Litecoin (LTC) – an altcoin introduction

For those who enjoy technical details

BTC (Bitcoin Core) the first and biggest cryptocurrency by market capitalisation ($250bn) at the time of writing, and trading over $14,500 is one of 1,337 cryptocurrencies according to http://coinmarketcap.com, with the total market capitalisation of all cryto currencies around $417bn.

The journey to understanding cryptocurrency takes one into a new world of geek terminology, cypherpunk ideology and cryptographic technology, but as familiarity sets in, trading cryptocurrencies start to look and feel like trading foreign exchange, and holding cryptocurrency feels like holding rare metals which follow the general pattern of supply and demand derived from scarcity.

Although BTC accounts for more than 50% of the cryptocurrency market, the world of Altcoins (alternative to BTC) and Tokens is rapidly gaining prominence.It’s worth noting at this point that most altcoins and tokens are not looking to replace bitcoin but offer their own value, although buyer beware there are many scams and ill conceived altcoins.

This article will examine just one of the more than thousand such altcoin instruments. The aim is to clarify how they come about, get into some detail about the altcoin itself, and just generally get a better feel for these coins. A basic understanding of cryptocurrencies, in particular BTC is assumed.

One important distinction required before we continue is the difference between a Token and a Coin. At first glance, in some instances the differences are blurred and the terms are often used interchangeably (correctly/incorrectly).

Crypto coin or token?

A crypto coin is a means of payment, and is synonymous with cash, being a mutually accepted unit of exchange.A crypto token, is this and more.Often a crypto token exists as a secondary asset within a blockchain ecosystem, most commonly Ethereum, to give effect to a Distributed Application (DApp) by adding functionality & event programmability to the blockchain.

The advent and terminology of Initial Coin Offerings (ICOs), muddies the waters even further. Bitcoin mining produces Coins, whilst Ethereum generates Tokens through a mechanism called a Smart Contract System (SCS). ICOs then are essentially Altcoin offerings or Token generation launches for the purpose of raising funds to achieve a specific project/product outcome or goal, and in turn the investor holds a token or coin whose value is hopefully linked to that outcome.

Coins and Tokens appear then to arise in several ways, namely via ICO’s, original effort such as Bitcoin and Ethereum, and out of forks of existing cryptocurrencies by creating a new branch of the code base to improve and enhance on the forked cryptocurrency.

What happens when a fork occurs?

When a cryptocurrency fork occurs, the holder of the original currency will end up holding both the original and the forked currency. The overall supply of cryptocurrency will have doubled, and the market forces of supply and demand would determine the new price of both currencies depending on the markets trust and acceptance of each.

LTC (Litecoin Core) is one such altcoin which forked off Bitcoin with improvements/differentiations in its implementation. Litecoin went live on the 13th October 2011. Like Bitcoin, Litecoin is also based on a proof-of-work (as opposed to proof-of-stake) mechanism which results in exponentially increasing effort to generate hashes for each block mined.

Litecoin describes itself as an “experimental digital currency that enables instant payments to anyone, anywhere in the world. Litecoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network. Litecoin Core is the name of the open source software which enables the use of this currency.”

The use of the term “experimental” acknowledges the fact that cryptocurrencies are software based and software is seldom error free. As yet unknown weakness in algorithms, design and even implementation limitations could become performance and or security vulnerabilities in the future as technology and understanding of cryptocurrencies becomes more common place. For this reason constant change and improvements form part of the lifecycle of any cryptocurrency code base.

The Litecoin developer github community has already had 14,762 code commits, resulting in 206 releases and is maintained by 458 contributors. That’s more coders working on its source code than most banks have working on their core banking system.

How Litecoin differs from Bitcoin

Litecoin differentiates itself from Bitcoin with faster transaction confirmation times and improved storage efficiency. It currently holds 6th place on the cryptocurrency leaderboard by market capitalisation and is displaying good industry support (most exchanges, wallets & cryptocurrency accepting merchants support it), trade volume and liquidity. It also currently has much lower fees.

It differs mathematically in that it uses a different proof-of-work hash algorithm, viz scrypt (pronounced ess-crypt) in place of the not-memory hard SHA256 algorithm used by Bitcoin.Scrypt security relies on time-memory tradeoffs and is designed to use exponentially increasing amounts of memory making the size and the cost of a hardware implementation more expensive, and therefore limiting the amount of parallelism an attacker can use, for a given amount of financial resources.

Speed of transaction is improved (four times faster) increasing its utility for near real time transactions.

It’s also the first of the top 6 cryptocurrencies to implement SegWit (not the same as the proposed SegWit2X which was never implemented). Segregated Witness (SegWit) which solves two rather technical constraints or weaknesses in the original Bitcoin protocol relating to (a) blocksize limitations slowing down transactions, and (b) signature malleability, which relates to the possibility of coin theft because not all transaction data was included in the signature.

SegWit does this in a backward compatible manner by redefining block size as “units” instead of bytes. The “witness” signature data is separated from the Merkle tree record of who is sending or receiving the bitcoin and moved to the end. Each byte of the “witness” data would only count as one quarter of a “unit” when determining block size for transaction costs. This also addressed signature malleability, by moving signatures out of the transaction data, making the transaction ID no longer malleable.

Litecoin is supported by the Lightning Network for fast, person-to-person payments.Lightning speeds up and scales out the blockchain by making use of multiple off-blockchain transactions recorded on the blockchain only by a channel open and close transaction. Lightning is less than a year old, rapidly evolving, and is likely to transform micropayments on the Litecoin blockchain.

Currently trading around $147, with a total market capitalisation of $8,449,548,671
and a circulating supply of 54,109,258 LTC out of a maximum possible supply of 84,000,000 LTC (limited by a geometric series algorithm which halves the mining rate every 4 years by increasing the difficulty every 2016 blocks).

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