In 2011, two years after the enigmatic character Satoshi Nakamoto had launched the now-legendary Bitcoin, an ex-Google employee by the name of Charlie Lee felt that the system needed some improvement. The original system seemed geared towards the specialist, and there was a fear that in the event of a catastrophic collapse they did not have a sufficient back-up network. Also, the launch of Bitcoin allowed insiders an unfair advantage, making huge gains from the very start and reducing the chances of the general public to be able to reap the same benefits. And so, Litecoin was born.
What’s so different about it?
Lee essentially took Bitcoin’s open-source system and tweaked it, migrating it from a cryptographic algorithm called SHA-256 to a newer model known as Scrypt.
Whereas the older system relied on super-powerful computers to process the ultra-complex computations required, Scrypt allowed ‘newbie’ users and miners with more general use CPUs or GPUs access to the world of digital currency marketing.
In today’s digital world, speed is everything. Litecoin was designed with this in mind, making transactions four times quicker than Bitcoin. Also, Lee considered the Bitcoin fees to be too high, so these were reduced in his new currency – about 2 cents per 1,000 Litecoins.
But what is a Litecoin?
The idea of a cryptocurrency is basically a way of avoiding the need for a bank through which to trade or make payments. Most of us use a bank, and whenever money moves in or out, or even when it stays still, the bank takes a cut in fees and interest. Also, our savings and investments are constantly hit by factors like inflation and interest rate fluctuation. Cryptocurrencies, like Litecoin, seek to avoid this, through ‘peer-to-peer’ payments without the need for a bank or any other third party. The fixed amount of available Litecoins, set at 84 million, rules out the possibility of inflation.
The fact that cryptocurrencies are decentralized, meaning that they are not subject to control by large banking corporations and government agencies, makes them attractive to merchants, traders and investors, cutting through a lot of the red tape and fees that often accompany mainstream banking procedures. Lee himself added to the impression of Litecoin being truly decentralized, by selling off his entire stake, thus removing any notion that he was influencing the system from within.
Litecoin, then, is one of these currencies and is becoming more widely accepted and supported by big companies across the globe as a viable option in place of fiat currency (your usual cash, as printed by your government). Currently, Litecoin is ranked fifth in terms of market capitalization, but its direct links with Bitcoin helps to maintain a healthy interest by investors, traders, and miners alike.
The future of Litecoin
Since its creation, Litecoin has earned the reputation for being Bitcoin’s ‘Little Brother’, and this label will be a hard one to shift. However, as it matures and grows, it is claiming a rightful place as a reliable and trustworthy means of cryptocurrency trading.
The key to this is innovation. There are now hundreds of ‘altcoins’ across the digital world, and that number will undoubtedly increase. Most are direct clones of a Bitcoin-like system, but with no real attempts to enhance them.
From the start, Litecoin has shown that it was trying to improve upon the groundwork laid by Nakamoto, with a faster blockchain sequence which allows for constant differentiation and expansion. One example of this was the incorporation of a protocol name Segregated Witness (SegWit) in 2017 which greatly increased the payment security without compromising speed and efficiency.
Litecoin is a fork of Bitcoin and will probably never be free from the shadow of its big brother, Bitcoin. However, due to its faster transaction speed, easier access to new users, and wider acceptance by certain industries, it is fast becoming a trusted means of peer-to-peer digital payment, as well as an attractive investment prospect. Most experts share this view, suggesting that it will experience a surge, as uncertainty grows around Bitcoin.
To use a quote from John Zwick, a board member of the Bitcoin Foundation, “I believe in Litecoin more than Bitcoin”.