This is a peer-to-peer cryptocurrency that is a fork of the original Bitcoin code. It is a decentralized system with block producers being miners. Hence, it utilizes the Proof-of-Work (PoW) consensus mechanism for block validation.
In addition to the network being called Litecoin, it is also the term applied to the coin itself. Since it is open source, anyone is free to run a node. Like Bitcoin, those who solve the mathematical equation are able to add to the blockchain along with claiming the block reward.
Litecoin uses distributed ledger technology for maintaining the database of transactions. This is kept in ledger form with each block producer being responsible to ensure the double spend problem does not arise.
All coins are accessed through wallets using the private key system. This ensure that the key holder has full ownership rights, something nobody can take away (without the key).
The similarities to Bitcoin means that it is often called silver to Bitcoin's gold. Whereas Bitcoin has 10 minute block times, Litecoin utilizes 2.5 minutes.
Due to the concern regarding GPU usage within the Bitcoin mining pools, a fork was usher to allow more CPUs to participate. This led to the formation of a new alternative currency called Tenebrix (TBX). This became GPU resistant.
One problem was a clause placed that allowed the founders to claim 7.7 million coins without any cost. This obviously was upsetting to the community.
Charlie Lee took it upon himself to correct this error. He copied the code while eliminating the founder clause. This was called Fairbrix (FBX).
In October 2011, the blockchain went live. The fork in Bitcoin's source code included these changes:
- decreased block generation time (2.5 minutes)
- increased maximum number of coins
- different hashing algorithm (scrypt, instead of SHA-256)
- faster difficulty retarget
The genesis block took place on October 13, 2011. Today, Litecoin is one of the longest running chains next to Bitcoin.
In May 2022, MWEB (Mimblewimble Extension Blocks) upgrade was activated on the Litecoin through a soft fork. This upgrade provides users with the option of sending confidential Litecoin transactions, in which the amount being sent is only known between the sender and receiver.
Changing Cryptocurrency Landscape
In spite of a lot of changes in cryptocurrency over the last decade, Litecoin is still a top 20 coin by market capitalization. This is rather impressive considering the emergence of stablecoins, a few which occupy the top 10. There are also a lot of tokens relating to decentralized finance, something that these older changes are not equipped to handle.