Litecoin: the differences with Bitcoin and the advantages

Some important media agencies such as the Wall Street Journal, CNBC and the New York Times have indicated Litecoin as an alternative to Bitcoin

by Lorenzo Ciotti
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Litecoin: the differences with Bitcoin and the advantages

Litecoin is a peer-to-peer cryptocurrency and an open source software project released under the MIT/X11 license. From a technical point of view it was inspired by and is very similar to Bitcoin. The minting and transaction of Litecoin takes place thanks to an open source protocol and is not controlled by any central authority.

The intention of the Litecoin developers was to improve Bitcoin through some major changes in the transaction validation process. Some important media agencies such as the Wall Street Journal, CNBC and the New York Times have indicated Litecoin as an alternative to Bitcoin.

Litecoin is the sixteenth largest cryptocurrency by market capitalization. Litecoin was released via an open source client on GitHub on October 7, 2011 by Charles Lee, a former Google employee. Compared to the Bitcoin-Qt client, it differs mainly in having decreased the processing time of a block, for having increased the number of coins, for having a different hash algorithm and for having a slightly modified GUI.

In 2013 The Economist pointed to Litecoin as a possible alternative to Bitcoin. During November of 2013 the overall value of Litecoin grew massively with a trend of 100% every day. In 2013, Litecoin reached a capitalization of one billion.

In January 2014 the National Bank of Finland declared Litecoin a commodity. In May 2017, Segwit support was activated in the Litecoin software.

Litecoin: the differences with Bitcoin and the advantages

In September 2017 the first atomic transactions were performed.

Within four days, transactions were made between Litecoin and Decred, Litecoin and Vertcoin, Litecoin and Bitcoin. In March 2021, Litecoin capitalized at $13.3 billion. Compared to Bitcoin, Litecoin has three fundamental differences which, in the view of the developers, should make it better.

The Litecoin network aims to process a block every 2.5 minutes, 7.5 minutes less than Bitcoin. The benefit translates into faster confirmation of trades. Conversely, such a short time has increased the size of the Litecoin blockchain and the number of orphaned blocks.

Litecoin uses scrypt in its proof-of-work algorithm: a memory-hard sequential function that asymptotically requires more memory than a non-memory-hard function does. The Litecoin network produces 84 million coins, or four times as many monetary units as the Bitcoin network.

The original intention of using scrypts was to allow miners to accumulate both Bitcoin and Litecoin. It was also chosen to use scrypts partly to avoid giving video card, FPGA and ASIC miners an advantage over CPU miners. While CPU accumulation is no longer profitable, individual CPU miners can still contribute to the network and acquire coins over the internet from a dedicated server.

Mining Litecoin with one CPU or video card is about 1000 times slower than mining Bitcoin with the same CPU and video card. Thanks to Litecoin's use of scrypts, the FPGAs and ASICs made for Litecoin mining are much more complicated and expensive to create and program than those needed against Bitcoin (which uses SHA-256).

On Litecoin, transactions, balances and issues through scrypt and the proof-of-work protocol are operations managed by a peer-to-peer network similar to Bitcoin. The emission rate forms a geometric series and halves every 840,000 blocks, approximately every four years, reaching a grand total of 84 million LTC.

Litecoin coins are currently exchangeable for fiat and other cryptocurrencies, mainly in online money changers.

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