Litecoin: a Legitimate Contender in Cryptocurrency

  • iReviews
  • August 08,2017
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Cryptocurrencies have grown tremendously in popularity during 2017. Bitcoin remains the flagship currency. But an altcoin named Litecoin appears to have great potential to take the title of most popular cryptocurrency from Bitcoin.

 

Referred to as the “Silver Bitcoin,” Litecoin has a number or traits that give it an advantage over the current crypto market dominator. Besides these traits, every crypto enthusiast knows that one characteristic defines cryptocurrency right now: volatility. Noone can tell you what will happen with cryptocurrencies in even a few weeks. Below are the basics about Litecoin to help you decide if this popular altcoin sounds like a good investment.

A Contender to Keep Your Eye on in the Crypto Market

On October 7, 2011, Charles Lee released Litecoin through an open-source client on GitHub. Lee, a former Google engineer, had one motivation in mind while creating Litecoin: to make an improved version of Bitcoin.

 

Litecoin was actually a fork of the Bitcoin Core client, so it has more similarities than differences with the reigning champ in the crypto market. But the few divergences it does have could make all the difference in establishing its dominance in the crypto market.

Litecoin’s Algorithm

Bitcoin employs the SHA-256 cryptographic algorithm while Litecoin utilizes a new algorithm called Scrypt. Many consider this the most important technical difference between the two. The hashing algorithm that a cryptocurrency uses has a direct impact on mining, the process that cryptocurrencies use to generate new coins.

 

Mining is the process of members in a crypto network designating some of their own computing resources to confirm the transactions of other users on the network. In return, these miners receive a new unit of the cryptocurrency (a coin).

 

SHA-256 is more complex than Scrypt but allows for a greater amount of parallel processing. Every year, mining methods become more sophisticated to keep up with the growing complexity and computing power required to mine efficiently. Application-Specifics Integrated Circuits (ASICs) is currently the most popular Bitcoin mining method. ASICs are hardware specifically for mining. Because of this trend in Bitcoin mining, amateur miners using regular CPUs and GPUs cannot compete.

 

Scrypt is not as vulnerable to custom hardware like ASICs. Scrypt does not put as much wear and tear on a miner’s GPU as Bitcoin does. Thus, altcoins like Litecoin that use Scrypt are more accessible to amateur miners who want to participate but cannot afford expensive advantages.

 

Of course, people like to have advantages in competition, so companies like Flower Technology and Zeus have created ASICs for Scrypt that brought them to the market. This may undo Charles Lee’s vision of Litecoin remaining easily accessible to all miners regardless of hardware.

Block Generation

It takes around 10 minutes to generate a block with Bitcoin. As discussed here, blocks are integral to cryptocurrency transactions. Litecoin can generate a new block in 2.5 minutes (4 times faster). This allows Litecoin to handle a heavier transaction volume and decreases transaction fees for its investors.

 

To even come close to matching this, Bitcoin would need some substantial updates to its code. Everyone on the Bitcoin network is currently running this code, so it could be tricky. However, generating blocks faster is not always a good thing.

 

Litecoin’s higher block generation means a higher probability for orphaned blocks to occur. Basically, orphaned blocks, also known as detached blocks, are valid blocks that do not become part of the main blockchain. They sometimes happen when 2 miners produce blocks around the same time. A hacker can also reverse transactions through sheer hashing power, but this is less likely. The crypto network will initially accept orphaned blocks. But when longer blockchains start showing up with no evidence of that orphaned transaction and recordings of later transactions, the orphaned block loses its validity.

Scalability

Adaptability is crucial for a product to scale. Litecoin’s team ensured that improvements to the altcoin could be implemented easier than with Bitcoin.

 

The altcoin is also in the process of creating a “lightning network,” something its team intends to buttress its already impressive adaptability. If Litecoin does indeed take off, this will keep the network running smooth as butter.

Lifetime Cap

Every cryptocurrency has a lifetime cap of how many coins can be mined. When this is reached, it is believed that the stability and security of that cryptocurrency’s blockchain will be weakened.

 

Bitcoin has a lifetime cap of 24 million. Litecoin’s lifetime cap is four times greater at 84 million coins. As mentioned before, Litecoin generates blocks four times faster than Bitcoin. So if this were a controlled experiment with consistent rates, this extra room in Litecoin’s lifetime cap would be filled up in the same amount of time as Bitcoin’s.

 

But this is not an experiment with controlled variables, so many believe that this extra room will be advantageous for Litecoin to establish a longer dominance than Bitcoin.

Silver & Gold

Volatility is the central theme of cryptocurrencies right now. Whether Litecoin will usurp Bitcoin remains to be seen. Its unique qualities do make it out to be a promising crypto investment.

 

Charles Lee never meant for Litecoin to take Bitcoin’s place, but instead wanted it to act as the “silver” to Bitcoin’s “gold” (hence the nickname). Perhaps both cryptocurrencies will co-exist for a long time, or maybe both will be history within a year’s time. Nobody is certain. Whatever happens, you are in control of your cryptocurrency investments. Check out Coinbase if either of these cryptocurrencies piqued your interest.

 

Sources: Futurism, Investopedia, The CoinTelegraph, coindesk