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What is Litecoin (LTC)?
Litecoin (LTC) is an alternative cryptocurrency Created in October 2011 by Charles “Charlie” Lee, a former Google engineer. Litecoin was adapted from the open source code of Bitcoin but with various modifications. Like Bitcoin, Litecoin is based on an open source global payment network that is not controlled by any central authority. Litecoin differs from Bitcoin on things like a faster block generation rate and the use of Scrypt as a proof-of-work scheme.
It is considered one of the first altcoinsderived from the original open source code of Bitcoin.
Initially, it was a strong competitor to Bitcoin. However, as the cryptocurrency market has become much more saturated and competitive in recent years with new offerings, Litecoin’s popularity has waned somewhat.
Litecoin has always been seen as a reaction to Bitcoin. In fact, when Lee announced the debut of Litecoin on a popular Bitcoin forum, he called it the “light version of Bitcoin.” For this reason, Litecoin has many of the same features as Bitcoin, while also adapting and changing some other aspects that the development team felt could be improved.
As of November 2021, 1 LTC is worth around $215, making it the 14th largest crypto with a market cap of just under $15 billion.
key takeaways
- Litecoin is one of the first altcoins developed by former Google engineer Charlie Lee in 2011.
- It was once called the silver of Bitcoin’s gold, and at its peak it was the third largest cryptocurrency by market capitalization.
- Because its structure is similar to that of Bitcoin, it has been used as a testnet or proving ground for improvements that were later applied to Bitcoin.
Understanding Litecoin (LTC)
Like other decentralized cryptocurrencies, Litecoin is not issued by a government, which has historically been the only entity that society trusts to issue money. Instead of being regulated by a central bank and coming off the press at the Bureau of Engraving and Printing, Litecoins are created through an elaborate cryptocurrency procedure called mining, which involves processing a list of Litecoin transactions.
Litecoin was developed by charlie leea Massachusetts Institute of Technology (MIT) graduate and former Google engineer who became interested in Bitcoin in 2011. According to Lee, “In October 2011, I was messing around with the Bitcoin codebase, and I guess the lack of it was that I was just trying to create… a Bitcoin fork. It was mostly a fun side project.”
Like Bitcoin, the maximum number of LTC is fixed. There will never be more than 84 million Litecoins in circulation. Every 2.5 minutes, the Litecoin network generates a new block–a ledger entry of recent Litecoin transactions worldwide. The mining software verifies the block and makes it visible to any system participant (called a miner) who wants to see it. Once verified by a miner, the next block enters the chain, which is a record of every Litecoin transaction ever made.
There are incentives to mine Litecoin: the first miner to successfully verify a block is rewarded with 12.5 Litecoins. As with Bitcoin, the amount of Litecoins awarded for such a task reduces over time. In August 2019, it was halved, and the halving will continue at regular intervals until 84,000,000 Litecoin is mined. The Litecoin Foundation estimates that it will be around 2142 when the maximum of 84 million Litecoins will be reached.
Scrypt proof-of-work algorithm
Bitcoin, Litecoin and many other cryptocurrencies use the work test (PoW) to secure your networks. Basically, PoW requires a party to prove to all other participating parties in the network that a required amount of computational effort has been expended. Unlike Bitcoin, which uses the SHA-256 PoW hash algorithm, Litecoin uses the Scrypt PoW algorithm, which consumes less resources.
Scrypt is a password-based key derivation function. According to Tarsnip, “The scrypt key derivation feature was originally developed for use in the Tarsnap online backup system and is designed to be much more secure against hardware brute force attacks than alternative features such as PBKDF2 or bcrypt.”
Scrypt was developed by Lee specifically to hinder large-scale custom hardware attacks against the currency. Bitcoin’s SHA-256 algorithm does not require much random access memory (RAM) as an impediment to parallel processing, while Scrypt does.
In the early 2010s, as mining operations developed specialized hardware, such as the application specific circuit (ASIC) to resolve the SHA-256 hash, it seemed that Bitcoin was vulnerable to such an attack. By making Litecoin’s consensus algorithm memory intensive, Lee sought to thwart the hardware arms race, although in practice that did not happen as the rise of GPUs responded to the need for more RAM.
How is Bitcoin (BTC) different from Litecoin (LTC)?
Litecoin was launched with the goal of being the “silver” of Bitcoin’s “gold”. Like Bitcoin, Litecoin is a peer-to-peer internet currency. It is a fully decentralized and open source global payment network. Lee developed Litecoin with the goal of improving Bitcoin’s shortcomings. The broader differences between the two cryptocurrencies are listed in the table below.
| BTC vs. LTC | ||
|---|---|---|
| Bitcoin | litecoin | |
| Creation | 2009 | 2011 |
| Creator | Satoshi Nakamoto | charlie lee |
| coin limit | 21 million | 84 million |
| Block generation time | 10 minutes | 2.5 minutes |
| Algorithm | SHA-256 | crypt |
| starting reward | 50BTC | 50LTC |
| Current block reward | 6.25BTC | 12.5LTC |
| rewards | Halved every 210,000 blocks | Halved every 840,000 blocks |
Litecoin is designed to produce four times as many blocks as Bitcoin (1 new block every 2.5 minutes vs. Bitcoin’s 10), and also allows 4 times the coin limit, which makes its main appeal over Bitcoin to do with with the speed and ease of acquisition. However, because Litecoin uses Scrypt (as opposed to Bitcoin’s SHA-256) as a proof-of-work algorithm, using mining hardware such as ASIC miners or a GPU mining rig requires significantly more processing power. .
Litecoin ranks among the top 15 largest cryptocurrencies in terms of market capitalization (although still well below Bitcoin) and as of November 2021, had over 69 million coins in circulation.
$14.5 billion
Litecoin market value as of November 2021, according to CoinMarketCap.
Future plans for Litecoin (LTC)
Litecoin has implemented various features since its launch aimed at improving its transaction speed without compromising the security and integrity of the network.
SegWit
SegWit or Segregated Witness was first proposed for Bitcoin in 2015. It works by “segregating” the digital token data (the “token”) out of the base block on the blockchain. SegWit was developed to address Bitcoin’s scalability issue, but the proposal sparked deep controversy within the Bitcoin community.
In 2017, Litecoin adopted SegWit and, due to Litecoin’s similarity to Bitcoin, functioned as a proving ground or testnet for the viability of SegWit on the larger Bitcoin network. The test was a success and Bitcoin adopted SegWit from then on. Some opponents of SegWit adoption advocating larger Bitcoin block sizes created a Bitcoin hard fork that resulted in bitcoin cash.
lightning network
the lightning network is a second layer technology for bitcoin that uses micropayment channels to scale the capacity of its blockchain to carry out transactions.
Similar to the SegWit example, the implementation of the Lightning Network in Litecoin has been a test network to demonstrate that innovations are possible in Bitcoin. Charlie Lee has also argued that when “Bitcoin’s blockchain is congested and fees are high, it’s easy to use Litecoin to get on the Lightning Network.”
wimble wimble
MimbleWimble is a privacy protocol that relies on sensitive transactions that encrypt or hide information such as transaction amounts. Is argument that MimbleWimble can decrease block size and increase scalability. Charlie Lee announced in early 2019 that Litecoin would be looking to develop MimbleWimble and as of 2021 development is underway.
What is Litecoin and how does it work?
Litecoin is a peer-to-peer (P2P) virtual currency, which means that it is not governed by a central authority. The Litecoin network offers near-zero cost instant payments that can be made by individuals or institutions around the world. Bitcoin, Litecoin and many other cryptocurrencies use the work test (PoW) to secure your networks. Basically, PoW requires a party to prove to all other participating parties in the network that a required amount of computational effort has been expended. Unlike Bitcoin, which uses the SHA-256 PoW hash algorithm, Litecoin uses the Scrypt PoW algorithm, which consumes less resources.
What is Litecoin used for?
Litecoin can be used as a P2P method to pay people anywhere in the world without an intermediary having to process the transaction. It can also be viewed as a store of value or as a component of a diversified crypto portfolio.
What was the original price of LTC?
When it debuted in April 2013, 1 LTC was worth around $4.30.
What is the highest price of Litecoin?
On May 10, 2021, LTC reached an all-time high of $410.26. Its all-time low of $1.15 was recorded on January 14, 2015.
What is the LTC Halving Program?
Just like Bitcoin, creating Litecoin tokens involves a process called mining. For participating in the act of mining, miners are rewarded with Litecoin. A Litecoin halving refers to an instance of halving the amount of Litecoin rewards miners receive for each block.
The Litecoin halving is intended to preserve the purchasing power of Litecoin. The last Litecoin halving took place on August 5, 2019. On this date, the mining reward was reduced from 25 Litecoins per block to 12.5 Litecoins per block. The next halving is expected around August 2023.
How many litecoins are there?
Ultimately, there will only be 84 million Litecoins in circulation. As of November 2021, there were just over 69 million Litecoins in circulation. That leaves less than 15 million LTC to be mined.
How can I trade Litecoin?
LTC is available on most cryptocurrency exchanges (eg Binance, Coinbase, Gemini, FTX) against other cryptocurrencies such as BTC and ETH, as well as national currencies such as dollars and euros. You can also buy LTC using Robinhood and Paypal.
Investing in cryptocurrencies and other initial coin offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decision. Investopedia makes no representations or warranties as to the accuracy or currency of the information contained in this document. As of the writing of this article, the author does not own Litecoins.
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