What is Litecoin (LTC)?

By iTrustCapitalJuly 28, 20223 minutes read
What is Litecoin LTC-01.png

Understanding Litecoin (LTC)

Litecoin (LTC) is a blockchain and cryptocurrency. Using the source code of Bitcoin, Litecoin’s goal is to be faster and less costly to use than Bitcoin. Litecoin’s founder Charlie Lee has described Litecoin as the “silver to Bitcoin’s gold.”

Keep reading to learn more about Litecoin. Find out how Litecoin works and how it differs from Bitcoin.

What is Litecoin (LTC)?

Litecoin is a digital currency and autonomous blockchain platform. LTC, as a cryptocurrency, functions as a decentralized, digital store of value that enables peers to transact directly. The goal of Litecoin is to be more efficient—cheaper and faster—than Bitcoin.

Litecoin was created using the same source code as Bitcoin. The source code was immediately adapted to give Litecoin its distinguishing features. Litecoin uses the proof-of-work consensus mechanism to process blocks of transactions.

The maximum coin supply of LTC is 84 million. More than 70 million LTC are already in circulation.

How does Litecoin (LTC) work?

Litecoin operates its blockchain using proof-of-work to process transactions and mint new LTC. Let’s delve into exactly how the Litecoin blockchain functions: 

  1. New LTC transactions are pooled: Users initiate new LTC transactions, which are pooled into blocks for processing.

  2. Miners compete to validate transactions: Cryptocurrency “miners,” who control vast computing resources, race to solve complex math problems. The first miner to solve the math puzzle wins the right to validate the new block of LTC transactions.

  3. Transactions are processed and new LTC is minted: The winning miner validates and processes the block of transactions to add a new block to the LTC blockchain. New LTC is also minted during this process.

  4. LTC rewards are paid: The miner earns a reward, paid in LTC, for validating the block of transactions. The miner must hold a digital wallet compatible with LTC to collect the reward.

  5. Wallet or account balances automatically update: Users’ account or wallet balances automatically update after the new LTC block is added to the blockchain.

The proof-of-work process is fully decentralized, meaning that no involvement by a centralized authority or organization is required. Anyone with the proper computing hardware can choose to assist with operating the Litecoin blockchain.

Litecoin vs. Bitcoin

You may be wondering how Litecoin and Bitcoin compare. Let’s take a look:

  • Source code: Bitcoin, as the first cryptocurrency, has completely original code. Litecoin was initially cloned from Bitcoin by replicating its source code.

  • Hashing algorithm: Litecoin uses a computing algorithm known as Scrypt, which is meant to be “lighter” and faster than Bitcoin’s algorithm. Bitcoin’s hashing algorithm is called SHA-256

  • Transaction processing speed: The average time required to add a new block of transactions to the Bitcoin blockchain is 10 minutes. Litecoin’s average block time is around 2.5 minutes—making the Litecoin blockchain about four times faster than Bitcoin.

  • Transaction processing cost: In the six months preceding May 2022, the average fee to process a Bitcoin transaction was $2.10. The average transaction cost for Litecoin transactions during the same period was less than $0.02.

  • Block rewards: The reward for mining a block of Bitcoin is currently 6.25 bitcoins, and the current block reward for Litecoin is 12.5 litecoins. Both Bitcoin and Litecoin adhere to a set block rewards schedule that periodically halves the reward—approximately every four years.

  • Maximum coin supply: The maximum coin supply of Bitcoin is capped at 21 million tokens, while Litecoin’s maximum coin supply is four times greater at 84 million tokens.

Both Bitcoin and Litecoin are decentralized peer-to-peer cryptocurrencies. Both use the proof-of-work consensus method. Both are relatively old compared to the newest cryptocurrency projects, with Bitcoin founded in 2008 and Litecoin in 2011.

A brief history of Litecoin

Litecoin was founded by Charlie Lee, a former Google engineer, who adapted the original source code for Bitcoin. The Litecoin blockchain was officially launched on October 13, 2011

In May 2017, Litecoin adopted the Segregated Witness protocol. Adopting this blockchain protocol established Litecoin as part of the Lightning Network, which uses smart contracts to increase compatibility among blockchains.

Litecoin was subject to a “dusting attack” in August 2019. Hackers using the Binance platform “dusted” many Litecoin wallets with small amounts of LTC, in an attempt to breach the privacy of the wallet holders. The attack—which affected as many as 300,000 Litecoin holders—also revealed that a similar, smaller attack had occurred earlier in the same year.

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