Since bitcoin is an open-source software, it’s possible to analyze and modify it. Thus, anyone can launch their own system. And this was the case with litecoin. Indeed, the community behind the litecoin has set up a network built on rules close enough to the Bitcoin.
Litecoin, the silver of cryptocurrencies
Litecoin is a peer-to-peer crypto-currency project and open source software. Peer-to-peer (P2P) is a type of computer network that looks like a client-server model. But where each client is itself a server.
Inspired by bitcoin, litecoin is almost identical technically. Indeed, the creation of coins and transactions are based on an open-source protocol. And the blockchain is not managed by a central authority: It’s decentralized.
The creators of litecoin intended it as an improvement of the bitcoin crypto-currency. And the main difference is that it uses the Scrypt algorithm instead of SHA256. The main difference lies in creating a faster “block” of transactions, which has the effect of speeding up the validation of a transaction by the network. And it’s the key success factor of litecoin: The transactions are verified much faster than bitcoin’s.
Differences with bitcoin
The developers of litecoin hope to make it better than bitcoin, thanks to the following three main differences.
- The network aims to process a block every 2.5 minutes, instead of 10 minutes for bitcoin. While this allows a faster validation of the transaction, it also increases the size of the block chain;
- Litecoin uses Scrypt as proof-of-work in its algorithm;
- The network will produce 84 million litecoins or four times more units than those delivered by the Bitcoin network.
The original purpose of using scrypt was to allow miners to undermine bitcoin and litecoin at the same time. And it was also to avoid giving the advantage to miners using their graphics card (GPU) to those who use the CPU.