Lee sought to make litecoin technically distinct from bitcoin in two different ways. First, he 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 utilizes. Second, Lee sought to create a network that allowed for faster and cheaper transactions (approximately 2.5 minutes per transaction compared to the 10 minutes bitcoin offered).
Litecoin is a cryptocurrency created by Charlie Lee 2011.
Lee announced litecoin on Bitcoin Talk 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 was originally a fork of bitcoin, intended to serve as “silver to Bitcoin’s gold”, rather than to compete with it.
This faster time and cheaper transaction fee was intended to enable consumers to use litecoin for smaller and more day-today transactions.
How does Litecoin work?
Litecoin was created by ex-Google engineer Charlie Lee in 2011 with the intent to improve the speed of transactions handled by a blockchain. 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.
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 computer-grade hardware to mine litecoin and thus making mining more democratic. Lee engineered litecoin to complement to bitcoin as a means of payment.
Launch & Issuance
Litecoin launched in October 2011 as a fork of the bitcoin blockchain. The first block (the genesis block) was mined on October 8th, 2011, and the first 150 coins were premined by the team behind litecoin.
The mined the genesis block and the next two blocks in order to confirm that the genesis block was valid prior to releasing the code.
Network Design & Security Model
Litecoin, similar to bitcoin uses a proof-of-work algorithm, rewarding the miners for processing each block.
While bitcoin uses the SHA-256 mining algorithm, litecoin uses Scrypt, an algorithm that allows users 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 utilizes.
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 weight 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.
Monetary Policy & Crypto-Economics
Litecoin is a deflationary currency, and there will be a hard limit of 84 million litecoin ever created, which is 4 times as many as 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, similarly to bitcoin, are all produced on-chain.
Litecoin was written in C++ and was based on the bitcoin protocol. Litecoin was created and is used as an open source, peer-to-peer digital currency.