In 2009, Bitcoin was created by Satoshi Nakamoto, an anonymous computer scientist who wanted to create a decentralized form of digital gold, the ultimate store of value. A few years later, Charlie Lee forked Litecoin off of Bitcoin attempting to create a form of digital silver. While the two are somewhat similar, there are several key differences such as the mining algorithm used, block time and supply.
While Lightning Network is often used with Bitcoin, it is still gaining traction with Litecoin. On a Lightning Network, users can send instant, near free transactions to almost anyone. This happens through a branching web effect that creates a massive network of connected nodes. As long as there is a connection between one node and another the nodes can transact. Lightning Network is a fantastic solution to block size issues as it allows more efficient scaling.
Shortly after Bitcoin, Litecoin added Segwit (segregated witness), a way of reducing the amount of memory a transaction uses. The cost of a cryptocurrency transaction depends on two major factors – the memory pool size, and the size of the transaction.
One of the largest contributors to a transaction size is the digital signature. By implementing Segwit, the signature can be removed from the main transaction, causing the size of the transaction to decrease, ultimately making Litecoin’s blocks bigger without changing the block size limit.
Another feature of Litecoin is atomic swaps, a process in which users can transact different cryptocurrencies without a 3rd party. Several Litecoin atomic swaps are already setup, such as:
- Litecoin ←→ Bitcoin
- Litecoin ←→ Decred
- Litecoin ←→ Vertcoin.
Currently, exchanges provide this exchanging service and take a fee for their services. One of the most attractive concepts of cryptocurrency is the removal of third parties, which is why atomic swaps are such a convenient feature.
Recent Price Movement
Litecoin is currently selling around $175 and is #6 in terms of market capitalization. Litecoin’s all-time high occurred in 2017, when it was selling for almost $370.
While Litecoin was close to its all-time high, Litecoin creator Charlie Lee decided to publicly announce he was selling all of his Litecoin to remain impartial to the project. This was a highly controversial move, and could have contributed to Litecoin’s price decrease.
Litecoin’s Consensus Algorithm
Litecoin uses proof of work, similar to Bitcoin. In proof of work, the network requires miners to provide some sort of work or computation. This helps reduce spam as it can be costly in terms of electricity and computing power for an attacker to harm the network.
Litecoin uses the Scrypt algorithm opposed to Bitcoin’s SHA256. In Scrypt the hash function is much more memory intensive. In addition to rapidly generating random numbers, the numbers need to be stored in RAM, causing the amount of memory needed to increase. This results in a hash function that is more ASIC resistant than Bitcoin’s SHA256. ASIC stands for Application Specific Integrated Circuit and they are much more effective at mining cryptocurrency than any GPU or CPU. At first, Litecoin was successful in being ASIC resistant but as time went on technology caught on and Litecoin ASICs were created.
At 2.5 minutes, Litecoin has much faster block times than Bitcoin. Faster block times are convenient as they allow you to receive money faster. Every block, 25 Litecoin are created and given to the miners who successfully mined it. This block reward halves around every four years, leading to a max supply of 84 million Litecoin.
One of the main contributors to the Litecoin project is Charlie Lee. Lee spent some time at Google before leaving to start Litecoin. Litecoin is entirely open source, so anyone can contribute to the project. Top contributors include GitHub users Laanwj and Sipa. View the entire projects code here.
Unlike most cryptocurrencies, Litecoin was not distributed through an ICO or premine. Similar to Bitcoin, all Litecoin distributed were distributed fairly, meaning no person receives founders rewards or vested tokens. Anyone who decides to mine Litecoin can obtain it in a fair and clear mining schedule.
How to Buy Litecoin
Litecoin is available on several cryptocurrency exchanges, including fiat exchanges such as Coinbase. Fiat exchanges allow you to purchase cryptocurrency directly with your dollars, making them much more convenient options. Litecoin is also able to be traded on cryptocurrency exchanges like Binance, Bittrex and Bitfinex.
How to Store Litecoin
Litecoin is one of the most popular cryptocurrencies and can be safely secured on a variety of wallets. One of the better options is the Trezor or Ledger Nano S as it supports multiple currencies and can be set up completely offline.
There are also several free software wallet options, such as the official Litecoin core wallet.
The Litecoin community is pretty active on Twitter and Reddit. They also have a forum similar to Bitcoin talk called Litecoin talk. Charlie Lee is also very active on social media and has some pretty funny and interesting content.
While Litecoin is similar to Bitcoin, it is an interesting alternative that still has a lot of room to grow. Through the use of Atomic Swaps, Lightning Network and Segwit, Litecoin can support an enormous amount of transactions in an efficient way.