Litecoin was one of the first cryptocurrencies created and has remained among the most popular digital currencies to-date.
- Like Bitcoin, Litecoin is a peer-to-peer digital currency
- Litecoin was created via a fork of the Bitcoin source code
- Block generation of Litecoin is faster than that of Bitcoin
- Supply of 84 million is higher than Bitcoin (21 million)
In this lesson, you will learn the basics about Litecoin.
Created via a fork of the Bitcoin source code and offering many of the same features, Litecoin was launched in 2011 and is a peer-to-peer digital currency that is developed on an ongoing basis in the scope of open source project. Unlike Bitcoin, whose mysterious inventor Satoshi Nakamoto is unknown to this day, the founder of Litecoin, Charlie Lee is a well known figure in the crypto space, who is very active on Twitter and regularly attends conferences.
How is Litecoin different from Bitcoin?
Litecoin was created via a fork of the Bitcoin source code and is one of the oldest altcoins. It has a block generation time of 2.5 minutes, which is significantly lower than Bitcoin’s block generation time of 10 minutes.
The maximum number of litecoins that can ever be produced is 84 million, compared to 21 million bitcoins. There are significantly more litecoins in circulation to-date than bitcoins (55 million litecoins compared to 17 million bitcoins).
One of the main differences between Litecoin and Bitcoin is the cryptographic algorithm called Scrypt used in mining Litecoin. The halving of Litecoin, namely reducing the number of litecoins by half to ensure scarcity and cap inflation, takes place approximately every four years. Further, Litecoin’s graphical user interface is slightly different to that from Bitcoin.
One of the main differences between Litecoin and Bitcoin is the cryptographic algorithm called Scrypt used in mining Litecoin.
The Scrypt algorithm, its name derived from “s-crypt”, utilises artificial complication for solving the cryptographic puzzle in the mining process by adding randomly generated numbers. These numbers are called “noise” and act as an additional layer of protection. Scrypt mining requires fewer resources but more memory than Bitcoin mining. Bitcoin uses the SHA-256 hash function, whereas Litecoin uses sequential memory-hard functions for maximum security against attacks.
This proof-of-work algorithm was initially introduced by the founder of Litecoin in order to offer consumer-friendly mining and to prevent computing power in the network becoming dependent on the financial power of network participants. He wanted to avoid that mining Litecoin would eventually require expensive mining equipment such as ASICs, as had happened in the case of Bitcoin. Still, Scrypt-compatible ASICs equipment has been introduced to the market since.
An interesting fact about Litecoin is that it was the first cryptocurrency to activate SegWit (Segregated Witness) - even before Bitcoin did. The technology behind SegWit “separates” the signature date from a transaction and then “witnesses” it for security, thus decreasing the amount of data. After the introduction of SegWit in the Litecoin protocol, Bitcoin followed suit a few months later. Consequently, Litecoin had served as a test bed for Bitcoin in this case.
MimbleWimble is an innovative and highly efficient protocol that uses one multisignature for all inputs and outputs, based on “confidential transactions”. The protocol offers even further protection of privacy while greatly compressing the size of a blockchain.
MimbleWimble is an innovative and highly efficient protocol that uses one multisignature for all inputs and outputs, based on “confidential transactions.”
At the Litecoin Summit in October 2019, an announcement was made that the MimbleWimble protocol was to be integrated in the Litecoin protocol. This integration is currently in progress. However, there have also been voices of criticism over MimbleWimble. On the one hand, it was discovered that nodes monitoring the network could see the original input-output links of most transactions. On the other hand, critics are arguing that adding further layers of privacy could turn Litecoin into a privacy coin, thus in danger of being delisted from cryptocurrency exchanges that need to conform to strict regulations and don’t list privacy coins.