What is Litecoin?
Litecoin was created in 2011 by Charlie Lee, a former Google employee. Litecoin is a decentralized, open-source cryptocurrency, which enables other applications to be built on its backbone and it is one of the top cryptocurrencies using the Proof-of-Work method, after Bitcoin (measured in market capitalization – USD 12,335,491,737 – February 2018). While the fundamental functions of Litecoin, like the way transactions are processed and validated, are the same as in Bitcoin, there are significant differences that make Litecoin a great competitor.
Differences and similarities between Litecoin and Bitcoin
Bitcoin is the most popular cryptocurrency, widely accepted by a large number of merchants. Litecoin is not as widespread yet, but the ease of payments, along with its significantly lower transaction costs, could make it an essential player for micropayments in the future. Even though the cryptocurrencies market shows extreme volatility, stability positions Bitcoin much stronger than any other altcoin.
Litecoin can process a higher number of transactions, as it takes 2.5 minutes to generate a new block, as compared to Bitcoin’s 10 minutes. This feature makes it much faster than Bitcoin and mitigates the risk of double-spending attacks, however, as more orphaned blocks will be added, this will result in creating a much larger Blockchain in the future.
Maximum supply, rewards and hash difficulty
Litecoin has a larger amount of coins that will ever be created (84 million), compared to Bitcoin’s 21 million. Similar to Bitcoin, the initial “per block” reward is 50 LTC, but the halving time has been set to occur every 840,000 blocks, while Bitcoin’s is at 210,000. The hash difficulty has remained the same, to be changed every 2016 blocks.
Mining Bitcoin vs Litecoin
One of the core differences between the two related cryptocurrencies is how each one is mined. The increasing popularity of Bitcoin has turned mining into an unattractive activity for small miners using home PCs. Powerful mining-specific grids (e.g. ASICs) have dominated the market and mining now requires costly and vast computational resources. Both cryptocurrencies are based on the Proof-of-Work method, but while Bitcoin uses the CPU-friendly, SHA-256 algorithm, Litecoin has implemented Scrypt. Scrypt’s algorithm utilizes RAM power with serialized processing capabilities, rather than raw processing power, minimizing the capabilities of the existing ASICs and FPGAs. Litecoin’s creators believe that Scrypt’s memory-hard features will attract everyday users to mine Litecoin, there are several companies though, that have Scrypt ASICs under development. It is indicative that Litecoin’s hashrate is 12,304 GH/s, remarkably lower as opposed to Bitcoin’s 8,481,426,187 GH/s.
Additionally, both Litecoin and Bitcoin have adopted SegWit, which will eventually lead to the implementation of the Lightning Network. Notable events during 2017 include the first transaction of Litecoin through the Lightning Network (successfully transferring 0.00000001 LTC in under a second) and the first off-chain atomic swap between BTC and LTC.