What is Litecoin, Bitcoin's sibling from another mother?
Litecoin or LTC, was created in 2011. It is a cryptocurrency that was developed from Bitcoin by Charlie Lee, a former software engineer at Google, with the aim of developing Litecoin to solve problems that occur in Bitcoin.
Charlie Lee intended to make Litecoin a cryptocurrency that is essentially lighter than Bitcoin or “Lite” as the name suggests. The features of “Lite” are lower fees, better decentralization and faster transactions than Bitcoin. Charlie defines Litecoin as "Silver", while Bitcoin is "Gold".
Litecoin’s maximum supply is set at 84 million coins, and it also has Halving events where mining rewards are reduced like Bitcoin, which happens every 840,000 blocks or approximately every 4 years.
The problem with Bitcoin is that Proof-of-Work consensus mechanisms require relatively high processing times. In the future, if Bitcoin becomes more popular, it will have a large number of transactions. As a result, the processing time will be longer like a road with severe traffic jams.
Apart from that, Bitcoin mining is also highly competitive. To mine efficiently, expensive mining machines like ASICs are essential, making decentralization not good enough as it can only be a group of people or people with a huge amount of funds to have an opportunity to verify more transactions.
This is when Litecoin comes in to solve those problems, because it is encrypted with “Scrypt”, unlike Bitcoin which uses SHA-256 for encryption which makes it hardware friendly and also saves energy and mining resources. Miners can use lower-cost CPU and GPU to mine, and with Scrypt, processing speeds are up to 4 times faster than Bitcoin.
Pros of Litecoin
1. Transaction speed
Litecoin can generate a new block within only 2.5 minutes, while Bitcoin’s generation duration is fixed at 10 minutes, making Litecoin more convenient for everyday use.
2. Low fees
Litecoin has high transaction speed. Therefore, the fee is also reduced as it is not congested like Bitcoin.
3. It uses less processing power and miners are more accessible
Litecoin uses “Scrypt” encryption, making processing lighter than Bitcoin’s SHA-256 encryption. As a result, it makes it less resource-intensive. If you don't have the funds to buy a powerful mining rig, you can use your CPU or GPU to mine and it is more decentralized as miners are not only in a group with the same mining power as Bitcoin.
Litecoin may not have its own interesting technology and still remains similar to Bitcoin, but Litecoin has made use of its existing technology and improved its capabilities even further. The technologies used are as follows:
1. Lightning Network
Litecoin is testing the function between Blockchain and Lightning Network. If complete, Litecoin’s network will be able to handle massive transactions as it is a separate channel from the main blockchain, much like a shortcut on a road. Therefore, transactions are not crowded. As a result, it is faster and able to handle more transactions.
2. Segregated Witness (SegWit)
Segregated Witness (SegWit) is the process of increasing the storage limits on the blockchain by extracting out the signature data transaction. The result is a reduced transaction size. This allows for more transactions to be added to the block. With signature data accounting for 65% of transaction data, which Litecoin also adopts SegWit just like Bitcoin.