Bitcoin Is The Gold Of Cryptocurrencies, But Litecoin Is The Silver
Although a handful of altcoins were launched during the year 2011, Litecoin was the first to retain significant value to this day. The cryptocurrency was developed by Charlie Lee, an MIT graduate who worked as a software engineer at Google. When Lee learned about Bitcoin’s proposal he quickly understood its power, and motivated it to undermine before trying to create its own variants. After the failed launch of Fairbrix in September 2011, Lee tried again with Litecoin in October of the same year.
Litecoin aimed to improve the Bitcoin protocol in two main ways. On the one hand, it reduced the time gap between the creation of a new block at 2.5 minutes, four times faster than Bitcoin. The change was important for merchants who accepted bitcoin payments and needed faster confirmation of transactions.
Second, Litecoin applied a different hash function in the work test process – also known as a hash algorithm – with the aim of making the mining process more accessible to ordinary users.
In the early years of Bitcoin mining, people used central processing units (CPUs), which are the central chips of personal computers, which should be used exclusively for that purpose. In 2010, due to its greater efficiency, people began to use the graphics card (GPU) of computers to speed up the process.
Many, including Lee, anticipated a shift to even more dedicated and specialized mining devices called ASICs (application-specific integrated circuits). ASICs require custom fabrication and specifically designed computers.
Lee correctly guessed that bitcoin mining would be out of reach for fans using their own PCs.
Lee wanted a currency that retained the fundamental roots of bitcoin, that users can be miners without the need to resort to specialized and expensive units. Therefore, Litecoin uses a hash algorithm called scrypt, which requires significant memory capacity, preventing ASIC chips from gaining a significant advantage.
Beyond these technical adjustments, much of Litecoin is similar to Bitcoin. However, since blocks are issued four times faster than bitcoin blocks, the total amount of coins issued will be four times greater. Litecoin will converge on 84 million fixed units, against 21 million units of bitcoin. Consequently, Lee also modified the litecoin halving process, so that a halving of the litecoin emission rate occurs every 840,000 mine blocks, compared to 210,000 bitcoin.
It is important to keep in mind that if both bitcoin and Litecoin are used in similar markets and, therefore, share the same network size, each bitcoin unit is four times more valuable. The monetary issue of all the cryptocurrencies differs according to their protocol, and therefore the price of each cryptoactive is not a correct measure of how much they can grow as it is necessary to take into account their money supply.
The Litecoin network is often used as a test platform for Bitcoin software updates, since Litecoin is more agile than Bitcoin because it stores a fraction of the monetary value. It has also inspired the creation of other cryptoactives. At the time of publication, it is the sixth largest crypto-active in the world by market capitalization, with a market value of almost 5 billion dollars.
This story was originally published in Spanish at Cripto247.com