What is Litecoin – A Beginner’s Guide
By: Steven Hay | Last updated: 11/9/20
Since its creation in 2011, Litecoin has become one of the more popular altcoins out there. This post explains exactly what Litecoin is, why it was created and how it is different from Bitcoin.
What is Litecoin Summary
Litecoin is a popular cryptocurrency which is similar to Bitcoin, with some significant differences.
Litecoin uses a different mining algorithm than Bitcoin (known as Scrypt). Its block mining time is 2.5 minutes, unlike Bitcoin’s 10. Finally, there can only ever be 84 million Litecoins in existence (compared to Bitcoin’s 21 million).
That’s Litecoin in a nutshell. If you want a more detailed explanation of Litecoin keep on reading, here’s what I’ll cover:
- What is Litecoin
- Litecoin VS. Bitcoin
- Frequently Asked Questions
Litecoin was created in 2011 by Charlie Lee, an ex-Google engineer, with the aim of being the silver to Bitcoin’s gold. In other words, Litecoin was designed from the get-go for faster, smaller payments than Bitcoin.
Technically, it was made by taking Bitcoin’s software and altering it, so it would be easier to mine, and that transactions would be made faster. Other than a few differences, Litecoin works in a similar manner to Bitcoin.
All Litecoin public addresses start with an ‘L’. Here’s an example:
Additionally, all Litecoin private keys start with ‘6’.
Perhaps the biggest difference between Bitcoin and Litecoin is the mining algorithm they use. Litecoin’s hashing algorithm is Scrypt while Bitcoin uses the SHA-256 algorithm for mining operations.
SHA-256’s tight security is a result of how complex it is. Due to that, it is also very slow and requires very strong computation equipment.
This is not the case with Scrypt. Thanks to its relative simplicity, Scrypt based coins like Litecoin, can be mined much faster using less advanced computation equipment (such as GPUs).
It is also worth mentioning that Scrypt is a Sequential Memory-Hard algorithm – a different approach than SHA-256, aimed to resist ASIC mining hardware.
However, ASIC hardware developers found a way to work around it, and nowadays you can mine Litecoin using ASICs as well as with GPUs.
As a result of Scrypt’s simplicity over SHA-256, Litecoin block confirmation time is ~2.5 minutes – 4 times faster than Bitcoin (~10 minutes per block added).
The main impact of this is a significantly faster transaction time than Bitcoin. To keep halving time in accordance with Bitcoin, Litecoin’s mining reward is halved every 840,000 added blocks, 4 times more blocks than Bitcoin (which is halved every 210,000).
Another important difference between Bitcoin and Litecoin is the number of total issued coins. Unlike Bitcoin’s 21 million coins in total, Litecoin has exactly 4 times that number, 84 million coins in total. This is done to keep the ‘silver to gold’ relation between Litecoin and Bitcoin.
Litecoin is mainly used for small payments that require faster confirmation time. For example, it makes more sense to use Litecoin to buy a cup of coffee than to use Bitcoin.
While Litecoin is based off Bitcoin’s code, it’s not considered a Bitcoin fork. This is mainly due to the fact that Litecoin began from scratch and not from a specific Bitcoin block like forks usually do.
Yes. Litecoin uses a Proof-of-Work consensus algorithm for mining.
Litecoin was designed to be the silver to Bitcoin’s gold – a faster if somewhat less secure way to send smaller payments. Since its inception, it gained significant popularity and has never left the crypto top 10 list.
That’s it! If you have any questions or wish to share your own experience with Litecoin, let me know in the comments section below!