Definition of Litecoin
Launched in the year 2011, Litecoin is an alternative cryptocurrency based on the model of Bitcoin. Litecoin was created by an MIT graduate and former Google engineer named Charlie Lee. Litecoin is based on an open-source global payment network that is not controlled by any central authority. Litecoin differs from Bitcoins in aspects like faster block generation rate and use of script as a proof of work scheme.
Litecoins were launched with the aim of being the “silver” to Bitcoin’s “gold,” and have gained much popularity since the time of inception. Litecoin is a peer-to-peer internet currency. It is a fully decentralized open-source, global payment network. Litecoin was developed with the aim to improve on Bitcoin’s shortcomings and has earned industry support along with high trade volume and liquidity over the years. The broader differences between the two cryptocurrencies are listed in the table below.
|Creator||Satoshi Nakamoto||Charles Lee|
|Coin Limit||21 Million||84 Million|
|Block Generation Time||10 Minutes||2.5 Minutes|
|Initial Reward||50 BTC||50 LTC|
|Current Block Reward (as of June 2014)||25 BTC||50 LTC|
|Rewards||Halved every 210,000 blocks||Halved every 840,000 blocks|
|Difficulty Retarget||2016 Block||2016 Block|
Litecoin is designed to produce four times as many blocks as Bitcoin (1 new block every 2.5 minutes to Bitcoin’s 10), and it also allows for 4x the coin limit, making its main appeal over Bitcoin to do with speed and ease of acquisition. However, because Litecoin uses scrypt (as opposed to Bitcoin’s SHA-2) as a proof-of-work algorithm, the use of mining hardware such as ASIC miners or a GPU mining rig requires significantly more processing power.
Litecoin is consistently among the largest cryptocurrencies in terms of market capitalization (though still remaining far below that of Bitcoin) and it currently has more than 50 million coins in circulation.
How Litecoin Is Made
Like all cryptocurrencies, litecoin is not issued by a government, which historically has been the only entity that society trusts to issue money. Instead, being regulated by a Federal Reserve and coming off a press at the Bureau of Engraving and Printing, litecoins are created by the elaborate procedure called mining, which consists of processing a list of litecoin transactions. Unlike traditional currencies, the supply of litecoins is fixed. There will ultimately be only 84 million litecoins in circulation and not one more. Every 2.5 minutes (as opposed to 10 minutes for bitcoin), the litecoin network generates a what is called a block – a ledger entry of recent litecoin transactions throughout the world. And here is where litecoin’s inherent value derives.
The block is verified by mining software and made visible to any “miner” who wants to see it. Once a miner verifies it, the next block enters the chain, which is a record of every litecoin transaction ever made.
Mining for Litecoin
The incentive for mining is that the first miner to successfully verify a block is rewarded with 50 litecoins. The number of litecoins awarded for such a task reduces with time. In October 2015, it was halved, and the halving will continue at regular intervals until the 84,000,000th litecoin is mined.
But could one unscrupulous miner change the block, enabling the same litecoins to be spent twice? No. The scam would be detected immediately by some other miner, anonymous to the first. The only way to truly game the system would be to get a majority of miners to agree to process the false transaction, which is practically impossible.
Mining cryptocurrency at a rate worthwhile to the miners requires ungodly processing power, courtesy of specialized hardware. To mine most cryptocurrencies, the central processing unit in your Dell Inspiron isn’t anywhere near fast enough to complete the task. This brings us to another point of differentiation for litecoins; they can be mined with ordinary off-the-shelf computers more so than other cryptocurrencies can. Although the greater a machine’s capacity for mining, the better the chance it’ll earn something of value for a miner.