Litecoin came into the cryptocurrency scene about 2 years after Bitcoin was introduced and it is pretty much a Bitcoin lookalike. While there are slight tweaks along the line, you are not likely to have any problem with Litecoin if you understand the working principles behind Bitcoin. You may even choose to call it the Poor man’s Bitcoin. Litecoin also works on the blockchain principle. A total of 84 million coins were created and new coins are released to miners who add new transaction blocks to the chain.
A Brief History
Many of the popular altcoins today only came into being a few years ago. Launched in October 2011, Litecoin is one of the cryptocurrencies that can lay claim to having been around for long enough to rub shoulders with Bitcoin. It was created by a former Google employee who admitted himself that Litecoin is ‘silver to BTCs gold’. The coin makes use of the Bitcoin core framework but some specific features were enhanced in order to make it a viable alternative to Bitcoins.
The Key Differences
Block processing time: Bitcoin blocks can only be processed at 10-minute intervals. This caused a delay in confirmation time particularly as the trading volume began to rise. Litecoin was launched with a target processing time of 2.5minutes per block. Although this target hasn’t been achieved by Litecoin or even any other cryptocurrency at that, Litecoin’s processing time is significantly shorter than Bitcoin’s. Ultimately, this means faster confirmations and cheaper transactions
Hashing algorithm: the whole hashing algorithm concept may be difficult for non-geeks to comprehend. The basic breakdown is that all cryptocurrencies employ complex algorithms for transaction processing and security. Bitcoin employs the SHA-256 algorithm and so did most of the cryptocurrencies that came after. Litecoin, however, did not follow the conventional. The coin employs the Scrypt algorithm which is lighter and Easier to compute than the SHA-256.
Litecoin as a Store of Value
Like most other dominant coins in today’s market, Litecoin has made a lot of traders very rich. From a coin that had zero worth in 2013, Litecoin has had quite the ride and it particularly enjoyed the cryptocurrency boom of 2017. At the beginning of 2017, Litecoin was valued at a mere $4. About 11 months later, it reached an all-time high of $371. As at the time of writing this article, Litecoin is valued at around $150. It is listed as the 7th coin in terms of trading volume, according to coinmarketcap.com. This gives Litecoin a lot of potential as a store of value. While the real purpose behind the launch of the coin is to facilitate transactions, the market forces of demand and supply make the coin capable of appreciating or depreciating. Thus, its potential as a store of value cannot be ignored, just like all other cryptocurrencies.
Litecoin miners are currently rewarded 25 new coins for every block added. The reward gets halved after every 840,000 blocks. This protocol is also very similar to Bitcoins. The total supply of Bitcoins is a quarter of the amount of Litecoins and the reward for mining Bitcoin is halved after every 210,000 blocks.
Litecoins incorporates an open software nature. The software was released under the MT/X11 license. Members of the Litecoin community can ‘run, modify, and copy the software’ and modified copies can also be distributed at will. More importantly, however, the open source nature makes it available for independent verification and bugs can be detected by the community.
Using Litecoin for transactions is definitely a cheaper and faster alternative to making use of Bitcoin. The concern, however, is that Litecoin’s potential as a store of value seems to draw more interest than it’s transaction features. But it’ll be unfair to term this Litecoin’s problem, it appears to be a general problem with cryptocurrencies.