Litecoin is viewed as silver to Bitcoin’s gold. It is important to notice that Litecoin was created to complement, not replace Bitcoin. Charlie Lee believes that Bitcoin should be used as a store of value and be used for larger purchases such as houses or cars. Litecoin, on the other hand, should be used for every day purchases such as groceries and meals.
Compared to Bitcoin it is a relatively less valuable cryptocurrency. Litecoin is easier to obtain and to transact. The properties of Litecoin can be summarized as follows:
- Transactions are 4 times faster than with Bitcoin.
- The total amount of Litecoins is 4 times higher than the total amount of Bitcoin.
- Barriers to entry for Litecoin mining are lower compared to Bitcoin
— Litecoin Foundation (@LTCFoundation) 6 december 2017
Litecoin blocks are on average generated every 2.5 minutes. Bitcoin on average generates blocks every 10 minutes.
- Faster confirmation reduces the anxiety of many people to see their transactions confirmed on the blockchain.
- Greater granularity. Acceptance of transactions with only 2 confirmations in Litecoin. Compared to at least 1 confirmation with Bitcoin transactions.
- Less expected time and variance in miner reward. Miners benefit even with a small mining pool, hence Litecoin can become more decentralized than Bitcoin.
- More overhead because of the bloated blockchain. Clients not running a full node and simple verification will be affected most. Compared to Bitcoin, the storage space is a factor 4 bigger.
- Less security in case everyone waits for a fixed amount of confirmations. The higher the amount of work, less computing power is being put to good use while generating the blocks.
- The risk of double spending arises with attacks that rely on network partitioning. E.g. when internet connectivity is lost between continents, the attacker could spend coins in both continents.
Total number of coins
The total number of Litecoins which will come into existence is 84 million. This is a factor 4 compared to Bitcoin with 21 million coins. The creation of new Litecoins is the reward for generating blocks, similar to Bitcoin. The initial reward is 50 Litecoins and the rate of generation is halved every 840,000 blocks. Given the factor 4 in transaction times and the factor 4 in the total number of coins, this implies the same inflation as Bitcoin.
Barriers to entry
Both Litecoin and Bitcoin use proof of work but use different cryptographic algorithms. Litecoin uses Scrypt instead of SHA256 for proof of work. Scrypt uses the SHA256 as subroutine and uses fast access to memory to solve the algorithmic functions. Modern GPUs have significant amounts of memory and therefore the cost of specialized hardware is less than specialized hardware. Bitcoin uses application-specific integrated circuit. (ASIC)
- Market entry costs are lower for Litecoin mining. Anyone with a computer connected to the internet can mine Litecoins. Thereby sustaining the network. Even CPUs can be used for mining. Lower barriers to entry result in decentralized mining power.
- Resale of hardware used of Litecoin mining. Miners don’t necessarily have stake in the Litecoin system.
- Attack by botnets. A botnet is a number of internet-connected devices used by a botnet owner to perform various tasks. Botnets with a high enough proportion of the total hash power could try double-spending attacks.