When talking about cryptocurrencies, the spotlight often falls on Bitcoin and Ethereum. But did you know that Litecoin is also a crypto giant? In fact, it is often referred to as the silver to Bitcoin’s gold.
Litecoin was created in 2011 by a former Google engineer called Charlie Lee. It was designed to address some Bitcoin limitations like slow transaction speed and high energy consumption. If you don’t know much about Litecoin and you’re curious to understand what it is, you are most welcome.
Follow closely as I walk you through what is Litecoin (LTC) and how does it work? I will also discuss its relevance in the crypto world and its significant use cases. Let’s get started!
KEY TAKEAWAYS:
- Litecoin is a decentralized peer-to-peer cryptocurrency that operates on an open-source blockchain.
- It was designed as a Bitcoin upgrade with faster transactions, higher supply, and the use of the Scrypt algorithm.
- LTC mining works through transaction initiation, validation, block formation, proof-of-work (PoW), and block addition.
- Litecoin is used for everyday payments, as a digital store of value, and as a testbed for innovation.
What is Litecoin (LTC)?
Litecoin is a decentralized peer-to-peer cryptocurrency that operates on an open-source blockchain. Similar to Bitcoin, it allows you to send and receive funds without the need for intermediaries. However, unlike the digital gold, it is faster, more efficient, and more affordable.
Litecoin went live on October 13, 2011, and was one of the earliest altcoins to hit the market. Today, it serves as a payment solution and platform for numerous blockchain innovations.
Key Features Of Litecoin
As earlier mentioned, Litecoin was launched to complement Bitcoin by improving on some of its shortcomings. Thus, the major features of Litecoin include:
- Faster transactions: Litecoin’s block time is 2.5 minutes, which is significantly shorter than Bitcoin’s 10 minutes. This means transactions get confirmed more quickly.
- Higher supply: Litecoin’s total supply is capped at 84 million — four times more than Bitcoin’s 21 million supply cap. As such, Litecoin is more affordable and accessible.
- Scrypt algorithm: LTC uses the Scrypt algorithm for mining. This is less computationally intensive than Bitcoin’s SHA-256.
How Does Litecoin Work?
Just like Bitcoin, Litecoin operates on a decentralized blockchain. Here is a stepwise breakdown of how it works.
- Transaction initiation: When a user sends Litecoin, the transaction details are broadcast to the network. This information includes the sender’s address, the recipient’s address, and the amount to be transferred.
- Validation: Miners validate the transaction to ensure it complies with the blockchain rules. This includes verifying that the sender has sufficient funds and that the transaction is not a duplicate.
- Block formation: Confirmed transactions are grouped into a block. Every block has a list of transactions, a time stamp, and a reference to the previous block in the chain.
- Proof-of-work (PoW): Litecoin uses a proof-of-work (PoW) consensus mechanism, where miners race to solve a maths problem. The first person to do so earns the right to add the new block to the blockchain.
- Block addition: The other nodes in the network verify the new block before it is added. The miner who solved the puzzle receives new Litecoin and the block’s transaction fees.
Things To Note About Litecoin Mining
Mining is important to Litecoin’s operation because it is how new coins are added to the network. Here are some things to know about LTC mining:
- Litecoin’s Scrypt is more memory-intensive than CPU-intensive. As such, it is more environmentally friendly and accessible for individual miners, unlike Bitcoin’s SHA-256.
- Litecoin miners earn 12,4 LTC for every block mined. However, this reward is halved approximately every four years in a process called halving.
Read Also – Everything You Need to Know About Bitcoin Halving
LTC Use Cases
Litecoin’s versatility makes it suitable for the following applications:
- Everyday payments: Litecoin’s fast transaction times and lower fees make it suitable for everyday purchases and transfers.
- Testbed for innovation: LTC has been used to try new blockchain technologies, such as Lightning Network and Segregated Witness before they were implemented in Bitcoin,
- Digital store of value: Litecoin is considered a reliable store of value by many crypto investors.
Conclusion
While Litecoin may not always be in the headlines, its impact on the crypto world is undeniable. With its faster transactions, lower fees, and robust network, it has proven resilient and relevant in the industry. If you want a reliable payment method or an easy way to understand how crypto works, then LTC is a good place to start. Indeed, its tech advancement proves that it will remain a key player in the blockchain space for years to come.
Reference
- bitstamp.net – What is Litecoin? (LTC)
- cointelegraph.com – What is Litecoin (LTC), and how does it work?
- investopedia.com – Litecoin (LTC): What It Is, How It Works, vs. Bitcoin
