What is Litecoin? (LTC) - A bitFlyer Academy Guide for Beginners

Commonly known as the first successful altcoin, Litecoin is one of the early spinoffs of Bitcoin, started in 2011 as an attempt to make a cryptocurrency more appropriate for use as digital cash.

Created by developer Charlee Lee, Litecoin has some advantages over its other cryptocurrency competitors. For instance, compared to Bitcoin, Litecoin offers much lower transaction fees. It is consistently ranked in the top five and top ten cryptocurrencies, holding ground with a stable market share of around 5% since its creation, even as other coins rise and fall in popularity.

Despite introducing new possibilities for the world of finance and technology, Bitcoins core came with significant usability and scalability shortcomings Litecoin (LTC) was created as an alternative solution to these problems.

Litecoin emerged out of a Bitcoin fork, proposed and developed by Charlie Lee, a renowned computer scientist. The projects primary vision was to become the silver to Bitcoins gold, thereby widening peoples access to cryptocurrencies. Prior to incepting the Litecoin Foundation in 2017a non-profit backing the Litecoin projectLee worked at Google and Coinbase, among other firms.

Distinguishing Features: How Does Litecoin Work?

In general, Litecoins primary competitor is Bitcoin, although the two networks complement each other in several regards. For one, Litecoin inherited Bitcoins code, enhancing the same with many novel implementations.

On the other hand, Litecoin pioneered technologies like the Lightning Network and Segregated Witness (SegWit), which have eventually been adopted by Bitcoin.

Scrypt for Speed

In terms of transaction settlement, Litecoin is nearly four times faster than Bitcoin. To achieve this, Litecoin implements a modified version of Bitcoins Proof-of-Work (PoW) consensus mechanism, namely Scrypt.

The implementation aligns with Litecoins agenda of addressing concerns related to ASIC-based mining, in which it has been partially successful. Instead of using highly expensive ASIC hardware, Litecoin miners can work with more affordable Graphics Processing Units (GPUs).

Thanks to Scrypt, Litecoin successfully reduced the block confirmation time, the time taken to finalise new blocks, to 2.5 minutes, as compared to Bitcoins 10 minutes. As a result, while Bitcoin settles roughly 7 transactions per second, Litecoin completes around 56 transactions per second.

SegWit for Scalability

Blockchain-based transactions are cryptographically encrypted, meaning that they include signatures of the sender and/or receiver to ensure authenticity and so on. In the original Bitcoin Core, these signatures were included in the transaction, so to say, thus increasing the size of each transaction.

In 2017, Litecoin implemented Segregated Witness or SegWit, a solution proposed by Blockstream co-founder, Pieter Wuille. To put it simply, SegWit separates signatures from transactions, putting them into the associated input rather than in the transaction.

This effectively reduces the transactions size, and consequently, more transactions can be added to each block. Combined with Scrypt, SegWit imparts a heightened scalability to Litecoin, which in turn, makes the network more relevant for large-scale usage.

The LTC Token: Litecoins Native Cryptocurrency

Similar to Bitcoin, Litecoin is an open-source, peer-to-peer digital currency, based on the networks native cryptocurrency, namely the LTC token. It can be used for a range of financial purposes and has a maximum supply of 84 million.

Litecoins fully decentralised payment network supports near zero fee for transactions in LTC. Moreover, the tokens code architecture facilitates optimum efficiency in terms of storage. It also provides greater security against malware, viruses, and hacks.

Rewarding miners to incentivise desirable behaviour is one of LTCs primary internal functions within the Litecoin network. Initially, the block reward was 50 LTC. However, the algorithm halves the amount every 4 year (roughly, after every 840,000 blocks). At the time of writing, in early 2021, miners receive 12.5 LTC tokens for each block.

Backed by the networks functionalities and inherent value, LTCs market performance has progressed steadily over time. To know more about Litecoin, as well as to buy, sell, and trade LTC, join bitFlyer and follow our blog.

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Text source: bitFlyer Europe

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