Litecoin basics for beginners
A decentralised, peer-to-peer and programmatically scarce crypto, Litecoin was introduced as a solution to Bitcoin’s scalability problem and bottlenecks. It’s initial use case was to relieve memory pool bottlenecks on Bitcoin, which contributed to long waiting times for completing transactions. Since its introduction in 2011, Litecoin has seen extensive development, aiding in the development and adoption of new technologies and features such as segregated witness (SegWit) on Bitcoin too.
While Bitcoin is seen as a store of value similar to gold, Litecoin has focused on commercial payments. More recently, Litecoin has rolled out MimbleWimble Extension Blocks (MWEB) as a means to radically increase privacy and fungibility on the network. Nevertheless, Litecoin is often regarded as the silver to Bitcoin’s gold due to its technical characteristics, close ties, and backwards compatibility with Bitcoin.
Litecoin basics summary
In this introductory post, I will discuss the Litecoin basics, frequently asked questions about Litecoin, and why cryptocurrency newcomers may want to look into the 11.5 year-old digital asset (instead of some 30,000-odd ‘assets’). If you’re new to crypto, stick around and read till the end. Here’s what I’ll discuss:
- What is Litecoin?
- Who created Litecoin?
- Who controls Litecoin?
- What’s the difference between Bitcoin and Litecoin?
- Defining characteristics of Litecoin
- Litecoin developments
- How do I buy Litecoin?
- Where do I store Litecoin?
- Where can I spend Litecoin?
- What is Litecoin Chikun?
1. What is Litecoin?
Litecoin is a decentralised, peer-to-peer (P2P) cryptocurrency and payments network that’s built around an open-source proof-of-work blockchain protocol. Users can make payments to anyone in the world at relatively high speeds and at a low cost compared to traditional payment channels (SWIFT, ACH, FedWire etc.).
2. Who created Litecoin?
Its founder, Charlie Lee, launched the cryptocurrency in 2011. A computer scientist, Charlie held positions at Google, followed by Coinbase until his departure in 2017, where he headed the Litecoin Foundation. Initially, Litecoin emerged as an alternative currency to Bitcoin due to concerns over Bitcoin’s slow transaction times. By introducing technical modifications to the source code, Litecoin allowed for fast transaction times all the while lowering processing fees.
To this day, Litecoin is the most successful Bitcoin derivative, establishing itself as a top 20 coin among tens of thousands of projects, most of which are vapourware. Being compatible with Bitcoin, Litecoin both compliments and reinforces Bitcoin’s mission statement, function and utility, all the while doing away with traditional notions of Fiat money.
3. Who controls Litecoin?
As a fully decentralised cryptocurrency, LTC is not controlled by any entity. The foundation is a non-profit organisation whose mission statement is to accelerate the development and adoption of the cryptocurrency. The non-profit has no bearing on the network’s decentralisation, integrity or 100% uptime history.
4. What are the differences between Bitcoin and Litecoin?
Bitcoin and Litecoin are peer-to-peer cryptocurrencies that are supported by their respective protocols.
Block confirmation time is a major difference between the coins. In fact, Litecoin blocks take about 2.5 minutes to be mined, while Bitcoin takes 10 minutes. Litecoin also halves at every 840,000 blocks, while Bitcoin halves at 210,000 blocks.
Beyond that, Bitcoin uses the SHA-256 algorithm, while Litecoin uses the Scrypt algorithm to verify transactions. When a transaction is verified, miners or nodes record the completed transaction data on the blockchain and receive rewards for this work. This authentication process requires somewhat resource-heavy computational power. The inefficient design is the trade-off required for immutable money.
Litecoin’s Scrypt algorithm
Bitcoin uses the SHA-256 algorithim that was created by the US National Security Agency in 2002. On the other hand, Litecoin uses a more recent algorithm that was created by computer scientist Colin Percival in 2009, who also created encrypted cloud storage services. Scrypt is memory-intensive and requires less processing power. Mining can be accomplished using CPUs or GPUs, which are far less expensive and more accessible. For a more in-depth understanding of Scrypt’s technical implementation, check out Percival’s whitepaper here.
Despite increasing competition for block rewards, Litecoin-specific ASICs have emerged over the last few years, leading miners to face challenges. While it is still feasible for non-ASIC entities to mine Litecoin, the profits generated are typically lower in comparison to utilizing specialized machinery.
5. Defining characteristics of Litecoin
Ac cryptocurrency’s worth is essentially defined by its characteristics. Litecoin has the following qualities which have made it a valuable asset in the digital asset space:
Litecoin is supported by a P2P blockchain protocol that eliminates the need for a central authority (e.g., governments, financial institutions). The proof-of-work blockchain is politically and architecturally decentralised, such that nodes hold equal power in the network and must collaborate to validate transactions.
Permissionless: Anyone with an internet connection can participate in the network.
Secure: The fast transaction speeds compared to other blockchains makes it hard for attackers to overtake the Litecoin network.
Open-source: Litecoin’s source code is freely accessible online. This is a vital characteristic for building trust, and it is a pillar for ongoing Litecoin support. Users can submit Litecoin Improvement Proposals (LIPs) to possibly improve the network.
Transparent: Litecoin has a hundred percent uptime history. All transactions are recorded and publicly viewable on the blockchain at all times.
Immutable: Transactions on the blockchain cannot be changed or reversed once added to the blockchain.
Pseudo-anonymous layer 1
While public wallet addresses do not contain personally identifying information, achieving total anonymity is challenging on the base layer. The reason being that any Litecoin transaction’s involved addresses are permanently and publicly accessible via the blockchain. Consequently, information such as multiple transactions originating from a single wallet or data breaches on exchanges could lead back to an individual’s identity. That said, Litecoin’s MimbleWimble Extension Blocks (MWEB) privacy layer upgrade radically alleviates the problem as it masks wallet funds and increases fungibility through the layer 2 tech. This makes it harder for coins to be regarded as ‘tainted’ too.
The maximum supply of Litecoin is 84 million LTC, and it has a disinflationary mechanism. Around 72.8 million LTC (~87%) is in circulation, and it is projected that the entire supply of Litecoin will be mined by the year 2142. Litecoin’s long-term viability is linked to its unchanging characteristics, transparency and defined issuance times.
On August 5th, 2019, the Litecoin block reward halved for the second time from 25 LTC to 12.5 LTC. The next block reward halving will occur on August 2nd, 2023. The reward will reduce from 12.5 to 6.25LTC, increasing supply constraints to the network.
6. Litecoin developments
Litecoin’s development history is filled with numerous noteworthy events. In September 2014, LTC was merge-mined with Dogecoin (a meme coin). The move increased security for the asset and offered a permanent block subsidy that was previously unavailable for Litecoin miners. Litecoin’s hashrate reached 900TH/s in April 2023, after having set all time highs in Sept 2022.
Litecoin adopted SegWit in May 2017 and conducted the first Lightning Network transaction in the same year. In 2020, PayPal and Venmo added the option for users to buy Litecoin. In May 2022, the MimbleWimble upgrade came into effect as a soft fork, enabling users to send confidential transactions. Litecoin became available to send/receive payments on PayPal and Venmo in 2022. Based in Europe, Revolut also supports user-generated wallets.
Privacy & fungibility
MimbleWimble is a decentralised protocol with a privacy focus that takes its name from a challenging spell in the Harry Potter books. The protocol’s confidentiality feature allows users to mask transaction data while also serving as a foundation for other blockchains to improve their token’s usability.
By using MimbleWimble Extension Blocks, network users have the option to conduct confidential transactions. MWEB boosts Litecoin’s viability as a fungible currency for real-world transactions. The layer two protocol reduces fees, increases, privacy, throughput and scalability.
Lead programmer, David Burkett and creator of Grin++ developed the update along with Litecoin developers.
Historically, Litecoin has been a ‘testnet’ for Bitcoin, certainly in the case of SegWit. In time, Litecoin’s MWEB upgrade might also be added to Bitcoin if developers agree to enhance privacy features on BTC.
7. How do I buy Litecoin?
The simplest way to get hold of Litecoin is by buying online or through a mobile application. Otherwise, Litecoin can be traded in real life or online P2P services. Physical ATMs are also an option but typically include high fees. As such, using a reputable exchange platform tends to be the simplest option. Unfortunately exchanges tend to include government-mandated KYC protocols. However, once you have acquired your Litecoin you can withdraw funds into a personal wallet and move funds to the MWEB layer for added privacy. There is no limit to the amount of addresses one creates on Litecoin.
It’s paramount to keep your funds safe, and to steer clear of any potential boating accidents.
8. Where do I store Litecoin?
If you are new to crypto, you may not be familiar with the concept of choosing where to “store” your assets. Fortunately, with Litecoin, you have many available options.
Many of the prominent cryptocurrency exchanges include integrated wallets where you can hold your Litecoin. Comparitively, holding your coins on a centralised exchange defeats the purpose of having a decentralised cryptocurrency. As such, you can store your crypto in a separate hardware wallet such as a Ledger, or a digital wallet which has in-built protections (2FA) against possible hackers.
Although the leading exchanges have safeguards in place to protect against security breaches, you may prefer to store your Litecoin in a cold wallet for added security.
9. Where can I spend Litecoin?
Bitcoin is not the world reserve currency and neither is Litecoin. Presently, the world does not run on cryptocurrencies yet and the process of mass adoption happens slowly at first, then all at once.
For the time being, VISA-enabled Litecoin cards are useful to spend your Litecoin. At the same time, the number of businesses that accept Litecoin and crypto as a means of payment are increasing. Peer-to-peer transactions without government intervention is the entire point of crypto, after all.
Here are seven reasons why accepting Litecoin and cryptocurrencies as a means of payment will help your business grow.
10. What is Litecoin Chikun?
Litecoin Chikun is a popular meme that causes head scratching among Litecoin onlookers who may be unfamiliar with inside jokes. The meme emerged in Litecoin’s early days when the coin hit $10. Litecoin’s price had exploded upwards and the market was euphoric.
Amidst the euphoria, market participants were posting random memes and quotes from films. One such quote was “Arise, chikun, chikun arise”. It was a reference to a strange scene in an Adult Swim cartoon called “Aqua Teen Hunger Force”. The dark humour, low budget (no budget) cartoon has a robot-chicken committing random acts of violence.
In the scene, a witch doctor wielding a staff and boasting a chicken’s head as an ornament attempts to resurrect a deceased friend by repeating the phrase: “Arise chikun, chikun arise” while thumping his rooster staff into the ground. After saying the phrase several times, seemingly out of nowhere, a giant Chikun appears.
The light-hearted reference infers that Litecoin tends to perform slowly, then all at once. Much like Bitcoin’s pizza day meme, the ‘Chikun’ meme has survived for years, and was reintroduced introduced with Litecoin NFTs and ordinals OmniLite update in 2021.
Now that you understand the Litecoin basics, it’s time to reconsider your illiquid crypto allocation and have a think on Litecoin.
Read More: Is Litecoin a Good Investment in 2023?
No information will be seen or construed as financial advice.