The crypto industry has been around for a little over a decade. Its development has been exponential, with Bitcoin alone having a market valuation of $584 billion as of July 10 23, 2023. Despite the emergence of hundreds of cryptocurrencies aiming at solving various problems, Bitcoin has maintained its market dominance.
Nonetheless, despite arguments regarding their antiquated concept, several earlier cryptocurrencies, like Litecoin, are still in use today. Litecoin has lately regained market interest because of its approaching halving event.
Litecoin has stayed in the top 20 cryptos in terms of market capitalization despite its lack of support for smart contracts and attributes that are essentially comparable to those of Bitcoin.
What is Litecoin, and why has its value among thousands of other cryptocurrencies stayed so high? We’ll go through what Litecoin is, its background, and how it works in this post.
What exactly is Litecoin (LTC)
Litecoin is an open-source global peer-to-peer (P2P) cryptocurrency network that allows users to send payments globally in a timely and cost-effective way.
The Litecoin network was created on October 13, 2011, as a fork of Bitcoin (BTC) to address three major flaws with the Bitcoin network: speed, scalability, and centralization.
The Litecoin network was formed on October 13, 2011, as a fork of Bitcoin (BTC) to address three major flaws with the Bitcoin network: speed, scalability, and centralization.
Litecoin is intended to be a convenient digital asset payment option for retailers and customers, with immediate transaction confirmations. To protect the network, it employs a proof of work (PoW) consensus, similar to Bitcoin.
However, its network uses a different hashing algorithm than Bitcoin. Scrypt is used by Litecoin, while SHA-256 is used by Bitcoin. This will be discussed in depth.
Litecoin Halving events
Miners receive LTC payouts when they complete a block. However, like with Bitcoin’s halving, Litecoin mining incentives diminish with time. This technique is included in the Litecoin protocol to manage the issuance rate and maintain the cryptocurrency’s finite supply.
Litecoin currently gives 12.5 LTC for every finished block, after the last halving event on August 5, 2019. The next halving event is scheduled for August 3, 2023, and will reduce mining payouts to 6.25 LTC per finished block.
The approaching Litecoin halving event has generated a lot of excitement and buzz in the cryptocurrency industry, especially considering it’s just a couple of months away.
The halving event, which is scheduled to happen every four years, is an important aspect of Litecoin’s monetary strategy.
The principal consequence of the Litecoin halving event is a decrease in the rate at which new Litecoins are generated. This scarcity mechanism is intended to reduce inflation by giving the coin a deflationary element.
The payout for miners decreases with each halving, which may have an influence on their profitability. As a result, this occurrence is known to cause changes in the mining landscape, as miners rethink their strategy and review the profitability of their operations.
Historically, Litecoin halving occurrences have had a substantial impact on the cryptocurrency’s price and market mood. For example, in the months leading up to its 2019 halves event, the price of LTC skyrocketed, rising from $30 in January to a high of $141.82 on June 23, 2019.
Similarly, prior to the 2015 halving event, the price of LTC climbed from a low of $1.45 in May to $7.66 on July 9, 2015.
Litecoin properties
Litecoin was created particularly to minimize the time it takes to validate a new block and to maintain storage efficiency. In this part, we’ll look at some of its characteristics.
1. Scalability
Litecoin’s block mining time is two and a half minutes, which is four times quicker than Bitcoin’s block mining time of ten minutes. As a result, the Litecoin network may attain better throughput.
2. Security
Scrypt hashing in Litecoin is intended to be more secure than other functions against hardware brute-force assaults. Even after a decade, Litecoin has not been subjected to any big attacks, confirming its dependability as a cryptocurrency.
3. Transaction speed
The transaction processing speed of Litecoin is 54 TPS, which is substantially faster than the transaction processing speed of Bitcoin, which is 5 TPS.
4. Decentralization
The Scrypt hashing algorithm powers Litecoin’s PoW consensus mechanism, lowering the network’s barrier to entry and allowing more people to participate in the mining process.
Mining power is no longer concentrated among larger players who can afford expensive equipment like Application-Specific Integrated Circuit (ASIC) miners, which adds to network decentralization.
5. Transaction fees
Litecoin’s fee structure is one-fifth the size of Bitcoin’s, significantly lowering transaction costs.
6. Privacy
Litecoin is also a cryptocurrency for privacy. The MWEB (MimbleWimble Extension Block) update allows users to opt in as needed to conduct private transactions, and transaction anonymity is assured — that is, the sender and recipient are the only people who know the value of the transaction.
How does Litecoin (LTC) work?
Litecoin, like Bitcoin, works on an open-source blockchain that is not controlled by a single central authority. Each Litecoin node operator keeps a copy of every blockchain to guarantee that new Litecoin transactions do not contradict the blockchain’s transaction history, and miners aid in processing new transactions by adding them to recently mined blocks.
Scrypt hashing algorithm
Scrypt is the hashing algorithm used by Litecoin. It was first chosen by the Litecoin development team to prevent ASIC miners from dominating mining.
ASIC mining was originally less suited to the larger memory needs of the Scrypt mining method, which opened opportunities for other miners, including those that employed CPU and GPU technology.
ASIC-based mining with Scrypt support, on the other hand, has evolved over time. As a result of their weaker computing capabilities, CPU- and GPU-based miners no longer have usable LTC mining equipment, as ASICs generate much more hashes per second.
Orphaned blocks
Orphaned blocks can emerge from Litecoin mining. They are formed when two miners complete a block at approximately the same time and the chain initially accepts both but subsequently rejects one.
Because of the short block confirmation time, there are many orphaned blocks. The Segregated Witness (SegWit) protocol addresses this issue by lowering the number of orphaned blocks.
Avoiding Pre-mine
Litecoin, a pre-mine, which allows the developers of a blockchain-based cryptocurrency to mine coins before the project is made public, was mostly avoided. Pre-mining was first utilized to compensate the project’s creators and fund its development.
Many community members wanted alternative currencies with a fair start, akin to Bitcoin. Charlie Lee (Litecoin founder) addressed these concerns when Litecoin originally started, arguing that it is “against the decentralized vision of Bitcoin” for one person or organization to hold a substantial number of coins and utilize them as they see right.
One week before the launch of Litecoin, Lee made its source and binary codes accessible for people to test mine. A vote on the Bitcointalk forum was used to determine the time of launch, allowing users to choose the time that was most convenient for them. Everyone was able to mine concurrently since everyone was informed of the launch date and simply needed to make a tiny edit to their files to begin mining genuine Litecoin.
Litecoin, on the other hand, had a little pre-mine. The genesis block, or the first block on the network, was pre-mined with 150 LTC, and two further blocks were mined to ensure its legitimacy. When Litecoin originally started, the payout for mining one block was 50 LTC, which was basically useless at the time.
Atomic swaps
Atomic Swaps enable the exchange of cryptocurrencies between blockchains, often known as cross-chain trading. This improves the interoperability of the Litecoin blockchain.
Conclusion
Despite being eclipsed by Bitcoin, Litecoin remains one of the top 20 cryptocurrencies, despite the creation of thousands of new cryptocurrencies. This is an excellent predictor of LTC’s strength.
Furthermore, with the impending halving event, Litecoin (LTC) is expected to acquire even more popularity in the cryptocurrency industry. We can undoubtedly expect further progress and innovation from the extremely talented technical team behind Litecoin.
Having said that, we would still advise you to conduct your own research before investing any of your money in cryptocurrencies.