Crypto Essentials: Litecoin

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Litecoin (LTC) is often referred to as the silver to Bitcoin’s gold, which is not surprising as its essentially a Bitcoin fork with a couple of key differences. When it first came out, many saw Litecoin as a day-to-day currency and Bitcoin as a store of value, given Litecoin’s much faster transaction times. In the current climate however, with hundreds of currency coins out there vying to be the premiere choice, how does Litecoin compete?

Speed Demon

Litecoin was created by Charlie Lee in 2011, who admired the ethos of Bitcoin but felt that it wasn’t agile enough to be considered a regular currency. He therefore created Litecoin off the back of Bitcoin’s core code but implemented some key differences. Firstly, the block processing time was set to two and a half minutes, which is four times faster than Bitcoin. This meant that Litecoin could be more secure, with twelve confirmations possible in half the time compared to Bitcoin. This made a huge splash in 2011, but unsurprisingly as time and technology has moved on, it has slipped down the pecking order when it comes to transaction speeds among other Proof-of-Work (PoW) currencies:

  • Zcash: 15 minutes
  • Dash 15 minutes
  • Monero: 30 minutes
  • Litecoin: 30 Minutes
  • BCH: 60 minutes
  • Bitcoin: 78 minutes

Litecoin Mining

Like Bitcoin, Litecoin uses a Proof-of-Work algorithm, but a different kind. Bitcoin uses a SHA256 hashing algorithm, while Litecoin uses something called ‘scrypt’. This has a number of advantages, primary among them that high-end ASIC miners cannot mine Litecoin and therefore hog the hashrate. It also means that GPU miners can have a crack at mining too, something that is very unusual for a top tier PoW cryptocurrency. In a world that is slowly moving away from PoW systems, Litecoin’s intransigence in staying with the format might be problematic as time passes and technology improves.

Litecoin’s Relevance Today

Many see Litecoin as a relic of crypto 1.0, which in many ways it is. When it came out it was revolutionary, but this was only in relation to Bitcoin. Now, in relation to faster, more agile currencies, it is something of a dinosaur. Lightning Network integration has long been heralded by founder Charlie Lee as something that will propel Litecoin back into the realms of everyday use, but the number of Litecoin nodes, despite rising recently, still lags behind Bitcoin’s node count by a factor of over ten. Charlie Lee himself was criticized for selling all this Litecoin and leaving the project at the height of the last bull run, which precipitated months’ worth of rumors about price suppression by cabals and questions over the long term viability of the project, claims Lee addressed in a series of tweets in mid-2018. Some say that Lightning Network integration is the only way Litecoin will be able to stay relevant in the new world of high-speed, partially decentralized algorithms. Litecoin faces a challenge to keep up with these newcomers, but the old dog has so far managed to fend most of them off and still sits in the top 5 by market cap, so it clearly still has some tricks up its sleeve.