, i.e. blocks not part of the main chain.
Although, Litecoin can’t hold a candle to bitcoin’s market capitalization, it still ranks amongst the top five cryptocurrencies of 2018. The reasons are simple: Ever since cryptos took the world by storm, altcoins are becoming more and more mainstream. Also, Coinbase, a popular cryptocurrency exchange, enlisted Litecoin making it easier for people to purchase it.
Since Litecoin complements Bitcoin, it is well integrated into the crypto community and thus, has a growing support from the public (both developers and merchants). It especially has a large fan base when it comes to online gaming platforms running on blockchains. However, a more widespread adoption of Litecoin as a universal tool for transactions may finally unlock its potential to shape the future of commerce.