What is Litecoin (LTC)?
MoonPay explains Litecoin, one of the very first altcoins.
By Milly Fox-Jones
A couple of years after Bitcoin launched, some of the original developers decided that there were key issues with the cryptocurrency that couldn’t be improved internally. Instead, they believed a new coin was needed – one that was faster and more scalable – so they created one.
Litecoin was the first real altcoin that forked into existence with the mission to improve upon everything that had come before.
In this article, we explore Litecoin, the world's first altcoin, and what differentiates it from Bitcoin.
What is Litecoin?
Litecoin (LTC) is an open-source, global, peer-to-peer (P2P) cryptocurrency network developed by Google engineer Charlie Lee. It’s the original altcoin – which is the umbrella term for any cryptocurrency that isn’t Bitcoin.
LTC was built on a fork from the Bitcoin blockchain in 2011 after developers decided a new network was needed to improve the main issues faced by Bitcoin at that time: speed, scalability, and centralization.
Centralization was the biggest concern, as there were fears that Bitcoin was becoming too centrally controlled. Litecoin therefore began developing with decentralization as its primary objective.
Like Bitcoin, Litecoin uses a proof of work (PoW) consensus model to secure its network, but it uses a different cryptographic algorithm (a sequence of processes used to code and decode messages) know as Scrypt.
How does Litecoin work?
As with most cryptocurrencies, Litecoin uses an open-source, cryptographic protocol to create and transfer digital currency quickly and easily across the world.
It uses a fork of the Bitcoin blockchain as a decentralized public ledger of all transactions, making it immutable and almost impossible to cheat.
Also similar to Bitcoin, Litecoin’s supply is set to reduce over time as a method of retaining the coin’s value. It does this through halving, a process in which the block reward for verified transactions on the Litecoin network is reduced by 50%. The next halving event is expected to take place on August 23rd, 2023.
How is Litecoin mined?
Since Litecoin uses Proof-of-Work to validate transactions, Litecoins are “mined”. Mining is the process rewarding new coins entering circulation to those who do the computation needed to validate transactions.
Of the total supply of 84 million Litecoins, approximately 13 million Litecoins are left to mine as of December 2022.
While one of the original goals of Litecoin was to make mining accessible, it’s unlikely that a single miner with one application-specific-integrated circuit (ASIC) could solve a hash and win a reward.
If someone wanted to mine Litecoin, they’d need to purchase several ASIC miners and join a mining pool.
Litecoin’s goal: improve on Bitcoin
When Litecoin was launched in 2011, its main goal was to solve some of the biggest issues faced by Bitcoin at the time.
So, what are the main differences between Litecoin and Bitcoin? There are three key differences:
As mentioned earlier, Litecoin uses the Scrypt algorithm, whereas Bitcoin uses SHA-256. Scrypt powers Litecoin’s PoW consensus mechanism, contributing to the coin’s decentralization. How? Well, as the mining power isn’t concentrated among the biggest players that can afford expensive mining, Litecoin mining is more accessible to individuals.
While transactions on both the Bitcoin and Litecoin networks happen instantaneously, it takes time for them to be confirmed. Without going into too much detail, Litecoin’s transaction confirmation time is just over half of Bitcoin’s due to the use of the Scrypt algorithm. Essentially, the simpler the algorithm, the faster the transaction.
The final key difference between LTC and BTC is market capitalization. This is the measurement of a cryptocurrency’s total value, and can be estimated using the following formula:
current market price x number of coins in circulation
Litecoin’s market capitalization is much smaller than Bitcoin’s. Bitcoin has a smaller supply but a much higher price stemming from its ability to be mined by large mining pools. As this isn’t possible with Litecoin (intentionally, so as to keep the barrier to entry low), it’s value isn’t as high, so neither is its market capitalization.
You can buy Litecoin now through MoonPay.