Litecoin project purpose and description
What is Litecoin?
Litecoin has been referred to as the silver to bitcoin, which is the gold standard for digital currencies. What this means is that Litecoin is very similar in very many ways to Bitcoin, but perhaps not as costly as the gold standard.
Like Bitcoin, Litecoin is a peer to peer cash transfer system that allows users to send, receive and make instant payments at almost zero cost all over the world.
Based on blockchain technology, Litecoin enables a system of trust between participants where they can transact without a central authority, thereby making the cost of transactions cheap.
Due to further developments in their technology litecoin has managed to create efficiency in their system to make them a noteworthy competitor to bitcoin in this space. In this article, we shall identify some striking features of litecoin that make it stand out, how it compares to other blockchain projects, the security features and potential applications of litecoin.
The technology used in litecoin is an open source system that allows other developers to code using the software. The vision behind it is this
“To provide an alternative global payment system that is secure, fast and nearly free.”
This means that individuals can send and receive cash and make payments both locally and internationally instantaneously and at almost no cost at all. Unlike traditional systems, they can do this without the need for a trusted intermediary such as the central bank.
For example, if you want to send $1,000 from California to the UK, you would probably need to visit your bank, fill out forms and then request for the transfer which could end up taking days and costing you a lot of money.
Litecoin, transferring the same equivalent of $1,000 will take you under 5 minutes and cost you less than one dollar! This is what makes litecoin attractive to businesses and traders who regularly transfer cash and make payments across borders.
The first ever litecoin transaction was made on 13th October 2011. Since then, litecoin has been used for many reasons and on many platforms including making payments on Bitcoinshop and Egift. As cryptocurrencies become more and more acceptable, we might see more shops and businesses accepting litecoin as a form of payment.
Litecoin can be purchased and sold on a number of mainstream exchanges including Binance, OKCoin, Bitfinex, Kraken, Bitstamp, and GDax. Look for LTC or XLT as the symbols used. It has been trading steadily since 2013, yearly returns in 2016 were 23.94%, 2017 saw a sharp spike to 4,714.55% while 2018 has shown a decline to -75.98 by August. Once purchased, litecoin can be stored on your computer or phone or in a hardware wallet.
Unlike bitcoin which has a total supply of 21 million coins, Litecoin has x4 supply placing it at 84 million coins. This further reinforces the idea of litecoin being the silver to bitcoin.
What is the problem that Litecoin Solves?
Litecoin was created by Charlie Lee, an ex-employee of Google who saw many inherent flaws in how bitcoin works and sought to create a complementary digital currency that would address this flaws.
Litecoin was created to take advantage of the opportunities created by blockchain technology and harness them to the maximum; trustless transactions that are decentralized, fraud-resistant (single point of failure) and efficient. Other than these strengths of blockchain technology, litecoin has additional ones which include
- Even faster transactions than bitcoin’s
- A more efficient mining system
- Zero cost
Let’s look at all the problems that litecoin solves individually:
Scalability basically refers to the number of transactions that can be processed in a fraction of time mostly in a second. This is relevant because it determines how many users the network can sustain at a given time without “dropping the ball.”
Bitcoin, for example, has a maximum capacity of 7 transactions per second; beyond this volume, the network will be overcrowded and cave in. users will be unable to carry out any transactions on the network until this hitch is resolved.
Because of this, Charlie Lee had to create a lighter version of bitcoin which could handle more transactions per second (more frequent block generation) that would be able to cope if the adoption of the technology would increase in the future. We shall look at this aspect in detail in the following section.
2. Transaction speed
Bitcoin has been plagued with network congestion issues that have resulted in transactions hanging at critical times. Users have been forced to wait in line for their transactions to be processed not being sure of when that will actually happen.
As much as bitcoin has many appealing factors, this problem has caused apprehension in the market as such delays could result in potential losses for businesses.
3. Mining efficiency
Bitcoin uses the SHA-256 hash rate which is quite expensive to maintain. As more and more transactions are verified, subsequent transactions become increasing harder requiring more and more energy.
This is not sustainable in the long run if the cost of handling bitcoins is to remain negligible.
How does Litecoin Solve the problem?
As mentioned earlier, Litecoin uses blockchain technology to enable peer to peer transactions that are secure, cheap and fast. It’s important to first understand how a blockchain works before we look at how litecoin solves some of the weaknesses in bitcoin’s blockchain model.
Transactions initiated in the blockchain are interpreted as complex mathematical computations that need to be solved by miners who carry out the work. Once transactions are verified and confirmed as valid, they are added to the latest block which will be added to the blockchain once all transactions added to it have been verified.
Once added to the blockchain this becomes irreversible and the record can be viewed by all participants in the network. Practically speaking, say you want to send your litecoin to John in Kosovo, you initiate the transaction which is interpreted as a complex mathematical problem.
The miners get into the work to verify that you actually own that litecoin and it has been sent to the rights address. The miners get rewarded for this work with new litecoins generated through the “mining” process. This method of verification is referred to as the proof of work algorithm and both bitcoin and litecoin use this algorithm.
With litecoin, transactions are completed every 2.5 minutes, meaning that John in Kosovo will receive his litecoin in less than three minutes. Once complete, this transaction is immutable and irreversible.
1. Faster transaction speed
As much as bitcoin is a pace setter in creating seamless cash transfers across the globe, litecoin has even faster transaction speeds than bitcoin. Litecoin uses a script algorithm which is faster and more energy saving to make this possible. It takes 10 minutes to confirm each block on the bitcoin blockchain, while it takes a fourth of this (2.5 minutes) to confirm each block on the litecoin blockchain. This means that sending digital currency on the litecoin system is much faster than it is on the bitcoin blockchain. . This is very important if Litecoin is to be the go- to global cash transfer system
We had mentioned scalability and what it means above. Scalability basically is the ability to handle more transactions as the need arises. The different algorithm (script algorithm) used by litecoin enables it to have faster transaction times as elaborated above. With this, scalability is possible. Bitcoin can handle up to 7 transactions per second while litecoin can handle up to 56 transactions per second. Compounded to minutes, hours and days the difference is not comparable. As more and more users adopt blockchain technology, scalability will be of the highest essence.
3. Efficiency in mining
Mining refers to the process through which transactions on the blockchain are verified and validated by nodes that are referred to as miners.
They work in a type of consensus model through different models, the most common being proof of work and proof of stake.
Both Bitcoin and Litecoin use the proof of work model, meaning that miners are rewarded for the actual work of confirming transactions and validating them on the blockchain.
However, a slight difference exists which gives litecoin a superior edge. Bitcoin uses the SHA-256 hash rate which basically means that the mathematical computations of solving the puzzles become harder as more transactions are processed. Eventually, the miners will have to use more and more computing power to solve these puzzles.
Currently, the hardware being used by bitcoin miners is the ASIC which is rather expensive.
The litecoin blockchain, on the other hand, uses a slightly different system called the Script algorithm which allows miners to mine using Graphics Processing Units (GPUs) which are way cheaper. With the cost of mining being much cheaper, transactions on the litecoin blockchain can occur at insignificant costs.
This is what makes it very cheap to make payments on the litecoin blockchain.
What makes Litecoin better than its competitors?
Bitcoin is just one of the Litecoin competitors. Others include Ripple, Neucoin and EOS among others. Most of these use the SHA256 hash rate algorithms in creating new coins.
This means that more and more power must be used to maintain the network, it is a race for the mighty.
Litecoin, on the other hand, uses an algorithm known as a script that is based on GPU which is not dependent on the amount of power thrown in to produce more coins.
This means that unlike its competitors, Litecoins can be generated at a steadier rate than the competition.
How can LitecoIn be categorized?
Litecoin is a digital currency that allows for peer to peer transfers of digital currency efficiently and at minimal cost. Due to the technology incorporated, it can also be classified as a cybersecurity currency.
Litecoin’s vision on Security?
Litecoin security is based on the technology behind it.
First, there is blockchain technology which is a decentralized system. In a centralized system such as those we have in traditional banking systems, all information is stored in a centralized vault which can be attacked.
On a blockchain, there is no central server with information as the whole chain contains blocks with copies of information.
This means that there is no central point that can be attacked to tamper with information. This is what makes the blockchain a secure system, more than the traditional banking system.
Examples of Litecoin use cases / applications.
One of the greatest selling points of litecoin is the efficiency it affords users, being very cheap and super fast. This makes it very appealing to businesses which need fast transaction times.
Litecoin is also ideal for making micropayments because the cost of making litecoin transfers and payments is negligible compared to bitcoin. It is also very easy to integrate litecoin into a company website using plugins to allow customers to pay using litecoins.
With litecoin, you can list your business on their website as a business that accepts litecoins as payment. Companies already accepting litecoin payments include Cryptojeweller which stocks jewelry, Overstock which is similar to Amazon, Torguard, Bitcoinshop, Cryptothrift and Blackforest Vapes among others.
Cryptocurrencies have been a subject of contention for many governments for some time now. They have been received with love and hate in equal measure, probably because they present opportunity and risk in similar measure.
As much as they present an opportunity for better and more efficient business systems, the fact that they are decentralized systems that may circumvent governmental processes poses a regulatory challenge.
Litecoin has shown unique strengths that are superior in some ways to bitcoin and other similar cryptocurrencies.
This has made it gain traction in a short while and be ranked among the top cryptocurrencies in the market.
As much as 2018 has been a bloodbath for the cryptocurrency space, Litecoin has managed to maintain a considerable following and many predict that it is one to bounce back should the market have a bull run any time in the near future. But this largely depends on whether governments and big corporations will favor the space allowing cryptocurrencies to gain mainstream acceptance.