Litecoin (LTC) is a cryptocurrency that offers speed, security, and technical enhancements over Bitcoin and other major cryptocurrencies.
Established in 2011, Litecoin is fundamentally similar to Bitcoin, but is distinguished by several major technical improvements, including the implementation of Segregated Witness technology (segwit) and the Lightning Network, which allow for much faster transaction speeds and lower fees than Bitcoin. (1) (2)
While not as popular as Bitcoin, Litecoin has become one of the hottest commodities on the cryptocurrency market and has been embraced by an increasing number of vendors and businesses due to its speed and reliability. (3)
Litecoin is a worthwhile investment for anyone looking for rapidity and security improvements over Bitcoin and other major cryptocurrencies.
Litecoin was created and released by ex-Google employee Charlie Lee on October 7, 2011 as an open-source client. (4)
Litecoin was originally designed as a fork of the Bitcoin Core client, distinguished from its parent currency by three major changes. Compared to Bitcoin, Litecoin has a shorter block generation time (only 2.5 minutes, compared to Bitcoin’s ten minutes), a different hashing algorithm (scrypt, as opposed to Bitcoin’s SHA-256), and a higher maximum coin count. (5) (6)
In particular, Litecoin’s scrypt algorithm allows for faster mining, as it is a sequential memory-hard function that processes changes in the Litecoin network very rapidly compared to Bitcoin. (7)
These changes combined mean that Litecoin transaction times are four times faster than Bitcoin, and transaction fees are drastically lower as well, which has become more significant given Bitcoin’s increasingly sluggish transaction speeds. (8) (9)
While initially ignored, Litecoin experienced rapid growth in 2013, reaching a $1 billion market cap in November of that year, and has kept growing since. Litecoin grew so fast that month that it experienced a 100 percent jump in its value within a single day. (10) (11)
In May 2017, Litecoin became the first of the top five cryptocurrencies (according to market cap) to adopt Segregated Witness (SegWit) technology, greatly decreasing transaction times. (12)
SegWit is an attempt to solve the block size limit problem that has increasingly plagued Bitcoin. At only 1 MB per block, Bitcoin’s low block size limit has severely impeded transaction times in recent years, as more and more people begin using the currency. The block size limit has also caused transaction fees to skyrocket. (13)
SegWit technology gets around the block size limitation by splitting transactions into two segments, with one of the segments, the “witness,” containing the unlocking signature. When the transaction reaches its destination, the two segments are rejoined. This allows for faster transactions due to the fact that the individual segments are smaller than the combined transaction. (14)
Additionally, in May of 2017, Litecoin implemented the Lightning Network, another solution to the problem of progressively slower Bitcoin transactions.
The Lightning Network is a technology that allows users to conduct transactions without making them publicly available on the blockchain. To do this, users commit to an amount of Litecoin to be transferred when they open a channel, with additional, unrelated transactions bundled together with that transaction and sent simultaneously. (15)
The combination of SegWit and Lightning Network technology has made Litecoin transactions some of the fastest in the cryptocurrency world. An initial test run of the latter allowed 0.00000001 LTC to be sent from Zurich to San Francisco in less than one second. (16)
Future upgrades to Litecoin will include cross chain atomic swap with Vertcoin, further enhancing its flexibility. (17)
Due to Litecoin’s similarity to Bitcoin combined with massive improvements to Bitcoin technology, many vendors and businesses have begun accepting it, and it has become an increasingly popular cryptocurrency among miners and traders.
Mining Litecoin is similar to Bitcoin and can be just as profitable, albeit with some important differences.
Like Bitcoin, mining Litecoin with a CPU or GPU is no longer profitable. This is due to the fact that the blockchain has grown so large that it will take CPUs or GPUs forever to mine a single coin. Combined with increased electricity costs and wear-and-tear on your computer, CPU or GPU mining is no longer worth it. (18)
Also like Bitcoin, Litecoin miners have a wide variety of customized mining rigs available for purchase. It is also possible for miners to build their own rigs out of custom parts for maximum flexibility. (19)
However, due to Litecoin’s scrypt hashing protocol, Litecoin mining rigs are considerably more expensive than rigs for other cryptocurrencies. This is due to the fact that Litecoin’s sequential memory-hard function consumes more memory than Bitcoin’s, requiring manufacturers to create more powerful machines to compensate. (20)
Litecoin’s scrypt hashing algorithm was originally designed to allow miners to mine Bitcoin and Litecoin simultaneously, as creator Charlie Lee referred to Litecoin as “silver to Bitcoin’s gold.” It was also designed to keep GPUs and mining rigs from having an advantage over CPU miners, though the number of Litecoins now in circulation and the complexity of the blockchain have rendered that moot. (21) (22)
Like with other cryptocurrencies, miners must also take into consideration their electricity costs. Due to the greater complexity and horsepower of Litecoin mining rigs, they also consume a greater amount of electricity, which should be factored into purchasing and mining decisions. (23)
However, mining Litecoin can still be a profitable enterprise with the right hardware, and due to Litecoin’s growing popularity, mining it is a definite growth market.
Litecoin is an increasingly popular alternative to Bitcoin that offers significant upgrades in the realm of speed and safety.
Litecoin’s faster block generation time, use of scrypt hashing algorithms, and larger maximum coin count give it distinct consumer advantages over Bitcoin in terms of speed and transaction cost.
Litecoin’s forward-thinking implementation of Segregated Witness and Lightning Network technology have also helped it become one of the most efficient cryptocurrencies on the market, with transactions often occurring in a matter of seconds.
Finally, Litecoin’s rapidity and security have helped it become popular among vendors and businesses, particularly those that already accept or used to accept Bitcoin.
Due to all these upgrades, Litecoin is a worthy replacement for Bitcoin for users looking for faster transactions and lower fees, and a good investment for those looking to diversify their altcoin portfolios.