What is Litecoin (LTC): A Peer-to-Peer Cryptocurrency Like Bitcoin

Dean Decho, 12 min read
Last Updated: 24 September, 2023

litecoin logo with background

Litecoin is a decentralized cryptocurrency created in October 2011 by former Google employee Charlie Lee. It is similar to Bitcoin but with some technical differences that aim to make Litecoin lighter and cheaper to use.

Like Bitcoin, it is a decentralised peer-to-peer network that allows funds to be transferred without involving a central authority. However, unlike Bitcoin, Litecoin has a much shorter block time, which means that transactions are confirmed more quickly.

In addition, it uses a different mining algorithm, called Scrypt. This makes it more accessible to miners who do not have access to expensive ASICs. For this reason, Litecoin is often seen as a silver Bitcoin versus a gold Bitcoin. While the coin does not have the same market capitalisation as Bitcoin, it is an important part of the cryptocurrency ecosystem.

History of Litecoin

Charlie Lee first announced Litecoin on October 7, 2011 on the popular cryptocurrency forum BitcoinTalk. He stated Litecoin was inspired by Bitcoin but aimed to be the “silver” to Bitcoin’s “gold” – a lighter and cheaper cryptocurrency that could be used for smaller, everyday payments.

Lee wanted Litecoin to complement rather than compete with Bitcoin. As a software engineer at Google, he had experience coding in C++ and wanted to create a cryptocurrency using the scripting language. On October 13, 2011 the Litecoin network went live with the genesis block being mined.

Some key events in Litecoin’s history:

  • October 7, 2011 – Announced on BitcoinTalk forum
  • October 13, 2011 – First block mined
  • November 2013 – Market cap surpasses $1 billion
  • May 2017 – First Lightning Network transaction using Litecoin
  • August 2017 – Litecoin implements SegWit
  • February 2018 – Reaches $250 per coin and a market cap of $14 billion
  • May 2019 – Charlie Lee announces the Litecoin Foundation

Since its creation, Litecoin has established itself as one of the top cryptocurrencies behind Bitcoin in terms of market capitalization, popularity, and adoption. It has inspired many other altcoins and is accepted by hundreds of merchants and businesses.

How does Litecoin work?

Litecoin is a peer-to-peer digital currency and operates on an open-source, decentralized global payment network. Its creation and transfer is based on cryptographic protocols that allow transactions to be conducted between peers directly without needing a central intermediary.

Some key components of the network include:

  • Blockchain – A public ledger that records Litecoin transactions. New transactions are grouped into blocks which are added sequentially to create a chain of blocks.
  • Mining – A process where miners use computing power to solve complex math problems and generate new blocks. Miners are rewarded with newly created Litecoins.
  • Transactions – Transfers of LTC from one wallet address to another. Transactions are recorded on the blockchain.
  • Consensus – A system for confirming transactions and adding new blocks to the blockchain. A Proof of Work consensus is used here.

What is the difference between Litecoin and Bitcoin?

Although bitcoin remains the best known and most popular cryptocurrency, it is not the only one. In fact, there are hundreds of different cryptocurrencies available on the market. One alternative to Bitcoin blockchain is Litecoin.

Like Bitcoin, Litecoin is a decentralised peer-to-peer digital currency. However, it has several features that distinguish it from its more famous cousin. Firstly, Litecoin can be mined faster than Bitcoin. In addition, its transactions are confirmed faster and it has more tokens that can be mined. As a result, Litecoin has become an attractive option for those seeking an alternative to Bitcoin.

Key differences between Litecoin and Bitcoin

As the first major altcoin, Litecoin is often compared to Bitcoin. Here are the key differences:

Litecoin Bitcoin
Creator Charlie Lee Satoshi Nakamoto
Launch date October 2011 January 2009
Max supply 84 million 21 million
Halving cycle Every 840,000 blocks (~4 years) Every 210,000 blocks (~4 years)
Block generation 2.5 minutes 10 minutes
Consensus algorithm Scrypt PoW SHA-256 PoW
Mining process CPU/GPU friendly ASIC dominated
Transaction fees Near zero Higher fees

In summary, Litecoin was created after Bitcoin as a faster and lighter alternative. It has 4 times the maximum supply, a faster block time, and uses Scrypt mining that is more accessible for regular computers than Bitcoin’s ASIC-dominated mining.

This allows Litecoin to have lower fees, faster transaction confirmations, and a more decentralized network. This crypto coin is positioned as “silver” to Bitcoin’s “gold” – great for smaller everyday payments while Bitcoin is better suited for higher value transfers.

Although there are many similarities between Bitcoin and Litecoin, there are also some important differences between the two cryptocurrencies.

Litecoin blockchain time

The network creates new blocks at 2.5-minute intervals, while bitcoin does so every 10 minutes. This results in faster confirmation of transactions. As a result, it is seen by many as a more convenient means of payment than Bitcoin.

A higher total supply

As a result of four times the time it takes to create a new blockchain, the total supply is four times that of Bitcoin (21 million), resulting in 84 million coins of max supply.

Scrypt vs. SHA256

Both Bitcoin and Litecoin operate on proof-of-work (PoW) algorithms. While bitcoin uses SHA256, Litecoin is with Scrypt. In order to work, Scrypt algorithm does not need as high hash rate like SHA-256 does.

Mining Litecoin – how to mine this crypto coin

Mining is the process of using computing power to verify transactions and generate new coins on the Litecoin blockchain. It provides the cryptocurrency its own capital and confirms ledger entries without needing a central authority. Anyone can become a miner and earn rewards in newly created LTC proportional to their contributed work.

How Litecoin Mining Works

Litecoin operates on a Proof of Work consensus that relies on computing power to secure the network. It uses an algorithm called Scrypt rather than Bitcoin’s SHA-256. Scrypt provides some advantages:

  • ASIC-resistant – Allows regular GPUs and CPUs to feasibly participate in mining instead of just specialized ASIC hardware. This spreads out mining power decentralized across more users.
  • Accessible – The ability to mine coins with consumer GPUs enabled many people to get into mining Litecoin when GPUs became unviable for Bitcoin. This boosted interest and adoption early on.

For miners, there are a few steps involved:

  1. Obtain a wallet to receive mined coins.
  2. Join a mining pool or operate as a solo miner. Pools allow smaller miners to combine computing power and share rewards.
  3. Acquire suitable hardware – Scrypt ASIC miners or GPUs designed for crypto mining.
  4. Install mining software and configure settings to connect to the pool.
  5. Input the wallet address to receive rewards.
  6. Run the mining operation with high uptime.

As the network difficulty rises over time, mining becomes harder and block rewards decrease.

The network started with 50 LTC block rewards but the amount halves every 840,000 blocks, or about every 4 years. The last halving was in Aug 2023 when reward was reduced to 6.25 LTC. The next halving event will likely occur in 2027.

Litecoin Mining Strategies

There are different strategies miners can take:

Do-It-Yourself

  • Assemble your own mining rig with GPUs or ASICs
  • Maintain and configure the hardware yourself
  • Knowledgable but more time intensive

Cloud Mining Services

  • Purchase contracts for hashrate from remote data centers
  • Quick and easy setup but less control
  • Avoid hardware costs and maintenance

Mining Pools

  • Join a pool to combine computing power with other miners
  • Shared rewards based on proportional hash contributions
  • Smooths out reward variance for smaller miners

Key Factors for Litecoin Mining

No matter the approach, there are essentials for profitable Litecoin mining:

  • Low electricity costs
  • Efficient and reliable hardware
  • Membership in a stable mining pool
  • Up-to-date mining software
  • A wallet to receive rewards

With the right setup and strategy, Litecoin mining can be a fun and rewarding way to participate in blockchain technology. The Scrypt algorithm makes it more accessible for everyday miners compared to Bitcoin mining. As interest and adoption continues growing, Litecoin mining remains a compelling option for entering the cryptocurrency space.

How is Litecoin used? Transactions and means of payment

Litecoin transactions

The main function of Litecoin is providing fast, inexpensive cryptocurrency transactions between users.

Some key transaction features:

  • Almost zero fees – transaction fees are optional and minuscule, typically under $0.01
  • Fast confirmation time – blocks are generated every 2.5 minutes on average
  • Global accessibility – LTC can be sent anywhere in the world within minutes
  • Censorship resistance – no entity can block transactions
  • Decentralized – no middleman needed, transactions occur directly between peers
  • Secure – transactions are irreversible and recorded permanently on the blockchain

A Litecoin transaction involves:

  1. The sender initiates a transfer by entering the receiver’s address, amount to send, and cryptographic signature. This happens via the sender’s wallet software.
  2. The transaction is broadcasted to nodes on the Litecoin network and included in a new block.
  3. As the block propagates, network nodes verify the transaction’s validity.
  4. After 2.5 minutes on average, the transaction receives 6 confirmations by being buried under 6 sequential blocks and is completed.

Litecoin’s Scrypt mining algorithm and more frequent blocks allow it to confirm transactions faster than Bitcoin. While Bitcoin takes 10 minutes on average to mine a block, Litecoin takes just 2.5 minutes. This enables faster transaction confirmation times.

Litecoin as a payment system

Litecoin accepted here sticker

When considering the utility of Litecoin, its primary use case stands out: serving as a means of payment. It boasts a fast and secure P2P network with minimal transaction fees. This vision was Charlie Lee’s aim when he initiated the project in 2011. The years that followed have seen consistent growth and achievements aligned with this goal.

In February 2019, the Litecoin Foundation announced a collaboration with SpendApp, a multi-cryptocurrency wallet that integrates with bank accounts.

Thanks to affiliated VISA cards, Litecoin, along with 15 other cryptocurrencies, can be utilized as a payment method at over 40 million merchants globally. It’s important to note that while these merchants may not directly accept cryptocurrencies, they do recognize VISA card transactions. Beyond places where the SpendApp Visa card is accepted, numerous other (online) vendors now directly accept Litecoin.

However, while Litecoin transactions are verified more rapidly than Bitcoin’s (2.5 minutes compared to 10), this duration is still somewhat lengthy for convenient on-the-spot purchases.

After all, who would want to wait more than two minutes before the staff at a local coffee shop makes sure that the coffee ordered has actually been paid for?

Other use cases

In addition to being a means of payment, Litecoin can be used to send large sums of money safely and cheaply to anyone, regardless of their location in the world. In November 2018, for example, there was a $62 million LTC transaction for which the operator had to pay a $0.50 fee. Competitors such as Paypal, Western Union and VISA cannot keep up, charging triple-digit fees for the aforementioned amount of Litecoin transactions.

Given this aspect of usage, the counter-argument of critics is often that such transactions are at least partially burdened by anonymity. Since transaction data is included, the public ledger is listed and the origin of the coins can be determined by blockchain analysis. But this is about to change, as announced on Twitter by Charlie Lee, founder of Litecoin. According to him, this is the new direction of development.

To achieve this, he believes that confidential transactions (TC) should be introduced. This is a software protocol developed by the creator of Bitcoin Core, Gregory Maxwell, which allows private transactions. Since there are some technical difficulties to overcome, such as big data, it is not yet known when and how this technological improvement will take place.

Next Litecoin halving, supply and economics

Litecoin has a maximum supply limit of 84 million LTC. This finite supply is distributed via mining over time. As of September 2023, over 74 million coins have been mined already.

The limited supply supports its’s value due to principles of scarcity. Since no more than 84 million LTC can ever exist, it operates outside of central banks and monetary inflation policies.

Litecoin releases new coins in the form of block rewards paid to miners. The initial reward was 50 LTC but this amount halves every 840,000 blocks which occurs approximately every 4 years.

Halving events reduce the block rewards by 50% each time. There have been three halvings so far:

  • August 2015 – Reward dropped from 50 to 25 LTC
  • August 2019 – Reward dropped from 25 to 12.5 LTC
  • August 2023 – Reward dropped from 12.5 to 6.25 LTC
  • 2027 – Reward will drop from 6.25 to 3.125 LTC

This controlled release of Litecoin via periodic halvings ensures continued incentivization for miners even as the maximum supply is approached.

What makes Litecoin unique? Technical features

Litecoin technology

Atomic exchanges of Litecoin

Atomic swaps are a very useful feature of Litecoin. They allow cryptocurrencies such as BTC ⇔ LTC to be exchanged without the need for a trading centre. If someone owns a bitcoin and wants to exchange it for the same value in litecoin, they can do so if there is someone else who wants to do so in the opposite direction (LTC ⇔ BTC). This is done via HTLCs (‘Effective Blockchain Contracts’). In this case, funds can be exchanged on a predetermined date.

Resistance to flood attacks

In July 2015, the bitcoin network was the target of a so-called flood attack. In such an attack, the attackers’ goal is to cripple the blockchain through a large number of small spam transactions. 80.000 transactions were temporarily confirmed on Mempool as a result of this attack.

In an interview with Cointelegraph, Charlie Lee commented on this attack on bitcoin and how he found a solution for Litecoin: “The solution put in place for Litecoin is to charge the sender for every small production created. For example, in this particular attack, the sender charges a fee for sending a maximum of 34 small outputs worth 0.00001 BTC.

With the amendment, this fee would be 34 times higher, so the attacker would have a significantly higher cost to execute the spam attack. The concept is very simple: the sender should pay for every small output he creates’ It is therefore very expensive and unattractive to launch a flooding attack on the network.

Litecoin Price

Litecoin is currently trading around $65 as of September 2023. LTC has a market capitalization of approximately $4.8 billion, making it one of the top 15 cryptocurrencies. The coin price fluctuates constantly based on trading volumes and market sentiment.

To see this coin’s latest price in real-time as well as historical charts, visit Litecoin Price Charts & Market Data.

Litecoin Price Predictions

Many experts have offered predictions on potential future price growth for Litecoin. Some see LTC reaching $500 or even $1000 long-term if adoption continues growing. However, crypto prices are notoriously difficult to predict accurately.

For more detailed Litecoin price predictions and analysis, check out Litecoin Price Predictions for 2025 and Beyond.

How to Buy Litecoin

There are several options for buying Litecoin to add it to your cryptocurrency portfolio:

  • Cryptocurrency exchanges like Binance, Bybit, or Bitget
  • Trading platforms like eToro
  • ATMs and online brokers like Libertex
  • Direct mining

For a full guide on the various methods to acquire LTC, visit How to Buy Cryptocurrency – A Complete Beginner’s Guide.

How to store LTC securely?

Storing Litecoin safely To protect your investment, it is best not to leave LTC on the exchange. If you don’t control your private keys, you could be a victim of hacking. Here are some popular software and hardware wallets you can use to exchange the coins.

Hardware wallet

As a hardware wallet for Litecoin, we recommend Ledger Nano. Together with Trezor, it is the most popular hardware wallet and supports Litecoin, among other things. It allows offline management of private keys. It includes an OLED display, a spare key and an additional PIN to unlock the device.

Wallet software

If you are looking for a software wallet for your computer to protect Litecoin, we recommend Exodus Wallet. It supports many other cryptocurrencies and is constantly being improved by a team of developers led by JP Richardson and Daniel Castagnola. It is available for Windows, Mac and Linux.

Mobile wallet

For mobile devices (Android and iOs), software wallets are best suited. Loaf wallet, developed by the Litecoin Foundation, it is very easy to use. It uses AES hardware encryption and is protected against various forms of malware. It is open source and can be verified by anyone.

Problems faced by Litecoin

Litecoin is a cryptocurrency that has been around since 2011. In many respects it is similar to Bitcoin, but there are some key differences. Firstly, it has a higher transaction speed than Bitcoin. It also uses a different hash algorithm, which makes it more resistant to ASIC mining. However, Litecoin has faced several challenges in recent years.

In 2018, the price dropped sharply after the Litecoin Foundation sold a large amount of its coins. This caused many investors to lose confidence in the coin. Litecoin has also been plagued by fraud and hacking on more than one occasion. In 2016, the network was hit by a major hacking attack that led to the theft of millions in Litecoins.

These challenges have hampered the adoption by ordinary users. However, some believe that Litecoin still has great potential and could one day become a significant force in the cryptocurrency world.

The Future of Litecoin Looks Bright

In recent years, the cryptocurrency market has caused a lot of hype, especially with regard to Litecoin. This digital currency is one of the best known and most popular in the industry, and many experts believe that it has enormous growth potential in the future.

What distinguishes Litecoin from other digital currencies are its low transaction fees, fast processing times and comprehensive security features. In addition, merchants who accept litecoin as payment can benefit from lower credit card processing fees and higher profits due to the fixed limit on the number of tokens that will be in circulation.

Given all these advantages, it seems inevitable that the project will continue to grow in popularity and spread in the coming years. Whether you are an investor or a trader, litecoin certainly represents an interesting opportunity to navigate the rapidly evolving landscape of blockchain technology.

Upcoming Developments

There are several upcoming developments and upgrades aimed at improving Litecoin and furthering its adoption:

  • Atomic swaps – Allow decentralized cross-chain trading between Litecoin and other cryptocurrencies without an exchange.
  • Lightning Network – A layer-2 solution being implemented to enable cheap, instant transactions on Litecoin.
  • Mimblewimble – A privacy protocol that could enhance fungibility and transaction anonymity.
  • Smart contracts – Could allow decentralized applications to be built on top of Litecoin.

Continued Adoption

Adoption by businesses and users continues to grow. Litecoin is accepted by major companies like AMC Theaters, Newegg, and eGifter. Its long history, significant trading volume, and status as a top market cap coin reinforce its position as a leading blockchain technology.

If cryptocurrencies gain mainstream adoption for payments, Litecoin will likely be a top choice due to its proven track record, speed, minimal fees, and security.

So if you are looking to enter the exciting frontier of blockchain technology, Litecoin represents an interesting opportunity as both an investment and a fast, inexpensive cryptocurrency for real-world payments. With its strong growth prospects, Litecoin’s future remains bright.

Conclusion

In summary, Litecoin is:

  • A decentralized cryptocurrency created in 2011 as a faster and lighter alternative to Bitcoin
  • Utilizes the Scrypt mining algorithm which allows regular computers to participate
  • Features near-zero transaction fees and 2.5 minute block confirmation times
  • Has a max supply of 84 million LTC
  • Halves its mining reward every 4 years
  • Is accepted by hundreds of merchants as a payment method

After over a decade of operation, Litecoin has established itself as one of the most trusted, liquid, and usable cryptocurrencies. Its technical improvements over Bitcoin make it well-suited for micropayments and everyday transactions. It continues to develop cutting edge upgrades like the Lightning Network to boost speed and scalability. As a proven and leading blockchain technology, Litecoin has solidified itself alongside Bitcoin as a viable digital currency into the future.

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Dean Decho

Dean is a passionate advocate for the financial freedom and independence offered by Bitcoin and the cryptocurrency space. He's built this crypto learning platform to help others in the industry learn, grow and be part of it.