Litecoin was initially conceived to complement Bitcoin; Litecoin’s developers have long stated that they intended to create the “silver” to Bitcoin’s “gold.” Like Bitcoin, Litecoin is a decentralized digital currency that uses the same encryption techniques to transfer, mine, and confirm transactions. Without getting too much into technical details, the key takeaway points are:
- The transaction confirmation time: Bitcoins mechanisms allow for one transaction to be recorded on the blockchain every 10 minutes. On the other hand, Litecoin has a faster confirmation time at 2.5 minutes. Users that are anxious to see their transaction confirmed in the blockchain as soon as possible benefit from this, as well as merchants who get faster confirmation times for their businesses.
- Different cryptographic algorithms: While both coins use proof-of-work as a consensus mechanism, Litecoin uses Scrypt in its proof-of-work algorithm, while Bitcoin uses SHA-256. Bitcoin’s SHA-256 can be parallelized while Litecoin’s Scrypt can’t (theoretically). This mitigates any 51% attack that can be sustained by mining pools like in the case of Bitcoin.
- The number of coins produced: The total number of Litecoins that will exist is four times more than the total number of Bitcoins: There will 84 million Litecoins in existence, compared to Bitcoin’s 21 million.
- Mining rewards: Litecoin’s initial reward is the same as Bitcoin’s with 50 Litecoins as a block reward. Due to the increased number of coins that will exist, the rate at which Litecoins are generated is halved every 840,000 blocks, four times more blocks than that of Bitcoin. Right now, every Litecoin block that is mined rewards 12.5 LTC while Bitcoin rewards the same, 12.5 BTC, the halving this year will see the block reward go to 6.25 BTC per block mined.
While Bitcoin and Litecoin have a lot in common, the main focus of Litecoin was too in many ways, introduce improvements to what Bitcoin offered. Litecoin could prove to be far more attractive to merchants because of its faster transaction confirmations times as well as higher capacity for transactions. Litecoin will always be considered the “silver” to Bitcoin’s “gold”.