Litecoin is a peer-to-peer altcoin developed by former Google engineer Charlie Lee in 2011. In terms of market capitalization, Litecoin was the third largest cryptocurrency at its peak. Since its structure is similar to that of bitcoin, it has been used as a test network or test platform for improvements that will then be applied to bitcoin.
Litecoin is a branch of Bitcoin (BTC). Like Bitcoin, Litecoin is based on an open source global payment network that is not controlled by any central government. Litecoin differs from Bitcoin in terms of faster block generation and the use of Scrypt as a health check solution.
About Charlie Lee
Charlie Lee graduated from the Massachusetts Institute of Technology and was a former Google engineer who became interested in bitcoin in 2011. Lee said, “In October 2011, I was working on the Bitcoin code. I think I just wanted to create it at that moment . . . A Bitcoin branch. It’s basically an interesting supporting project””
Scrypt Proof-of-Work Algorithm for Litecoin
Scrypt is a password-based key output function. According to Tarsnip, “the scrypt key output function was originally developed for use in the Tarsnap online backup system and is designed to provide more reliable protection against hardware brute force attacks than other functions (such as PBKDF2 or bcrypt).”
Scrypt was specifically designed by Lee to make large-scale individual hardware attacks on currency more difficult. The Bitcoin SHA-256 algorithm does not require a large amount of RAM as an obstacle to parallel processing, unlike Scrypt.
In the early 2010s, when the mining industry was developing special hardware such as dedicated circuits (ASICs) to solve SHA-256 hashes, it seemed that bitcoin was vulnerable to this kind of attacks. By increasing the memory density of the Litecoin consensus algorithm, Lee tried to prevent an arms race with hardware, although in fact this did not happen, since the increase in GPU power satisfied the greater demand for RAM.
Similarities between Bitcoin and Litecoin
At first glance, Bitcoin and Litecoin have a lot in common. At the most basic level, they are all decentralized cryptocurrencies.
1. Proof of work
An important similarity between Bitcoin and Litecoin is that they are both proof of a working ecosystem. This means that the main process of mining two cryptocurrencies (that is, the process of generation, authentication and subsequent addition to a public ledger or blockchain) is basically similar (but not exactly the same).
2. Shop and trade
For investors, many of the basic elements of Bitcoin and litecoin trading are also very similar. Both cryptocurrencies can be purchased through exchanges or mined using mining equipment. Both require a “wallet” with digital or cold storage for secure storage between transactions.
In addition, over time, the prices of both cryptocurrencies have been subject to strong fluctuations depending on various factors, from investors’ interest in government regulations.
Differences between Bitcoin and Litecoin
1. Market Value
As of March 2021, the total value of all bitcoins in circulation is about 11 trillion US dollars, and its market capitalization is more than 70 times higher than that of Litecoin (the total value is 113.7 billion US dollars). Whether the market value of bitcoin is high or low depends largely on the historical point of view. Considering that bitcoin’s market capitalization in July 2010 was only $42,000, its current figure looks staggering.
2. Total emissions
Another important difference between Bitcoin and Litecoin is the total number of coins that each cryptocurrency can generate. That’s what distinguishes Litecoin. The Bitcoin network can never exceed 21 million coins, while Litecoin can contain up to 84 million coins.
3. Transaction speed
According to the Blockchain. According to com, currently the average transaction confirmation time on the bitcoin network for each transaction (the time it takes to validate a block and add it to the blockchain) is less than 9 minutes. However, in the case of high traffic, the transaction time may vary greatly. The equivalent amount of Litecoin is about 2.5 minutes. The facts have proven that the speed of Litecoin transactions has its advantages.
4. the algorithm
So far, the most fundamental technical difference between Bitcoin and litecoin is the different encryption algorithms they use. Bitcoin uses the long-standing SHA-256 algorithm, while Litecoin uses the relatively new Scrypt algorithm. It is generally believed that SHA-256 is a more complex algorithm than Scrypt, and at the same time provides a greater degree of parallel processing. Therefore, in recent years, bitcoin miners have used increasingly sophisticated methods to extract bitcoins as efficiently as possible. The most common method of bitcoin mining is the use of applied integrated circuits (ASICs).
Litecoin Package (LTC)
Since its launch, Litecoin has implemented many features designed to increase transaction speed without compromising the security and integrity of the network.
SegWit was first offered for Bitcoin in 2015. Its principle of operation is to “isolate” the digital signal data (“indicators”) from the basic block of the blockchain. SegWit was designed to solve the bitcoin extensibility problem, but this proposal has caused deep controversy in the bitcoin community.
In 2017, Litecoin adopted SegWit. Because of the similarities between Litecoin and Bitcoin, it served as a proving ground or test network for the viability of SegWit in the larger Bitcoin network. The test was successful, and Bitcoin has since adopted SegWit. Some opponents of SegWit, advocating the use of large-sized bitcoin blocks, have created hard forks of bitcoin that have produced bitcoin cash.
2. Lightning network
Lightning Network is a second-tier bitcoin technology that uses micropayment channels to expand the transactional capabilities of its blockchain.
Similar to the SegWit example, the introduction of the Lightning network on Litecoin has always been a test network proving that innovations can be made on Bitcoin. Charlie Lee also argued that “when the Bitcoin blockchain is crowded and expensive, it’s easy to use Litecoin for easy access to the Lightning network” ”
MimbleWimble is a privacy protocol based on confidential transactions that encrypts or hides information such as transaction amounts. Some people believe that MimbleWimble can reduce the size of blocks and increase scalability. Charlie Lee announced in early 2019 that Litecoin will continue to develop MimbleWimble, and since the beginning of 2021, development continues.