What Is Litecoin? What Difference Does It Make?
By Tofiq Aliyev
On Nov 30, 2020
Table of Contents
The story began with Bitcoin and continues with a whole bunch of cryptocurrencies. The new stage in the financial system flourished quickly after the mysterious Satoshi Nakamoto. While the world was searching for remedies for the economic breakdown, a novel method of payment and financial tool emerged. The technology was much more different than we used to. This technology makes progress, and now it captures a lot of attention and proves itself as a reliable instrument. In the article, we will examine the next important actor in the crypto revolution.
History of Litecoin
Litecoin (Ł) is one of the best alternatives for Bitcoin. Bitcoin was the foundation, and other cryptocurrencies used it as a sample to build on it. Litecoin was released on GitHub as an open-source code by Charlie Lee on October 7, 2007. Litecoin began to operate on October 13, 2011. It is the source fork of Bitcoin Core. Litecoin has many differences from the original code, and those made for simplifying the utilization of cryptocurrency as a medium of payment. Litecoin was the first cryptocurrency in the top five to adopt Segregated Witness (SegWit), which is used to lower the size of transaction data to make payments faster.
How Did Charlie Lee Come Up with The Idea?
Unlike Bitcoin, Litecoin has a real author. The creator of Litecoin, Charlie Lee, has some interesting background. He was born in Côte d’Ivoire. Then he came to the United States to boarding school. Then he got accepted by MIT as his father. He was a Google employee when he first heard about bitcoin in 2011 in the Silk Road article. The idea of cryptocurrencies got the attention of Charlie Lee. He created Fairbrix before Litecoin, but due to some configuration issues, it did not prove itself. Litecoin is the masterpiece of Charlie.
Charlie Lee likes to refer to Litecoin as a complement to Bitcoin rather than a competing currency. He thinks that if Bitcoin is gold in the cryptocurrency world, then Litecoin is silver. As its name suggests, Litecoin is here to make fast and cheap the transaction. To make those real, Litecoin reduces the time needed to generate block to 2.5 minutes instead of 10 minutes in Bitcoin. Then Litecoin began to implement Segregated Witness. In addition to that, in May 2017, they made the first transaction using Lightning Network. These features make Litecoin more user-friendly. Being easy to use and user-friendly is one of the main focus points of Litecoin.
Consensus and Mining Process of Litecoin
Before talking about mining, we should talk about the hash function used in Litecoin. Litecoin utilizes a different kind of hash function from Bitcoin. Bitcoin uses SHA-256, and Litecoin adopted scrypt. Litecoin is the first cryptocurrency that adopted scrypt. You can mine Litecoin just with your personal computer, and it needs fewer resources, only a CPU or GPU for mining. However, Bitcoin miners use complicated tools, such as ASIC equipment to mine coins. So, it means that Litecoin is much more energy-efficient than Bitcoin.
According to Lee, many cryptocurrency creators premine a significant amount of coins and making rich themselves, and it should not be like that. He thinks that creators have to possess the same rights as users. They should mine their coins as others do. They should mine their coins as others do. Litecoin will come with 150 pre-mined coins (genesis block and two validated blocks). At the initial stage, miners will get 50 coins per block, and after that, the mining rewards will decrease. Halving will be done similarly to Bitcoin. If we compare with Bitcoin, which after each 210 000 blocks, halving happened. Halving will occur in Litecoin after every 840 000 blocks. The total amount of coins will be four times more than Bitcoin (84 million for Litecoin, 21 million for Bitcoin).
MimbleWimble in Litecoin
Charlie Lee once highlighted the importance of the fungibility and the privacy of cryptocurrencies. According to the interview he had, he mentioned that those characteristics are lacking in Litecoin and Bitcoin. If you take out cash from your wallet, it does not matter which one you take, and it must be the same for the cryptocurrencies. However, cryptocurrencies have a history of transactions that you made previously. If you want to pay with cryptocurrency, they may not accept it if you got it from gambling or the darknet. It also covers the privacy of the coin. If they can look into your history, it means you do not have privacy in the marketplace. Due to those reasons, Bitcoin and Litecoin need to improve those aspects of the transaction.
Here MimbleWimble comes to the stage. MimbleWimble will solve these issues to some extent. MimbleWimble supports Confidential Transactions. The confidential transaction includes “blinding factors” that encrypt the values, and they will not be easily visible. MimbleWimble will combine all the inputs and all the outputs, and it will create a kind of a large transaction that will be hard to determine which transaction belongs to whom. As we can see, it will solve privacy and fungibility issues to some level. Also, there will be winnings from the scalability prospect. MimbleWimble will combine some parts of the transactions, and it will take less amount of space. Litecoin plans to include the MimbleWimble protocol in 2021. The inclusion of this protocol will improve.
Litecoin and Cardano, Velvet Fork
There is some partnership news from Litecoin and Cardano. The creator of Cardano, Charles Hoskinson, suggested a partnership on blockchain interoperability to Charlie Lee. David Schwartz, the Project Director of the LTC Foundation, had some conversations with the Cardano team about the cross-chain payment system. Reportedly, the partnership and the fork can bring new advantages to Litecoin. It will improve scalability, make the cross-chain transaction possible, and introduce the smart contract. This event is called velvet fork, which is neither hard nor a soft fork, and miners will continue serving to Litecoin network even if they did not upgrade the system. The partnership could open new horizons for both cryptocurrencies.
As we can see, Litecoin is one of the innovative cryptocurrencies around. It is remarkable if you are unique in the original field. If Litecoin continues this flow, then it can accumulate benefits in the sector.