Litecoin ($LTC) Use Cases and More
Aug 24, 20225 min read
Crypto old-timers remember the days when Litecoin was the second most capitalized cryptocurrency after Bitcoin and even bore the title “digital silver” by analogy with the “digital gold” of Bitcoin. Since then, a lot has changed, and the once popular project has dropped to 21st place in the rating. This Litecoin review will reveal the reasons and goals for its appearance and help to understand whether the coin will be able to regain its former glory and whether there are significant advantages over other coins.
What Is Litecoin?
Litecoin is one of the first cryptocurrencies since it launched in 2011. Former Google employee Charles Lee was an initiator Litecoin launching. His goal was to improve Bitcoin, which had many negative aspects. Since Bitcoin has suffered from slow transaction processing and high transaction fees since its inception, Charles Lee decided to fix all these problems by creating a “lite” version of Bitcoin. Although Litecoin is based on the Bitcoin code, it does not represent a complete copy of it, developing as a separate project. The main differences between Litecoin and Bitcoin are:
- Block generation time. In the Bitcoin network, a block is generated approximately every 10 minutes but in Litecoin — every 2.5 minutes.
- Hashing algorithm. While Bitcoin uses the SHA-256 algorithm, Litecoin mining is based on Scrypt.
- The supply. The maximum LTC supply is 84 million units, unlike Bitcoin’s 21 million.
Charlie Lee has repeatedly stressed that Litecoin is not a replacement for Bitcoin but its complement. So, by analogy with Bitcoin, called “digital gold,” he suggested considering Litecoin as “digital silver.” According to Lee’s vision, suppose BTC is well suited for transferring significant amounts and storing large amounts. In that case, the fork he created should be used in everyday transactions — remittances, purchases, cross-border transfers, etc.
How Does Litecoin Work?
Litecoin mining is based on the Scrypt hashing algorithm. The Scrypt algorithm allows Litecoin to reduce the block confirmation time to 2.5 minutes and reduce the risks of a 51% attack. The crucial point is that Scrypt was developed to be ASIC-resistant, thereby preventing centralization. As a result, early miners could use GPU and CPU cards for mining LTC. However, over time, ASICs capable of efficiently mining LTC were released, which made GPU and CPU mining impractical.
Like Bitcoin, Litecoin controls the inflation rate by halving (a planned reduction in the issuance rate of new coins and a reduction in the miner’s reward). Halving in the Litecoin network occurs every 840,000 blocks; in Bitcoin — every 210,000 blocks. Two halvings took place on the Litecoin network — in 2015 and 2019, and the next one will happen in 2023. To date, the miner’s reward in the Litecoin network is 12.5 LTC, and in the Bitcoin network — 6.25 BTC.
Due to its similarity to Bitcoin, Litecoin is often used as a “sandbox” where developers can try out new blockchain technologies before implementing them into Bitcoin. This was the case with Segregated Witness (SegWit), adopted by Litecoin in 2015 and, after two years of successful work, was introduced into Bitcoin. Speaking about the SegWit utility, this solution increases the Litecoin network’s bandwidth, thereby making it a more attractive payment tool. Another solution that was adopted by Litecoin and later by Bitcoin was the Lightning Network. Lightning Network is a Layer 2 scaling solution that allows micro-transactions with near-zero fees. Thanks to the Lightning Network, LTC can be effectively used to pay for everyday purchases. In addition, this solution enables atomic cross-chain swaps. Simply put, it allows the peer-to-peer exchange of different coins, i.e., running on distinct blockchain networks.
Litecoin MimbleWimble Upgrade
In October 2019, Litecoin developers published two proposals: the first to introduce extension blocks and the second to implement MimbleWimble. In 2020, the MimbleWimble upgrade was implemented on the testnet via Extension Blocks under the codename MimbleWimble Extension Block (MWEB). MWEB is a modified PoW protocol that allows hiding the data of transaction participants and wallet balances. It got its name in honor of the tongue-tying spell from the Harry Potter universe.
MimbleWimble has become the most significant update of the Litecoin blockchain. It includes several technologies at once, including the CoinJoin payment anonymization solution, which hides data about the sender and recipient and batches several transactions into one. The transaction participants create a multi-signature key for it, and the protocol “cuts” additional transaction data, reducing the size of the blockchain and, as a result, reducing the fees and increasing the network speed.
Therefore, Litecoin users can decide whether to enable the private transaction mode or conduct a regular public transaction. In addition to increasing privacy, MWEB improves the scalability of the Litecoin network.
It is worth noting that after MWEB implementation, the two largest South Korean exchanges, Bithumb and Upbit, delisted Litecoin. The reason was that these companies were forced to comply with local legislation restricting the use of anonymous cryptocurrencies.
Litecoin Use Cases
Litecoin lags far behind other popular cryptocurrencies in terms of innovation. Smart contracts, DeFi, NFT, GameFi support — all this did not overlap with the project for a long time. In 2020, a Litecoin-based fantasy role-playing game LiteBringer was launched in partnership with CipSoft. However, the game has not received much success. In September 2021, the Litecoin Foundation launched a decentralized OmniLite platform for creating tokens, including stablecoins and NFTs, but so far, this project is not popular either.
Nevertheless, Litecoin was not created as a developer-oriented platform. Its main goal is to be a fast and reliable payment system, an alternative to Bitcoin but more accessible to the mass user, with good anonymity, low fees, and high settlement speed. And the project copes with this perfectly. LTC is accepted by several thousand retailers worldwide, several charitable organizations, several video games, and so on. Moreover, since 2021, a virtual Litecoin VISA debit card has become available to users. Thanks to the Litecoin Card, users can deposit LTC to their account and spend tokens wherever a VISA is accepted. LTC is converted into fiat at the checkout and sent to the merchant. In addition, in 2021, the LTC cryptocurrency was added to the BitPay crypto payment service, thanks to which LTC holders can buy gift cards for use with Whole Foods, Walmart, Uber, Google Play, and many other retailers. And finally, LTC is also one of the few coins that the PayPal payment service supports.
You can create a Litecoin wallet right here. ✅
Litecoin is a sought-after asset, especially in the commercial sphere. Litecoin is supported by many crypto payment gateways, exchanges, and even retailers. The coin has certain advantages of an early launch. So, for eleven years of its existence, it has proven its reliability: there has not been a single hack on the network, it has not been attacked, and no vulnerabilities have been found in the code. This is a reliable cryptocurrency with fast and cheap transactions. But Litecoin does not pretend to have the title of “digital silver” anymore. Nowadays, the crypto market needs not improved Bitcoin versions but innovative projects with unique value propositions.
Nevertheless, claiming that Litecoin will sink into oblivion is a mistake. Litecoin is a time-tested payment currency that has a large dedicated community. But the return of Litecoin to the top 10 largest projects by capitalization seems unlikely so far.