What is Litecoin (LTC)? A Comprehensive Guide

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Bitcoin is known as the first decentralized cryptocurrency and blockchain project. The creator of Bitcoin, Satoshi Nakamoto, made the project open-sourced. In this manner, many developers were able to use and replicate the Bitcoin core structure to create new blockchain projects.

There are many blockchains in the DeFi space that originated as a fork of the Bitcoin network. One such project is Litecoin. This article is going to discuss what Litecoin is and how it fairs against Bitcoin and other cryptocurrency products.

What is Litecoin?

Litecoin is a blockchain network that started as a fork of the Bitcoin network. The project is a peer-to-peer and open-sourced network that works as a cryptocurrency payment facilitator.

Litecoin is also a permissioned network which means that anyone can participate in the network without needing any approval or clearance. This cryptocurrency project was introduced in 2011 to add some upgrades to give it a boost in comparison to the Bitcoin genesis blockchain.

Litecoin has worked on improving three main features of the Bitcoin network, namely scalability, decentralization, and speed. Therefore, Litecoin was able to gain traction among Bitcoin users for faster transactions.

Litecoin also employs the Proof of Work consensus model, much like Bitcoin. This crypto project does not support smart contracts. The hashing algorithm in Litecoin has been upgraded to Scrypt. Bitcoin blockchain depends on the SHA-256 model for hashing.

How does Litecoin Work?

Since Litecoin was created as a fork of the Bitcoin blockchain. This project shares a lot of similarities with the Bitcoin blockchain. However, the developers of Litecoin have added upgrades and replaced some key protocols to give it a boost. Litecoin is also a decentralized blockchain, much like Bitcoin.

To ensure that the ledger of Litecoin does not repeat any transactions, the node operators are sent a copy of every new block. Additionally, Litecoin miners participate in the creation of new transactions by including them in the mined blocks after verification.

Litecoin issues an eponymous native currency that is denoted by LTC. The total supply of LTC is capped at 84 million, which is 4 times greater in comparison to the max quantity of BTC.

Origin of Litecoin

The creation of Litecoin is attributed to Charlie Lee. Lee is a computer scientist who graduated from MIT and also worked at Google. He studied the Bitcoin blockchain in detail and was inspired to add new specifications to its infrastructure.

Lee conceptualized Litecoin as a Bitcoin fork that will have faster speed, greater scalability, and better decentralization. He named the project Litecoin because he intended to create a lighter version of the Bitcoin blockchain that takes up smaller space in terms of data storage.

By aiming to create a lite version of Bitcoin, Lee made Litecoin faster and increased its scalability potential.

Owning to his extensive research and work in the field of DeFi, Lee was invited to join Coinbase in 2013 as Director of Engineering. It is important to note that Coinbase is the biggest cryptocurrency exchange in the USA and it is also the first cryptocurrency enterprise in the world to get a public listing.

When the news about Lee joining Coinbase spread in the market, Litecoin prices soared and reached from$3 $30 per unit in a matter of days. He introduced Litecoin via an open-sourced client on GitHub.

In 2014, Lee presented the proposal of merging mining for Litecoin with Dogecoin mining operations. This was implemented a few months later, adding block subsidy and increased security for Dogecoin.

In 2020, PayPal listed a derivative of Litecoin for purchase against Bitcoin, Bitcoin Cash, and Ethereum. However, the users were not able to withdraw the currency or spend it on account of its intrinsic feature. In 2021, Litecoin’s price appreciated by 30% as a result of a rumor about the partnership with Walmart.

In 2022, Litecoin made the MWEB upgrade live on its mainnet as a soft fork. This update allowed the users to make private transactions on the network. In the second quarter of 2022, PayPal listed Litecoin alongside other currencies such as Bitcoin, Bitcoin Cash, and Ethereum to be exchanged with other digital wallets and PayPal account holders.

Key Features of Litecoin

Here are some of the important features that are essential to the composition of Litecoin:

Gas Fees

Bitcoin transaction fees are considered to be cheaper in comparison to traditional remittance service providers such as PayPal, MasterCard, VISA, and Western Union. However, the cryptocurrency project can experience the inflation of gas fees during periods of trading volume amplification.

Litecoin was created to upgrade the core infrastructure of Bitcoin; therefore, the project touts a 1/50th transaction fee in comparison to Bitcoin.

Security Protocols

A hash is an amount of data transformed into another value or key. Bitcoin hash rate represents the total computational power available on the network in real time.

The hashing mechanism of Litecoin is created to protect the network against threats like hardware-based brute-force invasions. Therefore, Litecoin has managed to deflect all hack attempts since its inception to date.


Bitcoin is a permissioned network and a public ledger. All the transactions made on the Bitcoin blockchain are accessible and disclosed to every stakeholder to ensure transparency. However, Litecoin has transitioned into becoming a privacy token like Monero or Dash coin.

The privacy feature was added to Litecoin in the form of the MWEB upgrade mentioned before. Therefore, Litecoin users can make secure transactions where the transaction details are disclosed to only the sender and receiver.


Litecoin has replaced the SHA-256 hashing protocol in Bitcoin with the Scrypt algorithm. Scrypt plays an important role in supporting the PoW model for Litecoin mining. This algorithm ensures that more users can participate in the network by lowering the entry barrier for greater participation.

At the same time, Scrypt also compliments the decentralization of Litecoin. This mechanism ensures that mining opportunity is not limited to the big players who can evolve their computation power by using fancy equipment such as ASIC or Application-Specific Integrated Circuit.


Scalability is the property of blockchain to support the increasing number of computations per unit of time. Litecoin has achieved a block timing of 2.5 minutes. This faster scalability rate makes this project 4 times faster in comparison to Bitcoin.

The average block time for Bitcoin is 10 minutes.  Therefore, the Litecoin network also enjoys a higher throughput.


Bitcoin has introduced a halving protocol that cuts the total mining rewards in half for miners after every four years. Litecoin has kept this mechanism with the same rules. When miners verify blocks for the network, they can earn newly minted LTC as a reward.

Litecoin also decreases the mining rewards for miners every 4 years to control the total supply of the currency and salvage its demand. The last halving for Litecoin took place in 2019, with mining rewards decreasing to 12.5 LTC.

The next Litecoin halving event will happen in August 2023, reducing the mining rewards to 6.25 LTCs per block.

Transaction Speed

Litecoin was designed to perform transactions at a faster rate in comparison to Bitcoin. The current processing speed of Bitcoin is set at 5 TPS or transaction per second. On the other hand, Litecoin can perform 54 TPS or transactions per second. Litecoin is not immutable like Bitcoin; therefore, the network can increase its existing transaction speed in the future.

Special Protocols

It is clear that Litecoin shares many of its attributes with Bitcoin. However, the project has managed to stand out as an independent cryptocurrency project on account of its unique characteristics. Some of the exclusive features of Litecoin are as under:

Orphaned Blocks

Litecoin has managed to issue the problem of Orphaned blocks. When two or more miners complete the block verification at the same time, the Litecoin network can accept both at first but reject on later.

The rejected but verified blocks are known as Orphaned blocks and they are common in PoW networks. Litecoin has integrated the SegWit or Segregated Witness protocol addresses this issue and reduces the formation of Orphaned blocks.

Scrypt Hashing

As mentioned before, Litecoin replaced the SHA-256 protocol in Bitcoin with the Scrypt hashing algorithm. It was a way to prevent the ASIC miners from launching a brute-force attack and taking hold of the hashrate on Litecoin.

On account of this change, Litecoin experiences an increase in CPU and GPU miners. However, the technology has limited the growth of mining potential for Litecoin since ASIC miners are capable of creating more hashrate per second.

Atomic Swaps

Atomic swaps stand for the exchange of a cryptocurrency taking place between different blockchains. Litecoin has enabled the atomic swap option on its network allowing users to utilize the cross-chain trading option. Therefore, this protocol increased the interoperability of the Litecoin network.

Absence of Pre-Mine

Many blockchains require a pre-mine protocol to get started because they need miners to mine new coins only after processing a transaction on the platform. However, Litecoin avoided the pre-mine option and used the pre-mine option to compensate the founder and investors of the network.

To ensure that Litecoin remains truly decentralized like Bitcoin offering a fair and equal investing opportunity to everyone, Lee discarded the idea of allowing some investors to get a chance to pre-mine Litecoin before its public debut.

He maintained that it was against Bitcoin’s decentralization vision. He chose to make the source and binary code of Litecoin public one week before its public launch. This way, developers were able to perform test mining operations. The date of the launch was issued after a discussion on the Bitcointalk forum.

The test-mined users only required adding a few files to perform real Litecoin mining. However, the network did have a pre-mine of its first block that released 150 LTC and two blocks for their verification. The mining reward for Litecoin started at 50 LTC in 2011.

Modified GUI

Another change added to the Litecoin network when it was introduced as a fork of Bitcoin was in the GUI. The founder of the project customized and added new features to the GUI or Graphical User Interface.

How to Mine Litecoin?

Mining Equipment

Litecoin miners can use ASIC-based devices to perform mining operations using a pre-installed mining program. Meanwhile, there is also an option available for CPU and GPU miners where they can use customized or self-generated mining software.

However, the CPU/GPU miners need to pay special attention to the security of their operations because there is much ready-made software in the market that come with malware, while others have weak security propensity that can be vulnerable to cyber-invasion.

Mining Process

In PoW blockchains, the users who request a validation application can view the block that is up for mining. Litecoin miners perform verification of blocks by offering computation power and solving mathematical encryption.

Once they find the correct key, they are permitted to add the new transaction to the blockchain. When a block has been fully verified, miners can earn rewards in the form of transaction fees and newly minted LTC issued by the network.

Mining Operations

Once miners have made the necessary preparations for verifying the transactions on Litecoin, they can consider other options. Some miners can work as a standalone unit, while others can affiliate with an existing mining firm.

The independent miners will have to wait for a longer duration to get a chance to earn rewards.  On the other hand, those who are pooling their operations can start earning much quicker. However, the unit miners do not have to split their mining rewards.

On the other hand, the users who are working with CPU and GPU methods can keep working independently. However, these miners have little chance of making a profit because ASICs are more powerful mining tools. Litecoin Scrypt has evolved to cater to the hash rate generated by the ASIC mining operators.

Litecoin vs. Bitcoin vs. Ethereum

At present, the cryptocurrency space is dominated by Bitcoin and Ethereum. Bitcoin has maintained its place as the genesis blockchain. On the other hand, Ethereum is known as a decentralized application host and setting up standardization for cryptocurrencies and other blockchain protocols.

Bitcoin and Ethereum have a dominance of 38% and 17% simultaneously in the DeFi market. Litecoin shares some similarities and differences with both these currencies in terms of consensus mechanism, scalability, and security.

Litecoin uses the PoW mechanism much like Bitcoin, but the Ethereum blockchain has recently moved to the PoS network. The hashing mechanism of Litecoin replaced the SHA-256 from Bitcoin to Scrypt algorithm.

Meanwhile, Ethereum started with Ethash, and when it shifted to the PoS mechanism, it became irrelevant. Scrypt is an updated version of SHA-256 with memory extension that made mining more exclusive until the invention of ASIC Srycpt mining machines in 2021.

The total supply of Bitcoin is capped at 21 million; Litecoin also has a limited supply of 84 million, while Ethereum does not have a supply cap. The yearly limit of ETH is set at 18 million.

The transaction speed of Bitcoin is set at 5 TPS and 10 minutes average block time. Bitcoin’s maximum block size is set at 1 MB. For Ethereum, the limit is extended to 10K TPS after the Merge upgrade with and block time of 12.06 seconds and a block size of 4 MB. Litecoin TPS is 54 per second, an average block time of 2.5 minutes and a block size of 1MB.

Litecoin gas is typically 1/50th of Bitcoin transactions. Ethereum uses a different mechanism for determining the transaction fee, which is tied to computational work, and it can differ from one transaction to another.

Advantages of Litecoin

Litecoin enjoys healthy liquidity because it has been listed on all major cryptocurrency exchanges.

Litecoin has been considered one of the earliest blockchain projects, and its networking efficiency is strong on account of its close association with Bitcoin sparking media attention and traction from investors.

Litecoin core resembles Bitcoin in many ways; therefore, developers can use it as a testnet for new proposals before implementing it on Bitcoin.

Litecoin offers higher transaction speed and cheaper fees in comparison to Bitcoin. It is essentially Bitcoin blockchain with some important updates.

Limitations of Litecoin

Litecoin is considered a vulnerable cryptocurrency because it has not been able to match the Store of Value and security protection offered by Bitcoin.

If Bitcoin devs introduce a new upgrade to address its scalability issues, Litecoin can lose its edge as a faster and cheaper network.

An increasing number of stablecoin projects have threatened the status of Litecoin as a viable and practical cryptocurrency project with real utility in the DeFI market.

Fair distribution of Litecoin among big market players is riskier in comparison to other forks like Bitcoin Cash.

Litecoin gained considerable traction on account of its ASIC-averse policies; however, with the introduction of ASIC Scrypt mining machines, the feature became redundant.

The rate of upgrades and development activity happening in the Litecoin network is much lesser in comparison to projects like Cardano and Polygon.


Litecoin reached an ATH of 300 euros in 2017 when Lee sold out his entire LTC stake. Since that time, there have been some rumors about market manipulation and foul play in the Litecoin community. However, the project has managed to remain in the top 20 cryptocurrency projects on the global leaderboard by market capitalization.

However, the technical foundation of Litecoin is strong, and the founder of the project has left Coinbase to join Litecoin Foundation and work on its technical development.

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