Cryptocurrencies have been the center of debates during the past several years because of their potential to change the economy. Their wildly fluctuating status drew equal attention and criticism from the masses. Speculators, investors, and individuals interested in e-commerce have been curious to study cryptocurrency patterns unfold in the market.
Bitcoin is the first and currently the most popular cryptocurrency out there. Ripple, Ethereum, and Litecoin follow close behind. The background of Litecoin and its operations is what we are going to explore here.
What is Litecoin?
This cryptocurrency is often referred to as a “lite version of Bitcoin” or even “Bitcoin’s little brother”. It was designed for cheaper and efficient transactions on daily basis. In November 2013, Litecoin experienced a major price surge, bringing it to the front of financial discussions. Since then, it has gained more recognition amongst other cryptocurrencies.
Litecoin was created by a former Google engineer Charlie Lee, in 2011. It was not designed as a competitor or replacement of Bitcoin but rather as a variation of it. Lee himself quoted it as the “silver” to Bitcoin’s gold. The growth of this cryptocurrency has been rather astounding since its release. According to reports by Forbes, Litecoin peaked at a startling sum of $360.93 in December 2017. Why startling? Because the year before that it was only around $4.40!
Despite being its extension, Litecoin uses a blockchain different from that used by Bitcoin. This enables it to have increased transaction speed, dubbing it the lighter version of Bitcoin. By using this particular blockchain technology, which we will look into further on, Litecoin directly transfers funds between businesses and individuals.
Using this form of technology ensures that Litecoin has a public record of all transactions. Allowing it to operate as a decentralized payment system autonomous from government censorship or control. Currently, Litecoin ranks as the sixth-largest cryptocurrency in the market. So far, it has managed to survive and stay relevant were many other virtual currencies have failed.
Technology used by Litecoin
The most fundamental difference between Litecoin and Bitcoin is in the cryptographic algorithms employed by each. Bitcoin uses the standard SHA-256 algorithm, while Litecoin applies Scrypt which is fairly new compared to SHA-256.
The significant change brought by this newer algorithm is how it affects the mining process of the currency. Mining is the name given to the process of using mining software to secure each block to an existing blockchain. The completion of securing each block releases a new unit of cryptocurrency. These units can be injected back into the market by the miners.
In both Litecoin and Bitcoin, confirmation of transactions requires considerably powerful computing. Some miners allocate their computing resources to confirm other users’ transactions. In return, they receive currency units as a reward for mining. By general consensus, SHA-256 is perceived as being more complex than Scrypt. However, it allows parallel processing to a greater degree as well. In the past few years, miners of Bitcoin have utilized advanced and more sophisticated mining methods.
The most commonly used systems used for mining Bitcoin require the employment of Application-Specific Integrated Circuits. You must be wondering at this point why we are delving into the technical details of Bitcoin here. The technological aspects of Litecoin can only be comprehended clearly if you have knowledge of Bitcoin. After all, more or less every cryptocurrency has its roots in the design of the very first of its kind.
ASICs are hardware, unlike ordinary GPUs and CPUs, that can be fully tailored to mine Bitcoins. In consequence, mining is increasingly getting farther out of reach for the normal public. Unless they proceed to join a mining pool. In contrast, Scrypt’s design is less inclined towards customized hardware necessary for ASIC mining. This is why Litecoin, similar to other Scrypt-based cryptocurrencies is seen as a more accessible option than Bitcoin.
By using Scrypt, Litecoin is able to produce four times more coins than Bitcoin. Its average production speed is 2.5 minutes per coin as opposed to Bitcoin producing 1 coin every 10 minutes. It is evident how Litecoin has a more efficient mining process due to its design. Making it easier for regular users of cryptocurrency to mine without excessive complication.
The dramatic speed difference between these processes makes Litecoin an attractive opportunity for businesses. The waiting period becomes shorter thus more convenient for transaction processes within organizations. Although the future of Litecoin is uncertain as most of its brethren, by far it has seen more prominent progress.
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- Anthony is a professional content writer and blogger