Faster. Cheaper. More Decentralised
These are traits that many cryptocurrencies possess as of 2023. But at the time of its launch in 2011, Litecoin was the first of its kind. A sound-money cryptocurrency that possessed many of the traits valued in Bitcoin and at the same time made innovations to improve its speed, affordability, and scalability. This was the vision of Charlie Lee, a Software Engineer for Google and eventually Coinbase, who founded Litecoin over 19 years ago.
Bitcoin is often referred to as a store of value. “Digital gold” is a term often used to describe the project. This is because, like gold, Bitcoin has a very limited supply, and high demand, and can be easily locked away and stored in a safe way.
You can look at LTC more like cash. It’s fast and affordable to transact with. You wouldn’t buy your groceries with gold, and you wouldn’t hold cash for too long. Remember how your grandpa locked his gold away in a safe and paid for his groceries with cash? Enthusiasts believe in locking your Bitcoin away in a cold wallet and using your Litecoin to transact.
How can Litecoin work faster, be more affordable, and be more decentralized?
Bitcoin has a block time of 10 minutes, meaning a new block can be added to the blockchain every 10 minutes. Litecoin has a block time of 2 1/2 minutes, making it 4 times faster. Litecoin can also handle more transactions per second (TPS). Bitcoin has a TPS of 5, whereas Litecoin has a TPS of 54. Bitcoin has a typical transaction cost of $2 to $10 dollars, whereas Litecoin costs less than $0.01!
These innovations are possible because Litecoin uses open-source code. This means that the code is available to everyone. Anyone can look at the code and give objective feedback for improvements. If more than half of the people on the Litecoin network believe a suggestion is good and vote as such, it will automatically pass. This is the beauty of blockchain technology. The power isn’t in the hands of a select few. Instead, the future of Litecoin is down to its users.
The Hashing Algorithm
The hashing problem is the puzzle computers are trying to solve when mining blocks. Like Bitcoin, Litecoin uses a Proof-of-Work consensus mechanism which is how miners are rewarded for solving these “puzzles” (cryptographic algorithms). At a point in time, a computer chip called ASIC was produced. It was more expensive but also much more efficient than those previously produced.
Only the wealthier validators on the Bitcoin network could get their hands on newer, more powerful ASIC chips, causing an imbalance of computational power in the network. These validators dominated the mining of new rewards.
Charlie Lee saw this problem and developed a script for Litecoin that leveled the playing field again, making it possible for those with cheaper computers to compete fairly with wealthier validators.
The Tokenomics of Litecoin
Just like Bitcoin, Litecoin didn’t have an ICO or pre-mine. It was a fair launch in which a date was given and miners had an equal opportunity to start mining. There will only ever be 84,000,000 LTC, and it follows the same halving process as Bitcoin. This simply means the mining rewards are halved every 4 years. As of today, there are 69,000,000 LTC in circulation. However, controversially, Charlie Le dumped all of his coins during a bull run which caused both the Litecoin and wider crypto community, to question his intentions and credibility.
There are many questions surrounding Litecoin’s place in the modern crypto world. There are faster blockchains, more affordable blockchains, and more decentralized blockchains out there. Will Litecoin continue to follow Bitcoin closely in its growth, or are other projects that address the same problems Litecoin is tackling (but better) set to take Litecoin’s place and a percentage of its market share?
As of March 2023, it is one of the most widely accepted cryptocurrencies, with over 2,000 merchants and stores now accepting LTC across the globe. This is why, despite the competition and innovation, Litecoin enthusiasts remain very bullish on the project.
