Litecoin was released in 2011 by Charlie Lee as a decentralized, open-source cryptocurrency. If Bitcoin is the “gold” of cryptocurrencies, Litecoin’s goal is to become the “silver.” Transactional costs in Litecoin are fifty times small than in Bitcoin. Additionally, Litecoin can be mined using the Proof-of-Work method in a more computational-friendly way than Bitcoin.
As a Bitcoin derivative, when comparing the two cryptocurrencies, we can see that there will be a maximum 84 million Litecoins, compared to the 21 million Bitcoins. This makes sense if we consider that Litecoin’s block time is set at 2.5 minutes; four times faster than in Bitcoin. While the block reward is the same in both blockchains, Litecoin is designed to halve four times slower than Bitcoin. Indicative, Litecoin can process 56 transactions per second, while Bitcoin can only handle seven. Litecoin’s block number is currently 1420780.
Litecoin was prone to orphaned blocks due to the small intervals between new blocks. Developers partly solved this issue with the adoption of the SegWit protocol. Also, Litecoin acted as the testbed for the implementation of SegWit on Bitcoin, since both cryptocurrencies are based on the same code.
A notable event was the successful completion of the first atomic swap between Litecoin and Decred in September 2017. This signified a major milestone for the future of cryptocurrencies, that is expected to blossom with the advent of off-chain solutions like the Lightning Network and Raiden.
Part of the crypto-hype that broke out during 2017, Litecoin’s worth was just $4 at the begging of the year, to peak at $371 in December and trade at $146 at the time of writing (May 2018).
What makes Litecoin unique and one of the core differences between the two cryptocurrencies lays on the mining algorithm they use. While both use the PoW hashing method, Bitcoin’s SHA-256 requires vast computational processing power. What started as an incentive for every user to become a miner and contribute to the network, has turned into an impossible procedure for common PC users. Custom-made computer grid and ASICs have dominated the mining market, together with centralized mining pools.
Litecoin makes use of the Scrypt algorithm. While based on SHA-256, Scrypt serializes the calculations required to make them memory-hard. In Bitcoin the ASICs can parallelize two processes utilizing its CPU capabilities; however, the same procedure would become extremely hard in Litecoin. Its purpose is to make mining a democratic activity, accessible by every single PC user. Litecoin was mostly mined using GPUs, and as Lee says, Litecoin was lucky to benefit from Bitcoin’s migration from GPU to ASICs, as many of GPU miners moved to Litecoin.
In time though, Scrypt ASICs were developed (like Bitmain’s Antminer L3+), and mining Litecoin with an ordinary PC became non-profitable. Solo miners that keep using plain CPU and GPU resources, only contribute to maintaining the network’s security and decentralization.
While Litecoin’s acceptance isn’t any close as of Bitcoin’s, it has a respectable market capitalization of $8 billion. It is used by plenty of merchants globally, as it has an intrinsic value due to its scarcity and its transactional fees are significantly lower than other cryptocurrencies and wire transfers in traditional methods. In many ways, Litecoin follows on the heels of Bitcoin and its future looks optimistic.