SUMMARY
Litecoin is an open-source, secured, decentralized blockchain network that facilitates instant transactions. In fact, Litecoin can handle higher transaction volume than the most popular cryptocurrencies like Bitcoin due to frequent block generation.
The wallet encryption feature of Litecoin prevents wallet-stealing viruses and ensures your authorization before sending payments. Above all, Litecoin miners receive 6.25 new Litecoins per block, and the network is scheduled to produce 84 million Litecoins, which is four times more than Bitcoins, making Litecoin mining a lucrative field for miners.
Litecoin Explained
Launched shortly after Bitcoin, Litecoin (LTC) was considered a potential altcoin in 2011. Since Litecoin is built by modifying the Bitcoin network, it has many similar features to Bitcoin. Both Bitcoin and Litecoin are open-source and decentralized global payment networks but vary in the mining algorithm.
Bitcoin follows the PoW-based SHA-256 algorithm, whereas Litecoin follows the same consensus mechanism but a different mining algorithm, Scrypt. In those early days, Litecoin was the best alternative to Bitcoin and was famously known as silver to Bitcoin’s gold.
Litecoin and its blockchain is robust and known for its security and reliability. For all these years, Litecoin hasn’t undergone any major attacks. Thus, it has become one of the most reliable cryptocurrencies among investors. Furthermore, maintaining privacy on the Litecoin network is relatively easier than Bitcoin, which charges higher transaction fees.
Litecoin payments are more common as many cryptocurrency payment processors accommodate Litecoin. Besides, Litecoin transactions are relatively cost-effective compared to other popular cryptocurrencies. For example, top cryptocurrencies like Bitcoin and Ethereum charge high transaction fees, which makes Litecoin transactions more affordable.
Understanding Litecoin Technology
An open-source cryptocurrency, Litecoin works almost like the top cryptocurrency, Bitcoin. Users can trade Litecoins peer-to-peer without any intermediaries, just like Bitcoins. Charlie Lee, the Litecoin founder, describes Litecoin as complementary to Bitcoin. Though Litecoin is similar to Bitcoin, it comes with certain modifications.
The modifications made to the Bitcoin blockchain to build the Litecoin blockchain required minimal development as Bitcoin itself is innovative. However, the slight improvements made to the Bitcoin blockchain network are significant as those changes are precise and significant. Litecoin addresses Bitcoin’s few shortcomings.
Though Litecoin follows the Proof of Work (PoW) consensus mechanism, the algorithm differs from Bitcoin’s SHA-256. For instance, Litecoin follows the Scrypt algorithm. Litecoin enables faster transaction confirmation times and enhanced storage efficiency than any other leading cryptocurrencies like Bitcoin.
Let’s discuss how Litecoins outperforms Bitcoin. The major advantage of Litecoin is faster block creation. It is four times faster than Bitcoin, with an average interval of 2.5 minutes rather than 10 minutes. The total number of units is also four times higher with Litecoins, which is 84 million rather than 21 million in Bitcoin. Lastly, mining difficulty is regulated for every two and a half days with Litecoin, unlike four weeks with Bitcoin.
On the flip side, Litecoin also halves like Bitcoin halves every 4 years. Now, the Litecoin reward is 6.25 LTC from 12.5 LTC.
How does Litecoin Function?
As an open-source and decentralized blockchain network, Litecoin functions without any intermediaries like banks or financial institutions for validating transactions. Like Bitcoin transactions, miners validate Litecoin transactions and add them to the distributed blockchain ledger, ensuring secure and transparent Litecoin transactions.
Litecoin miners use advanced Litecoin ASIC miners, precisely tuned for the Scrypt algorithm with high computational power to solve complex algorithmic problems and validate Litecoin transactions. Miners who solve the problem first and add the block to the network receive freshly mined new Litecoins as rewards.
As we know, Litecoin is an improvised version of the Bitcoin blockchain network; it shares features similar to those of Bitcoin. Though Litecoin and Bitcoin follow PoW-based mechanisms, the mining algorithms differ. For example, Bitcoin uses the SHA-256 algorithm, and Litecoin uses the Scrypt algorithm.
In short, Litecoin works similarly to Bitcoin with significantly enhanced features like faster transactions, wallet encryption, etc.
Litecoin Blockchain Details
The Litecoin blockchain network is robust and can handle enormous transaction volumes compared to Bitcoin. Moreover, the Litecoin blockchain network supports more transactions due to consistent and fast block generation.
The scalability of the Litecoin blockchain network is also excellent, as developers can scale up their applications without modifying the software in the future. Thus, Litecoin users get to enjoy faster confirmation times. Furthermore, they can quickly trade more Litecoins.
What is Litecoin Mining?
Litecoin mining is a validation process for transactions that happen in the Litecoin blockchain network. Miners who participate in the Litecoin blockchain network will solve complex puzzles, mine new Litecoins, and receive rewards.
Since Litecoin follows the PoW-based Scrypt algorithm, Litecoin miners use advanced mining hardware with high computational power to solve hash and mine new blocks. Thus, the Litecoin mining process is similar to Bitcoin mining.
Now, let’s see the Litecoin mining process in detail. The mining software in the mining rig generates encrypted numbers, attempting to predict a value lower than or equal to the target hash set by the mining network. For instance, the target hash is a hexadecimal value set by the mining algorithm that regulates the mining difficulty level.
Litecoin miners join the mining pool rather than solo mining, as it is tedious to mine Litecoins in solo mining. Miners in the pool can share their resources and knowledge and solve the hash. The first miner to guess the hexadecimal value smaller than the set target hash receives a reward of 6.25 Litecoin.
Litecoin Transactions Explanation
Let’s break down the Litecoin transaction process. Here is a step-by-step explanation of how Litecoin transactions work.
1. Initiate Litecoin transaction
The user wants to send Litecoins to another user. Firstly, the user needs to have Litecoin wallet software to initiate transactions.
2. Transaction Details
The sender would mention the recipient’s Litecoin address, the Litecoin amount to be transferred, and any other details they intend the recipient to know.
3. Digital Authentication
The sender’s Litecoin wallet uses the private key to authorize the transaction. Thus, Litecoin ensures secured transactions.
4. Transaction Broadcast
Once the transaction is authenticated, it is broadcast to the Litecoin network. The network participants validate it by solving complex mathematical problems and then include the transaction in a block.
5. Block Formation
A new block is created with the sender’s transaction details upon authorizing the transaction.
6. Transaction Confirmation
The transaction is confirmed and added to the blockchain ledger and is visible to the network participants.
7. Transaction Completion
Once the transaction is confirmed and included in the blockchain, the recipient can see the incoming Litecoins in their wallet. These Litecoins are now available for the recipient to spend or hold.
The entire Litecoin transaction is decentralized, ensuring security, transparency, and immutability. The confirmation time for a Litecoin transaction typically averages around 2.5 minutes due to Litecoin’s faster block generation.
Litecoin Wallet Functionality
The Litecoin wallet helps users send, receive, and store Litecoins securely. Wallet encryption enables users to secure their wallets. For instance, they can view transactions and account balances but must enter a password to spend Litecoins. That adds a layer of security to your Litecoin wallet while preventing it from any viruses and trojans. Thus, the Litecoin transactions are secure.
Sending Litecoins
Users can send Litecoins to anyone by specifying the recipient’s public address and the amount they want to transfer. After mentioning the details, they should authorize the transaction by entering the private key.
Receiving Litecoins
Users can give their Litecoin wallet’s public address to the sender. The wallet address acts as a place for others to send Litecoins.
Litecoin Transactions
All Litecoin transactions are recorded on the blockchain ledger once the network participants validate them. The transactions cannot be manipulated once they are added to the blockchain.
Litecoin Network Features
Litecoin’s network has features similar to the Bitcoin network, as it is Bitcoin’s enhanced version. However, the enhancements address many of Bitcoin’s drawbacks and provide several benefits like faster confirmations, quick transactions, better privacy, and decentralization.
SegWit
The Litecoin blockchain adopted Segregated Witness (SegWit) before Bitcoin. SegWit helps segregate digital signature data on every transaction to use the limited space better and address Bitcoin’s scalability problems. Later, the Bitcoin blockchain also adopted Segwit.
Lightning Network
The Lightning Network adds an extra layer to Bitcoin’s blockchain, making transactions fast while transaction fees are minimal. The extra layer has user-generated payment channels. Though the Lightning Network feature was initially designed to be implemented on the Bitcoin blockchain, the Litecoin network utilized it first.
Litecoin’s Lightning Network adoption has been slow compared to Bitcoin’s blockchain. The slowdown in LTC may be due to the base layer’s already low transaction fees. Charlie Lee suggested that Litecoin will be handy for users when the Bitcoin blockchain is congested or when the fees are exorbitant.
MimbleWimble
MimbleWimble’s core objective is to enhance transaction privacy. Since the Litecoin blockchain inherently exposes sender and recipient addresses and transaction amounts in every transaction, MimbleWimble technology offers a solution to address the privacy issue within the Litecoin network.
Litecoin History and Development
Litecoin was launched in 2011. As one of the early alternative cryptocurrencies to Bitcoin, Litecoin was highly successful in those initial years. However, Litecoin was dwarfed by the launch of numerous other cryptocurrencies over the years.
Since Litecoin is built on the Bitcoin blockchain’s base network, it shares features similar to those of Bitcoin. Even the Litecoin creator, Charlie Lee, explains Litecoin as the lite version of Bitcoin. He further adds that Litecoin is built out of the Bitcoin codebase with certain extra features.
Litecoin is also reliable and secure with a PoW consensus mechanism like Bitcoin. Plus, Litecoins will be limited in number like Bitcoin. For instance, there will be less than 84 million Litecoins in circulation. Litecoin also undergoes halving like Bitcoin every four years. At present, after Litecoin halving in August 2023, miners receive 6.25 Litecoins as rewards.
Litecoin Price and Market Analysis
Since cryptocurrency’s prices are highly volatile, tracking the price history is crucial to determine its profitability. Litecoin is no exception. Thus, tracking Litecoin’s price is essential to predict Litecoin’s profitability. Here is the Litecoin’s price history for the last year.
The graph depicts Litecoin’s recent downtrends. However, it is so common for cryptocurrencies and users can’t jump to a quick conclusion. Thus, users should watch the market trends and monitor the price history regularly to make informed decisions.
CONCLUSION
Litecoin is a fork of Bitcoin with all the benefits of the Bitcoin network while addressing the major drawbacks of Bitcoin. The code base of Bitcoin is altered, and Litecoin follows the PoW-based Scrypt algorithm, unlike Bitcoin’s SHA-256 algorithm.
Fast block generation times, quick transactions, better scalability and low transaction costs are some of the prime advantages of Litecoin. All of these Litecoin characteristics attracted many crypto enthusiasts towards Litecoin mining. If you’re an aspiring Litecoin miner, buying a high quality Litecoin miner (Scrypt miner) from a reputed mining hardware distributor will ease your Litecoin mining.
FAQs on Scrypt Algorithm
Name some differences between Litecoin and Bitcoin?
~ Litecoin follows the Scrypt algorithm, while Bitcoin follows the SHA-256 algorithm.
~ The maximum coin supply is 84 million for Litecoins, whereas 21 million for Bitcoin.
~ Litecoin transactions are cheaper than Bitcoin transactions.
Explain some ways to acquire Litecoin?
One can obtain Litecoin by buying it from crypto exchanges, mining it, or receiving it from others for the exchange of goods or services.
Where can we use Litecoins?
Litecoins are one of the prominent cryptocurrencies that are accepted by numerous merchants, exchanges, online platforms, and various service providers. Thus, users can use Litecoins almost anywhere.
RELATED ARTICLES
How to Mine Litecoin?
What is the Scrypt Algorithm and How does it work?
