Ushered into existence by Google engineer Charlie Lee on October 13, 2011, Litecoin is the 10th largest cryptocurrency by market capitalization today.
Litecoin coin is an “OG” crypto. Aside from Bitcoin, no other coin has stayed in the top ten longer. BTC and LTC have held places in the charts for 410 and 409 weeks, respectively (other top performers include XRP at 396 weeks and ETH at 291).
It was created following a source code “fork” of the Bitcoin Core blockchain (a fork is when a blockchain diverges into two separate paths, creating two distinct coins). Litecoin’s biggest differences from Bitcoin include:
- Lower transaction fees
- A different hashing algorithm
- A decreased block generation time
- An increased maximum cap of coins
Don’t be deterred! We’ll get into the specifics of these differences below and also have a look at how these factors contributed to Litecoin’s success as a more “spendable” cryptocurrency. You may have heard Bitcoin described as “digital gold,” and following that line of thinking, Litecoin could be considered “digital silver.” But the cryptocurrency’s history isn’t as spotless as you might think.
In an April 26 interview with CNBC’s Worldwide Exchange, Lee discussed Litecoin, comparing and contrasting its attributes with those of Bitcoin. Although Lee is something of a polarizing entity in the cryptosphere, it’s worth hearing what he has to say about the cryptocurrency he invented. Let’s dive in.
CRYPTO-SAVVY is an occasional series from Inverse that explains the world of cryptocurrency and where it’s going next.
Litecoin vs. Bitcoin
One of the main differences between the two cryptocurrencies is transaction fees (1). Cryptocurrency miners choose to validate the transactions that pay the most. The current average transaction fee for Litecoin, at the time of writing, is just $0.04. With Bitcoin, that number is much higher, with its average transaction fee being $26.89.
“The Bitcoin blockchain is congested,” says Lee. “Everyone is competing to get their transactions into the next block, and the way they do that is by paying more fees.”
Another fundamental difference between Litecoin and Bitcoin is their mining algorithms (2). Litecoin employs Scrypt, one of the first hashing algorithms implemented on blockchain networks. Developers of Scrypt intended it to be an improvement on an even earlier hashing algorithm, SHA-256 (the one used by Bitcoin). Lee chose Scrypt for good reason, but we have to take a deeper look at cryptocurrency mining to understand why.
The basics: mining can be performed using a central processing unit (CPU), graphics processing unit (GPU), or application-specific integrated circuit (ASIC) miners. ASIC miners have the advantage of being able to solve the complex data strings needed to mine (think “win”) the block much quicker – generating considerably more hashes (think “tries”) per second than CPUs or GPUs.
Consequently, Bitcoin mining, using the more expensive and hard-to-find ASICs, is now a sort of arms race. On April 28, Core Scientific, the largest mining pool in North America, announced it had bought 112,800 Antminer mining machines from ASIC manufacturer Bitmain. Core Scientific’s CEO says this most recent purchase could help his company increase its global share of Bitcoin’s hash rate from 5% to 12%. To be clear, this would mean one organization could plausibly be processing more than 1/10 of all the Bitcoin blocks and, in the opinion of many, this goes against a philosophy at the very core of cryptocurrencies: decentralization.
This is where Litecoin’s hashing algorithm comes in: Lee went with Scrypt because the algorithm is less susceptible to ASIC mining. While over the years, Scrypt ASIC miners have become more prevalent, the majority of the mining on the Litecoin blockchain still uses CPUs and GPUs, making it much more accessible to the average person and less susceptible to “control” by…