What is LiteCoin and how does it work?
Litecoin explained
Litecoin (LTC), launched shortly after Bitcoin, was considered a potential altcoin in 2011. Litecoin was built by modifying the Bitcoin network, so it has many similar features to Bitcoin. Bitcoin and Litecoin are both open source and decentralized global payment networks, but their mining algorithms are different.
Bitcoin follows the PoW-based SHA-256 algorithm, while Litecoin follows the same consensus mechanism but a different mining algorithm, Scrypt. Initially, Litecoin was the best alternative to Bitcoin and was popularly known as silver to Bitcoin’s gold.
Litecoin and its blockchain are powerful and known for their security and reliability. Litecoin has not suffered any major attacks for several years. This makes it one of the most trusted cryptocurrencies among investors. Moreover, maintaining privacy on the Litecoin network is relatively easier than on Bitcoin, which charges higher transaction fees.
Litecoin payments are more common because many cryptocurrency payment processors accept Litecoin. Moreover, Litecoin trading is relatively cost-effective compared to other popular cryptocurrencies. For example, top cryptocurrencies such as Bitcoin and Ethereum charge high transaction fees, making Litecoin transactions cheaper.
Understanding Litecoin Technology
Litecoin, an open source cryptocurrency, works almost similarly to Bitcoin, the leading cryptocurrency. Users can trade Litecoin peer-to-peer, without any intermediaries, just like Bitcoin. Litecoin founder Charlie Lee explains that Litecoin complements Bitcoin. Litecoin is similar to Bitcoin, but with certain modifications.
Modifying the Bitcoin blockchain to build the Litecoin blockchain required minimal development, as Bitcoin itself is innovative. However, the small improvements made to the Bitcoin blockchain network are important because these changes are precise and important. In fact, Litecoin solves several of Bitcoin’s shortcomings.
Litecoin follows a proof-of-work (PoW) consensus mechanism, but its algorithm is different from Bitcoin’s SHA-256. For example, Litecoin follows the Scrypt algorithm. Litecoin offers faster transaction confirmation times and improved storage efficiency than other major cryptocurrencies such as Bitcoin.
Let’s discuss how Litecoin surpasses Bitcoin. Litecoin’s biggest advantage is faster block generation. The average interval is 2.5 minutes instead of 10, making it 4 times faster than Bitcoin. The total number of units is 84 million, which is four times more for Litecoin than Bitcoin’s 21 million. Lastly, mining difficulty is regulated every two and a half days for Litecoin, compared to four weeks for Bitcoin.
On the other hand, Litecoin also undergoes halving, just like Bitcoin halving every four years. Litecoin rewards are now 6.25 LTC, down from 12.5 LTC.
How does Litecoin function?
Litecoin, an open source and decentralized blockchain network, operates without intermediaries such as banks or financial institutions to verify transactions. Like Bitcoin transactions, miners verify Litecoin transactions and add them to the distributed blockchain ledger, ensuring secure and transparent Litecoin transactions.
Litecoin miners use advanced Litecoin ASIC miners fine-tuned for the Scrypt algorithm with high computational power to solve complex algorithmic problems and verify Litecoin transactions. The miner who solves the problem first and adds the block to the network is rewarded with freshly mined Litecoins.
As we know, Litecoin is an improvised version of the Bitcoin blockchain network. It shares similar features with Bitcoin. Litecoin and Bitcoin follow a PoW-based mechanism, but their mining algorithms are different. For example, Bitcoin uses the SHA-256 algorithm and Litecoin uses the Scrypt algorithm.
Simply put, Litecoin operates similarly to Bitcoin with significantly improved features such as faster transactions, wallet encryption, and more.
Litecoin Blockchain Details
The Litecoin blockchain network is powerful and can handle massive transaction volumes compared to Bitcoin. Additionally, the Litecoin blockchain network supports more transactions due to consistent and fast block generation.
The scalability of the Litecoin blockchain network is also excellent. This is because developers can extend their applications in the future without having to modify the software. Therefore, Litecoin users can enjoy faster confirmation times. Plus, you can trade more Litecoins faster.
What is Litecoin Mining?
Litecoin mining is the verification process for transactions that occur on the Litecoin blockchain network. Miners who participate in the Litecoin blockchain network earn rewards by solving complex puzzles and mining new Litecoins.
Because Litecoin follows the PoW-based Scrypt algorithm, Litecoin miners use advanced mining hardware with high computational power to solve hashes and mine new blocks. Therefore, the Litecoin mining process is similar to Bitcoin mining.
Now let’s take a closer look at the Litecoin mining process. The mining software on the mining rig generates encrypted numbers and attempts to predict a value that is lower than or equal to the target hash set by the mining network. For example, the target hash is a hexadecimal value set by the mining algorithm that regulates mining difficulty.
Litecoin miners participate in mining pools rather than mining alone. Because mining Litecoin is tedious in standalone mining. Miners in the pool can share their resources and knowledge and solve hashes. The first miner to guess a hexadecimal value less than the set target hash will receive a reward of 6.25 Litecoins.
Litecoin Transaction Explained
Let’s analyze the Litecoin trading process. Below is a step-by-step explanation of how Litecoin trading works.
1. Start Litecoin trading
Users want to send Litecoin to other users. First, users will need Litecoin wallet software to start trading.
2. Transaction details
The sender mentions the recipient’s Litecoin address, the Litecoin amount to be sent, and any other details that the recipient wishes to know.
3. Digital authentication
The sender’s Litecoin wallet uses the private key to authorize the transaction. Therefore, Litecoin ensures safe transactions.
4. Transaction Broadcast
Once the transaction is verified, it is broadcast on the Litecoin network. Network participants solve complex mathematical problems to verify this and then include that transaction in a block.
5. Block formation
When a transaction is approved, a new block is created with the sender’s transaction details.
6. Confirm transaction
The transaction is confirmed and added to the blockchain ledger and visible to network participants.
7. Complete transaction
Once the transaction is confirmed and included in the blockchain, the recipient will see the Litecoin coming into their wallet. The recipient can now spend or hold these Litecoins.
All Litecoin transactions are decentralized, ensuring security, transparency, and immutability. Confirmation times for Litecoin transactions typically average around 2.5 minutes due to Litecoin’s faster block creation.
Litecoin Wallet Features
Litecoin Wallet helps users send, receive, and store Litecoin securely. Wallet encryption allows users to protect their wallets. For example, you can view your transactions and account balance, but you must enter your password to use Litecoin. This adds a layer of security to your Litecoin wallet while protecting against viruses and Trojans. Therefore, Litecoin transactions are safe.
Users can send Litecoin to anyone by specifying the recipient’s public address and the amount they wish to send. After mentioning the details, you need to enter your private key to authorize the transaction.
Users can provide the sender with the public address of their Litecoin wallet. Your wallet address serves as a place for other people to send you Litecoin.
All Litecoin transactions are recorded on the blockchain ledger once they are verified by network participants. Once a transaction is added to the blockchain, it cannot be tampered with.
Litecoin Network Features
Litecoin’s network has similar features to the Bitcoin network in that it is an enhanced version of Bitcoin. However, the enhancements address many of Bitcoin’s shortcomings and offer several benefits, such as faster confirmations, faster transactions, better privacy, and decentralization.
The Litecoin blockchain adopted Segregated Witness (SegWit) before Bitcoin. SegWit separates digital signature data from every transaction, making better use of limited space and helping solve Bitcoin’s scalability issues. Later, the Bitcoin blockchain also adopted Segwit.
The Lightning Network adds an additional layer to Bitcoin’s blockchain, making transactions faster while minimizing transaction fees. An additional layer includes user-created payment channels. Lightning Network features were initially designed to be implemented on the Bitcoin blockchain, but the Litecoin network took advantage of them first.
Litecoin’s Lightning Network adoption has been slow compared to Bitcoin’s blockchain. The slowdown in LTC may be due to the already low transaction fees at the base layer. Charlie Lee suggested that Litecoin would be useful to users when the Bitcoin blockchain is congested or the fees are prohibitive.
MimbleWimble’s core goal is to enhance transaction privacy. Since the Litecoin blockchain inherently exposes the sender and recipient addresses and transaction amount in every transaction, MimbleWimble technology provides a solution to address privacy concerns within the Litecoin network.
Litecoin history and development
Litecoin was launched in 2011. Litecoin, one of the earliest alternative cryptocurrencies to Bitcoin, has enjoyed great success in its early years. However, Litecoin has been dwarfed by numerous other cryptocurrencies launched over the years.
Litecoin shares similar features with Bitcoin as it is built on the underlying network of the Bitcoin blockchain. Litecoin creator Charlie Lee also describes Litecoin as a light version of Bitcoin. He also added that Litecoin is built on the Bitcoin codebase with certain additional features.
Litecoin is also stable and secure thanks to its PoW consensus mechanism like Bitcoin. Additionally, Litecoin is limited in number like Bitcoin. For example, there are less than 84 million Litecoins in circulation. Like Bitcoin, Litecoin also experiences a halving every four years. Currently, after Litecoin halving in August 2023, miners will receive 6.25 Litecoin as a reward.
Litecoin price and market analysis
Since the prices of cryptocurrencies are highly volatile, tracking price history is important in determining profitability. Litecoin is no exception. Therefore, tracking the price of Litecoin is essential to predict its profitability. The Litecoin price history last year is as follows:
The graph clearly shows Litecoin’s recent decline. However, this is a very common occurrence in cryptocurrencies, so users cannot make any quick conclusions. Therefore, users should observe market trends and monitor price history regularly to make informed decisions.
