Litecoin is a cryptocurrency created by software engineer Charlie Lee 2011. Lee announced litecoin on the popular message board BitcoinTalk while working at Google. He launched Litecoin using code that was very similar to Bitcoin, save for a few key differences that aimed to solve the transaction speed and scalability of Bitcoin.
Litecoin is a software fork of Bitcoin, which means the two share a lot of code. Litecoin is intended to serve as “silver to Bitcoin’s gold”, rather than to compete with it. Lee sought to make Litecoin technically distinct from Bitcoin in two different ways. First, he originally aimed to make it possible for the average consumer to mine the coin using consumer grade hardware, as opposed to the specialized mining hardware that bitcoin required. Second, Lee sought to create a network that allowed for faster and cheaper transactions, approximately 2.5 minutes per transaction compared to 10 minutes for Bitcoin.
How does Litecoin work?
Lee launched Litecoin using code that very similar to bitcoin, save for a few key differences that aimed to solve the transaction speed and scalability of bitcoin.
The main differences are that litecoin will have a maximum of 84 million coins, as opposed to bitcoin’s 21 million, and that it incorporates Scrypt proof-of-work mining algorithm, as opposed to bitcoin’s SHA-256. The goal was for people to be able to use any computer to mine litecoin and thus making mining more democratic. Lee engineered litecoin to complement to bitcoin as a means of payment.
Launch and Issuance
Litecoin launched in October 2011. The first Litcoin block, its genesis block, was mined on October 8th, 2011. The code for Litecoin was released three days prior to the mined genesis block and the next two blocks confirmed that the genesis block was valid.
Network Design and Security Model
In May 2017, litecoin conducted a “soft fork” to enable segregated witness (SegWit), a change which allowed a greater number of transactions per block to be created. This was done by putting less data load on each transaction via removing the signature information. This was done to solve the long-term scaling debate that originally started with bitcoin and trickled down to litecoin because of the similar codebase.
Monetary Policy and Crypto-Economics
Litecoin is a deflationary currency, as there will be a hard limit of 84 million litecoin ever created, which is four times the total supply of bitcoin. With a reward of 50 litecoin per block created at its inception, the block reward is halved every 840,000 blocks, and the last block is expected to be mined in 2142.
The average time for litecoin to produce a block is 2.5 minutes compared to bitcoin’s 10-minute block time. The transactions for litecoin, similar to bitcoin, are all produced on-chain.
Used as an open source, peer-to-peer digital currency, Litecoin was written in C++ and is still mostly based on the bitcoin protocol.