What Is Litecoin (LTC)?
Litecoin (LTC) is an alternative cryptocurrency created in October 2011 by Charles “Charlie” Lee. Litecoin is a fork of Bitcoin (BTC). Like Bitcoin, 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 Scrypt as a proof of work scheme.
- Litecoin is an early altcoin developed by former Google engineer Charlie Lee in 2011.
- It has been called the silver to Bitcoin’s gold, and at its height was the 3rd largest cryptocurrency by market cap.
- Because its structure is similar to Bitcoin’s, it has been used as a testnet or testing ground for improvements that later were applied to Bitcoin.
Charlie Lee is a graduate of the Massachusetts Institute of Technology and a former Google engineer who became interested in Bitcoin in 2011. According to Lee, “In October of 2011, I was playing around with the Bitcoin code base, and I guess the short of it was that I was just trying to create…a fork of Bitcoin. It was mainly a fun side project.”
Scrypt Proof-of-Work Algorithm
Scrypt is a password-based key derivation function. According to Tarsnip, “the scrypt key derivation function was originally developed for use in the Tarsnap online backup system and is designed to be far more secure against hardware brute-force attacks than alternative functions such as PBKDF2 or bcrypt.”
Scrypt was developed by Lee specifically to make large-scale, custom-built hardware attacks on the currency more difficult. Bitcoin’s SHA-256 algorithm does not require a lot of random access memory (RAM) as an impediment to parallel processing, whereas Scrypt does.
At the beginning of the 2010s, as mining operations developed specialized hardware, like the application-specific circuit (ASIC) to solve SHA-256 hashing, it appeared that Bitcoin was vulnerable to such an attack. By making Litecoin’s consensus algorithm memory intensive, Lee sought to thwart the hardware arms race, though in practice that didn’t happen as the rise of GPUs answered the need for greater RAM.
Plans for Litecoin (LTC)
Litecoin has implemented several features since its launch intended to improve its transaction speed without compromising the security and integrity of the network.
SegWit or Segregated Witness was first proposed for Bitcoin in 2015. It works by “segregating” the digital signal data (the “witness”) outside the base block in the blockchain. SegWit was developed to address Bitcoin’s scalability issue, but the proposal created deep controversy within the Bitcoin community.
In 2017, Litecoin adopted SegWit, and because of Litecoin’s similarity to Bitcoin, it worked as a testing ground or testnet for SegWit’s viability on the larger Bitcoin network. The test was a success, and Bitcoin adopted SegWit thereafter. Some opponents of the SegWit adoption who advocated for larger Bitcoin block sizes created a Bitcoin hard fork that resulted in Bitcoin Cash.
The Lightning Network is a second-layer technology for bitcoin that uses micropayment channels to scale its blockchain’s capability to conduct transactions.
Similar to the SegWit example, the implementation of the Lightning Network on Litecoin has been a testnet to prove innovations are possible on Bitcoin. Charlie Lee has also argued that when “the Bitcoin blockchain is congested and the fees are high, it’s easy to use Litecoin to onboard onto the Lightning Network.”
MimbleWimble is a privacy protocol that builds on confidential transactions that encrypt or obscure information like transaction amounts. It is argued that MimbleWimble can decrease blocksize and increase scalability. Charlie Lee announced in early 2019 that Litecoin would pursue MimbleWimble development, and as of early 2021, development is underway.