What is Litecoin? How Does It Work? A Comprehensive Guide

What Is Litecoin (LTC)?

Litecoin (LTC) is a cryptocurrency that was created in 2011 from a fork in the Bitcoin blockchain. It was founded by a former Google engineer named Charlie Lee1, who designed it to address concerns that Bitcoin was becoming too centrally controlled and to make it more difficult for large-scale mining firms to gain the upper hand in mining. Although Litecoin was unsuccessful in preventing enterprise miners from taking over the lion’s share of Litecoin mining, it has reworked itself into a minable coin that arguably offers an improved peer-to-peer payment solution than Bitcoin.

Key Takeaways

  • Litecoin shares features similar to Bitcoin but has a different algorithm.
  • Litecoin has a faster transaction processing time compared to Bitcoin, making it more efficient for daily use.
  • Litecoin’s most recent halving event decreased mining rewards to 6.25 LTC per completed block.
  • LTC is one of the most successful Bitcoin forks in terms of market capitalization and adoption.

What Is The History of Litecoin?


In 2011, Charles Lee, a former Google engineer, unveiled Litecoin, a cryptocurrency inspired by Bitcoin’s protocol. Litecoin aimed to address some of Bitcoin’s shortcomings, specifically its slow block generation time.

In April 2013, Litecoin’s market capitalization surpassed $1 billion, becoming the second cryptocurrency to achieve this benchmark after Bitcoin. The following year, in February 2014, the Litecoin Foundation2 was established to foster the development and adoption of the cryptocurrency.

2017 marked a pivotal year. The cryptocurrency’s price skyrocketed, reaching an all-time high of around $4103, fueled by the broader cryptocurrency bull market. In October of that year, MimbleWimble, a privacy-enhancing protocol, was integrated into Litecoin’s code base but remained inactive.

However, the cryptocurrency market experienced a downturn in early 2018, and Litecoin’s price suffered a significant decline alongside the broader market. Nevertheless, Litecoin’s development continued, and in March 2022, MimbleWimble4 became optional for Litecoin users through a soft fork upgrade, introducing optional privacy features.

In August 2023, Litecoin underwent its third halving event, reducing the block reward from 12.5 LTC to 6.25 LTC. Halving events are part of Litecoin’s monetary policy and are designed to control inflation and increase the scarcity of the cryptocurrency.

How Does Litecoin Work?


Litecoin operates on a decentralized network secured by cryptography. Transactions are verified and recorded on a public ledger known as a blockchain, ensuring transparency and immutability. Just like Bitcoin, the system operates using proof-of-work miners that add transaction data to the newest block on the chain. Each block contains transaction information and cannot be changed retrospectively.

What Are Litecoin Halving Events?

Halving is a process that reduces the reward given when a block’s hash and transaction information is validated and a new block is created. Halving reduces the number of Litecoins awarded by half, reducing supply growth. The halving dates for LTC are:

  • Aug. 25, 2015: 50 to 25 LTCs
  • Aug. 5, 2019: 25 to 12.5 LTCs
  • Aug. 23, 2023: 12.5 to 6.25 LTCs

Litecoin’s Hashing Algorithm

Litecoin uses a hashing algorithm called Scrypt, which is more memory-intensive and slower than SHA-2565. Scrypt found greater acceptance in the cryptocurrency community after the 2011 Tenebrix project modified it to work with regular CPUs for mining. The significantly larger memory requirements for Scrypt made it difficult to develop ASIC miners.

One notable advantage of Scrypt was its resistance to being mined with ASIC (Application-Specific Integrated Circuit) hardware initially. ASICs are specialized hardware designed for a specific task, and they can outperform general-purpose hardware like CPUs or GPUs in mining efficiency. The larger memory requirements of Scrypt made it less feasible to develop ASIC miners for Litecoin, which arguably reduces the danger of network domination by large industrial-scale miners.

What’s The Difference Between Litecoin and Bitcoin?

While Bitcoin and Litecoin share many similarities, there are also some key differences between the two cryptocurrencies. Here’s a table summarizing the key distinctions:

FeatureBitcoinLitecoin
AlgorithmSHA-256Scrypt
Block Time10 minutes2.5 minutes
Transaction Speed3-7 transactions per second56 transactions per second
Total Supply21 million84 million
Market Cap$840 billion$5.4 billion
Litecoin is a Bitcoin fork that offers faster transaction speeds and lower block times.

Algorithm

Both Bitcoin and Litecoin use cryptography to secure their networks, but they employ different algorithms: Bitcoin relies on SHA-256, while Litecoin utilizes Scrypt. SHA-256 is a more complex algorithm, which translates to higher energy consumption and slower transaction speeds. Scrypt, on the other hand, is more energy-efficient and enables faster transaction processing.

Block Time

The time it takes to generate a new block on the blockchain is a crucial factor affecting transaction speed. Bitcoin’s block time is 10 minutes, while Litecoin’s is 2.5 minutes6. This means that Litecoin transactions are processed four times faster than Bitcoin transactions.

Transaction Speed

Transaction speed refers to the number of transactions that can be processed per unit of time. Due to its shorter block time, Litecoin can handle significantly more transactions per second than Bitcoin. Litecoin can process up to 56 transactions per second, while Bitcoin’s transaction capacity is limited to 3-7 transactions per second.

Total Supply

The maximum number of coins that can be created is another distinguishing factor. Bitcoin has a finite supply of 21 million coins, while Litecoin has a total supply of 84 million7. This difference reflects Litecoin’s aim to address Bitcoin’s perceived scarcity and provide more flexibility for usage.

How Has Litecoin (LTC) Traded In 2023, And What Is The Litecoin Price Prediction?

The Litecoin (LTC) halving in August had led to predictions from some analysts of a massive rally, but several months later, it has still failed to materialize. LTC is set to end 2023 essentially flat at around $73, while Bitcoin has had an incredible 2023, returning over 160%.

Coincodex8 has issued a very bullish Litecoin forecast with a maximum price target of $111 for 2024 and over $300 for 2025. However, they don’t expect LTC to return to its all-time high of $410 any time soon.

Cryptopolitan9 is very bullish on Litecoin. In 2023, they expect it to reach $100, but this seems increasingly unlikely as the end of the year is just around the corner. By 2026, they see LTC trading above $300 and setting a new all-time high in 2028.

Remember that crypto prices are extremely volatile, and you should always do your own research before risking your capital. Nothing in this post should be considered as financial advice.

Litecoin has had a slow year, trading mostly flat, but over the past five years, it has returned over 215%.
Litecoin has had a slow year, trading mostly flat, but over the past five years, it has returned over 215%. Source: TradingView

Final Thoughts on Litecoin

Litecoin, like many Bitcoin forks, was born out of the idea that Satoshi’s vision could be improved without giving up the core features of Bitcoin philosophy, namely decentralization and privacy. Litecoin has been an enormous success overall; it has an impressive market cap and decent adoption and has effectively mirrored Bitcoin’s features while improving transaction speeds and costs. However, the LTC coin has been struggling to keep up with BTC stagnating throughout 2023 while BTC has surged by 160%.

Frequently Asked Questions

Where Can You Buy Litecoin?

Litecoin can be traded on leading crypto exchanges, including Binance, Kraken, Coinbase, and BitMart.

How is Litecoin different from Bitcoin?

Litecoin is a cryptocurrency that was created in 2011 by Charlie Lee as a fork of the Bitcoin blockchain. While both Litecoin and Bitcoin are decentralized digital currencies, Litecoin has several key differences that set it apart from Bitcoin. Firstly, Litecoin has a faster block generation time of 2.5 minutes compared to Bitcoin’s 10 minutes. This means that transactions are confirmed more quickly on the Litecoin network. Additionally, Litecoin has a different mining algorithm than Bitcoin, which makes it more accessible to individual miners with less powerful hardware.

What are the potential uses and applications of Litecoin?

Litecoin can be used as a digital currency for buying goods and services online, and it can also be used for peer-to-peer transactions. Additionally, Litecoin can be used as a store of value, similar to gold or other precious metals. Some investors also see Litecoin as a potential hedge against inflation or economic uncertainty.

Peter Barker

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Peter Barker

Peter is an experienced crypto content writer and a DeFi enthusiast with more than 3+ years of experience in the space. Previously a journalist and news editor at a leading European news sourcing agency.

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