What is Litecoin?
Litecoin is a peer-to-peer digital currency and electronic payment protocol, created as an alternative to Bitcoin from which most of its code is taken. Like Bitcoin, Litecoin’s are generated by the network itself, and transferred directly between users, without the need for a central authority.
First released on October 7th 2011 by Charles Lee, the code which runs Litecoin is open source and available for others to use and adapt under an MIT license.
Classified as a ‘Proof of Work’ cryptocurrency, new coins are generated by users running software which helps to maintain the network, known as ‘miners’. Litecoin was the first to implement the Scrypt mining algorithm for this purpose (see ‘comparison with bitcoin’ below for more). The mining difficulty, which determines how many calculations a miner must perform on average in order to earn the block reward, is updated every 2016 blocks. New coins are generated according to a decreasing geometric progression, meaning that the rate of generation halves every four years. The creation of new coins will eventually stop, reaching a maximum level of 84 million LTC.
What is a Litoshi?
Each Litecoin can be divided into 100 million sub-units. The smallest unit, representing 0.00000001 LTC, is sometimes known as a ‘Litoshi’, in homage to the ‘Satoshi’ which is the smallest unit of Bitcoins. Other common denominations include the millicoin (mLTC), representing one thousandth of a coin, and the microcoin (µLTC), which is 1 millionth of one coin.
Comparison with Bitcoin
Litecoin introduced the use of a new mining algorithm known as Scrypt, as an alternative to the SHA-256 algorithm used by Bitcoin.
Scrypt is ‘memory hard’ algorithm, meaning that it requires more computer memory than Bitcoin to mine. This made it more difficult for hardware producers to create specialist ASIC chips for mining, and reduced the advantage of using high-end GPU processor rather than ordinary computer CPUs. The aim of this was to make mining more accessible for ordinary users, but today scrypt ASIC chips have been created and their use dominates Litecoin mining.
Litecoin also has faster block times of 2.5 minutes, compared to Bitcoin’s 10 minutes. This allows transaction confirmation times to be quicker, and increases the security of the network against double spending attacks given the same hash rate (the rate at which miners are performing proof of work calculations).« Back to Glossary Index