The Litecoin Project was conceived and created by Charles Lee with support of members in the Bitcoin community. It was pre-announced and was launched on October 13th, 2011. Based on Bitcoin's peer-to-peer protocol, Litecoin brings a number of features viewed by its development team as improvements over Bitcoin's implementation.
The main feature is use of scrypt as its proof-of-work algorithm. A proof-of-work algorithm creates a computational challenge to be solved by the network of computers in order to "certify" a "block" of transactions. scrypt was developed in 2009 by Colin Percival of Tarsnap Inc., and--in contrast with Bitcoin’s SHA-256d--serves to inhibit hardware scalability by requiring a significant amount of memory when performing its calculations. This change reduces the efficiency gain and economic incentive to develop custom hardware such as Application Specific Integrated Circuits (ASIC). While ASICs can be adopted for any purpose and are likely to be introduced for Litecoin, the use of scrypt should delay this change, and preserve the decentralization in mining that brings a decentralized currency so much of its value and resiliency.
The second important feature is a reduced transaction confirmation time targeted at 2.5 minutes on average. Bitcoin confirms transactions every 10 minutes on average and reasonable security measures mean waiting one to two hours is often recommended. Litecoin’s faster confirmations provide end-users with faster access to their finances, especially in time-sensitive situations.
Other Bitcoin parameters have remained unchanged, such as the number of blocks between difficulty changes, and the number of years between block reward halving events. This means Litecoin has a difficulty change about every 3.5 days and will produce a total of 84 million litecoins—four times the number of Bitcoin currency units.
This math-based currency is seeing increase in its adoption. A recent announcement by MtGox (the world’s leading Bitcoin exchange) stated that it is integrating Litecoin in its portfolio. This news ignited a lot of speculation over Litecoin, and ultimately led to a substantial rise in value. As of April 2013, Litecoin reached a peak market cap of $81 million USD. The exchange rate at that time was highly volatile, trading between 2.5 and 4.5 USD.
As of May 2013, over 50% of Bitcoin had been mined, while only 20% of Litecoin had been created. Litecoin’s first reward halving will occur around October 2015 at which time 42 million Litecoins will be in circulation.
The Litecoin project is currently maintained by a core group of 6 software developers, led by Charles Lee, with a large community that is growing in support.
- Comparison between Litecoin and Bitcoin
- Compiling the Litecoin daemon from source on Debian
- Purchasing litecoins