What is Litecoin?
Litecoin is one of the earliest alternative cryptocurrencies, considered to be a direct spinoff from Bitcoin. It was designed with the goal to be a more efficient everyday payment system than the original cryptocurrency.
Like Bitcoin, Litecoin is a form of digital money, used to transfer value over the internet between individuals and businesses. It complements Bitcoin’s utility as a store of value by offering faster and more affordable transactions. In short, it provides a lighter version of the original’s cryptocurrency network, and is often marketed as “the silver to Bitcoin’s gold”.
Thanks to its strong community and established presence, Litecoin is known as one of the most popular cryptocurrencies. This success has kept it firmly in the top 10 cryptocurrencies by market cap.
How Litecoin works
Litecoin was based on a copy of Bitcoin’s protocol. In contrast with coins created by forking Bitcoin’s network, it is an entirely separate network from Bitcoin, with its own genesis block.
The Litecoin network uses blockchain technology to empower transactions using its native cryptocurrency, LTC. All transfers are done in a peer-to-peer fashion, with no involvement of third parties. To achieve this, transactions are organized in blocks and chained together in a distributed digital ledger using cryptography. New blocks of transactions are added to the ledger using a Proof-of-Work (PoW) consensus method where powerful computers called miners race to solve increasingly difficult mathematical problems. The miners that manage to solve the problem receive newly created LTC, as well as the fees of the transactions of that block.
Similar to Bitcoin, this block reward follows a halving scheme. Every 4 years, the number of LTC rewarded for each newly discovered block is cut in half, reducing the number of coins put into circulation, and increasing scarcity and the price of Litecoin over time.
And while Litecoin shares numerous technical similarities with Bitcoin, it differs from it in several essential ways:
Increased transaction speed - Litecoin transactions are four times faster than those made with Bitcoin. The block validation of the Litecoin blockchain takes 2.5 minutes as opposed to the 10 minutes of Bitcoin’s network.
Larger total supply - The total supply of LTC is capped at 84 million coins, compared to BTC’s 21 million coins.
Scrypt algorithm - Litecoin uses the Scrypt mining algorithm in contrast to Bitcoin’s SHA-256. It was initially intended as a more democratic hashing algorithm, allowing users to remain profitable by mining LTC with their CPUs.
Who invented Litecoin?
Litecoin was created by computer scientist and MIT graduate, Charlie Lee. Prior to his involvement with Litecoin, Lee worked as an engineer at internet giant Google.
In 2013, he joined Coinbase exchange as director of engineering and advocated the listing of LTC within the company, contributing to the coin’s success.
At the peak of the Litecoin price in USD value during 2017, Lee announced that he had sold the entirety of his Litecoin holdings. While the move was considered rather controversial, he explained that it was necessary to avoid any conflict of interest in his involvement with the Litecoin project.
Today, Charlie Lee works on Litecoin development full-time and manages the Litecoin foundation, a non-profit organization entirely dedicated to spreading Litecoin adoption.
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