What is Litecoin (LTC)?
Litecoin —— An Open Source Peer-To-Peer Digital Currency
- Litecoin (LTC) is a peer-to-peer cryptocurrency that aims to enable fast and low-cost payments to anyone in the world.
- The Litecoin Project was conceived and created by Charles Lee, a former Coinbase employee, with the support of multiple members in the Bitcoin community. It was launched on October 13th 2011, and has introduced a number of modifications based on the original Bitcoin protocol.
- The most prominent of these is Litecoin’s Proof-of-Work consensus: its algorithm is based on Scrypt, instead of SHA-256d. Furthermore, Litecoin has a target block time of 2.5 minutes, and a total supply of 84 million.
- In May 2017, Litecoin upgraded the Litecoin main blockchain in the form of Segregated Witness (SegWit) and Lightning Network to make LTC transactions faster.
- In order to solve the growing security and privacy issues, the Litecoin Foundation also announced a partnership with the BEAM team to integrate the MimbleWimble protocol, an additional encryption function based on confidential transactions.
Litecoin Key Metrics
Litecoin (LTC) is a cryptocurrency that was designed to provide fast, secure and low-cost payments by leveraging the unique properties of blockchain technology. The cryptocurrency was created by Charlie Lee, a former Google employee, who intended Litecoin to be a "lite version of Bitcoin," in that it features many of the same properties as Bitcoin—albeit lighter in weight.
The cryptocurrency was created based on the Bitcoin (BTC) protocol, but it differs in terms of the hashing algorithm used, hard cap, block transaction times and a few other factors. Litecoin has a block time of just 2.5 minutes and extremely low transaction fees, making it suitable for micro-transactions and point-of-sale payments.
Litecoin (LTC) used Scrypt Proof-of-Work algorithm. The project aims to provide an alternative to Bitcoin by making modifications to the original Bitcoin Protocol.
A Proof-of-Work algorithm creates a computational challenge to be solved by the network of computers in order to verify a block of transactions. The Scrypt algorithm was developed in 2009 by Colin Percival (Tarsnap Inc.). In contrast with Bitcoin’s SHA-256d, it serves to inhibit hardware scalability by requiring a significant amount of memory when performing its calculations.
The maximum supply of Litecoin is capped at 84 million, and it is equipped with a deflation mechanism. There are currently 63.17 million Litecoins (about 75%) in circulation, and it is expected that the total supply of Litecoins will be mined around 2142. The established transparent money supply and issuance plan is critical to determining the investability of digital currencies.
On August 5, 2019, Litecoin block rewards were halved for the second time, from 25LTC per block to 12.5LTC.
Litecoin Project Team
Litecoin was founded by Charlie Lee, an early cryptocurrency adopter and a name held in high regard in the cryptocurrency industry.
Charlie Lee, also known as “Chocobo,” is an early Bitcoin miner and computer scientist, who was a former software engineer for Google. In addition, Charlie Lee held the role of director of engineering at Coinbase between 2015 and 2017 before moving on to other ventures.
Today, Charlie Lee is an outspoken advocate of cryptocurrencies and is the managing director of the Litecoin Foundation—a non-profit organization that works alongside the Litecoin Core Development team to help advance Litecoin.
Besides Lee, the Litecoin Foundation also includes three other individuals on the board of directors: Xinxi Wang, Alan Austin and Zing Yang — all of which are accomplished in their own right.
The difference between Litecoin and Bitcoin
Litecoin and Bitcoin are peer-to-peer currencies supported by their respective blockchain protocols. Both use Proof of Work (PoW) consensus algorithms to verify transactions. However, the two protocols also differ in terms of algorithm architecture:
- Bitcoin SHA-256d algorithm
Bitcoin uses the SHA-256d algorithm, which was created by the National Security Agency in 2002. The SHA-256d algorithm is a processor-intensive algorithm and requires less memory. It is an indispensable part of the mining process and the creation of Bitcoin addresses.
Bitcoin mining is computationally expensive and requires custom hardware equipment called ASICs (application-specific integrated circuits). In terms of performance and efficiency, ASICs are far superior to CPUs and GPUs in personal computers (PCs). However, they are relatively more expensive. With the Bitcoin block reward halving or the third halving in May 2020, there is no increase in the offsetting effect of the Bitcoin price, and the profit margin of mining may drop significantly.
- Litecoin Scrypt algorithm
Litecoin uses the updated Scrypt algorithm, which was created in 2009 by Colin Percival, a computer scientist known for creating the encrypted cloud storage service Tarsnap. The Scrypt algorithm is memory intensive and requires less processing power. By allowing the use of CPU or GPU to complete mining, Scrypt effectively eliminates the need for ASICs, which are cheaper and easier to access than ASICs.
In the past few years, as miners have been facing increasingly fierce competition for block rewards, Litecoin-specific ASICs have been introduced. Although entities without ASIC capabilities can still mine LTC, the profitability of this type of mining is lower than that of using specialized machines.
Litecoin's potential advantages over Bitcoin
The difference in the PoW algorithm has led to three potential advantages for Litecoin to face Bitcoin over on-chain transactions:
- Faster transaction speed: Litecoin's block generation speed is 2.5 minutes, while Bitcoin takes 10 minutes. Litecoin achieves faster transaction speed and settlement time.
- Lower transaction costs: Litecoin's transaction costs are also lower than Bitcoin. As of August 31, 2019, the average transaction cost of LTC in U.S. dollars is $0.03 and BTC is $0.68. In addition, compared with the handling fees incurred by using or accepting credit card payments as individuals or merchants, the transaction fees paid by Litecoin are much lower.
- Lower barriers to entry for miners: People with restricted equipment are more likely to enter Litecoin mining. In terms of electricity costs and computing power, the cost of confirming LTC blocks is much lower than that of Bitcoin. Therefore, Litecoin mining is more attractive to potential miners because it requires less processing power and lower operating costs.
In addition, in order to solve the growing security and privacy issues, the Litecoin Foundation also announced a partnership with the BEAM team to integrate the MimbleWimble protocol, an additional encryption function based on confidential transactions.