Popularly known as “ digital silver”, Litecoin was released via an open-source client on GitHub on October 7, 2011. It is a peer-to-peer Internet currency which enables instant, near-zero cost payments to anyone in the world. It is a fork of the Bitcoin Core client. The supply of Litecoin is fixed to 84 million.
Litecoin is the brainchild of Charlie Lee, an ex-Google employee with the vision to create a lighter version of Bitcoin. While it is true that Litecoin draws its similarities from Bitcoin, a major point of difference are their transaction speeds.
Transaction Speeds in Litecoin Network
The average block mining speed in Litecoin is 2.5 minutes. However, due to network congestion and slow block mining times, the median waiting time can rise up to 29 mins.
The faster transaction speed is an added bonus for merchants carrying out several transactions in a day. In Litecoin network, they can easily get two confirmations within 5 minutes. Whereas, it will take a minimum of 10 mins in the Bitcoin network.
However, the lower downtime has its own perils. This exponentially increases the chances of mining orphaned blocks. They are created when more than one miner comes up with a block which could be added to the chain. These blocks put an immense strain on the blockchain. This problem was reduced to a great extent by introducing Segwit.
Sidechain conceptualizes two parallel chains which run along the main chain. The chain is attached to the main chain via a two-way peg. According to Dr. Wiulle, the sidechain includes the signature data of all transactions, separating it from the main chain in the process. This feature is known as Segregated Witness or Segwit.
Chain implementing Segwit
The removal of signature data from transactions served a twin purpose. The block space got emptier than before and transactions got malleable free. Since the implementation of Segwit on Litecoin network, on-chain load has considerably reduced.
It is important to note that Bitcoin has been a victim of flood attacks in 2015. ln the event of a flood attack the network is flooded with spam transactions. At one point there were around 80,000 transactions in the mining pool. However, Litecoin prevented such attacks by making it economically infeasible.
In the Litecoin network, a sender is charged a fee for each created output. If in case such an attack happens, the sender will go bankrupt.
Litecoin and Atomic Swaps
Atomic swaps make the cross-chain exchange of coins possible, eliminating the need of a third party. For instance, a person has a Bitcoin and wants Ethers in return, she would need to go to an exchange. However, with atomic swaps, she can simply swap it with another person having Ether. Moreover, the process can be carried out without paying any unnecessary transaction fees. The project is still in its preliminary stages. However, an atomic swap was carried out between Litecoin and Decred on September 20th, 2017.
Consensus Mechanisms used in Litecoin Network
Litecoin uses proof-of-work as a consensus mechanism in its network. It is a known fact that more than 50% of Bitcoin’s hashrate is used by 5 mining pools. If in case the miners manage to get 51% hashrate, they can launch a 51 % attack on the blockchain. Moreover, Bitcoin uses the SHA-256 algorithm which uses a tremendous amount of processing power.
Litecoin uses the Scrypt algorithm. It is referred to as a “memory hard problem” as the main limiting factor isn’t the raw processing power but the memory. Scrypt has been designed to ensure that mining is accessible and democratized as possible.
Litecoin can be stored in hardware wallets, software wallets, and paper wallets. These include-
1. Ledger Nano S
Ledger Nano S is the best option when it comes to storing a large amount of Litecoins. The private keys are stored offline and are in complete control of the user.
Trezor is a small key-sized device which connects to the computer with a USB cable. It can be safely used on a malware infected computer.
3. Loaf Wallet
It is the first iOS-only mobile wallet for Litecoin. Presently, it is not available for Android devices. It is an open-sourced HD wallet which allows the user to restore funds by using a 12-word backup seed key. It has an inbuilt feature which allows its users to purchase LTC via Coinbase and store them on Loaf Wallet.
4. Litecoin Core
Litecoin Core is the official Litecoin wallet. It is free to use and the private keys are stored on the desktop.
Electrum-LTC is a lightweight Litecoin desktop wallet. It is SegWit-enabled and provides an extra feature of “freezing” an address.
It is the cheapest way to store Litecoins. The private and public keys can be generated and stored on the wallet.
SFOX has recently listed Litecoin on its platform. The platform caters to institutional investors and high-volume professional traders.
“Because we cater to investors who are accustomed to Wall Street standards, we only add cryptocurrencies we are completely confident in,” said Akbar Thobhani, CEO of SFOX. “Litecoin has utility and liquidity and is supported by a great team at the Litecoin Foundation. We are happy to deliver on our promises and provide our customers with an option that they’ve been asking for.”
Clients will now be able to trade LTC against both Bitcoin and USD. LTC creator Charlie Lee commented that the move would increase Litecoin’s liquidity and make the coin more accessible to institutional buyers.
“This partnership provides increased liquidity and institutional exposure for Litecoin,” said Lee. “SFOX is backed by several well-known investors, which speaks to the company’s business model and team. We look forward to providing support through the Litecoin Foundation to help make this partnership a success.”
While some analysts continue to debate if Litecoin remains a high-growth investment product. According to Mati Greenspan, a senior market analyst at eToro Litecoin is “massively discounted” relative to its fundamental value.
The debates will continue on the prowess of Litecoin. With a massive price rise of 7000% in a year Litecoin undoubtedly has tremendous potential.