Does Litecoin (LTC) Have a Future? Better than BTC?

What Is Litecoin (LTC)?

LiteCoin is an online currency based on peer-to-peer technology and is an open-source software project under the MIT/X11 license. It enables users to make instant payments to anyone in the world.

LiteCoin was designed and programmed to be implemented by a programmer (Qiwei Li) who worked at Google, and was released into operation on January 9, 2011. LiteCoin is an improved version of the digital currency inspired by Bitcoin.

The technical principles of Litecoin are the same as Bitcoin; they both use a decentralized architecture, have no central authority control, and new coin issuance and transaction payment transfer are based on open source cryptographic algorithms. These are all designed to mimic Bitcoin’s design principles. However, Litecoin tries to improve on the shortcomings that Bitcoin has shown before, such as the slow transaction confirmation, the low total cap, the emergence of large mining pools due to the proof-of-work mechanism, and the SHA256 algorithm.

Litecoin aims to improve on Bitcoin and has three significant differences compared to it.

First, the Litecoin network can process a block every 2.5 minutes (instead of 10 minutes), thus providing faster transaction confirmations.

Second, the Litecoin network is expected to produce 84 million Litecoins, which is as much as four times the amount of currency issued by the Bitcoin network. Third, Litecoin uses the script cryptographic algorithm, first proposed by Colin Percival, in its proof-of-work algorithm, which makes it easier to mine Litecoin on a regular computer compared to Bitcoin. Each Litecoin is divided into 100,000,000 smaller units, defined by eight decimal places.

Design Purpose 

Litecoin is based on the Bitcoin protocol but differs from Bitcoin in that it can be “mined” efficiently, even at this stage, with consumer-grade hardware. The Litecoin network is expected to produce 84 million units of currency.

One of the design goals of Litecoin is to provide a mining algorithm that allows it to be run simultaneously on machines that mine bitcoins. The gradual rise of Application Specific Integrated Circuits (ASICs) designed for bitcoin mining followed the technological evolution of Litecoin. However, it is unlikely that ASICs designed specifically for Litecoin will emerge until the Litecoin currency is widely used.

Features 

High Development Security

In terms of cryptocurrency security, the development process and payment process of Litecoin are both more secure than ordinary cryptocurrency. During the development process, it is impossible to counterfeit. Litecoin is a complex sequence of solved codes, and it is mined to obtain the currency rather than printed, which fundamentally eliminates the creation of “counterfeit” coins, which is one of its advantages.

In the payment process, Litecoin uses addresses and private keys for transactions, which are like passwords and keys, and there are hundreds of millions of possible combinations of these addresses and private keys, making them difficult to crack and increasing security. However, even though it is a non-centralized payment system, the Litecoin system is still threatened by the “51% Attack”, which means that more than 51% of the network’s computing power is used to build a regional chain to race against the entire network, and if it succeeds, it will be able to take control of Litecoin, which will have serious consequences. Although the probability of a “51% Attack” is small, such a vulnerability should not be tolerated for a public virtual currency system.

Innovation in the workload proof mechanism

LiteCoin has the same characteristics as Bitcoin except for three improvements (proof-of-work mechanism algorithm, aggregate cap, and block generation speed). The proof-of-workload mechanism algorithm of LiteCoin uses the scrypt algorithm, which makes it difficult to centralize computing power, making it difficult to form large mining pools like Bitcoin, and the miners’ mining is more dispersed than Bitcoin, which makes it better to prevent 51% attacks.

If a cottage coin has the same algorithm as Bitcoin, then miners can simply bring in chip miners customized for Bitcoin to mine these cottage coins or implement 51% attacks. This will make these cottage coins with the same algorithm as Bitcoin quickly lose their value. So, it is because the script algorithm of Litecoin is different from that of Bitcoin that Bitcoin chip miners cannot be used to mine Litecoin, which makes Litecoin immune to attacks and keeps it on track.

Does Litecoin (LTC) Have a Future? Better than BTC?

Commonalities with Bitcoin

Identical virtual currency

Like Bitcoin, Litecoin is a virtual currency with no physical form.

Decentralized Structure

Like Bitcoin, LiteCoin has a decentralized structure, with no central authority to control it, and no central bank or commercial bank is required to issue, pay, or transfer new coins.

Blockchain Technology

Bitcoin and Litecoin both use blockchain technology and both have the problem of a 51% attack. They use blockchain technology, where all historical records are packaged into individual blocks in chronological order, and these individual blocks are linked together to form a master ledger. These blocks contain not only transaction records, but also newly issued Litecoin and transaction fees, both of which are paid to the miner who mines them as a reward. Regardless of who mines the block, both the newly issued Litecoin and the transaction fees contained in the block go to the person who mines it, to encourage miners to actively participate in the settlement. 51% attack: Blockchain technology is vulnerable to the 51% attack.As long as any organization or even individual controls 51% of the computing power of a certain blockchain-based virtual currency, that person or organization will be able to manipulate all transactions of that virtual currency at will.

If the blockchain only recognizes the person with the greatest computing power, then whoever has the greatest computing power can grab the next block. If a certain individual or organization controls 51% of the total computing power, it means that no one is stronger than him in computing power, so he can manipulate at will. Therefore, for virtual currencies based on the blockchain principle, the more people participate in mining, the more robust they are, and the more decentralized the computing power is, the more robust they are; the fewer the diggers are, the more vulnerable they are, and the more concentrated the computing power is, the more vulnerable they are.

Decentralized Anonymous Distribution:

A “mining” competition is a fair fight. Like Bitcoin, LiteCoin is a virtual currency based on the blockchain principle, and new coins are issued in a decentralized manner, in the form of rewards for miners. Miners who participate in “mining” compete for computing power, and whoever has more computing power can grab the next block, so it’s a fair competition. And they are anonymous accounts. There is no correspondence between the account and the owner’s identity information.

Differences from Bitcoin

Proof-of-workload mechanism

The proof-of-work mechanism of Litecoin uses the scrypt algorithm, while the proof-of-work mechanism of Bitcoin is SHA256. Scrypt takes longer to calculate and requires more memory, making it difficult to centralize computing power, and mining miners are more dispersed than in Bitcoin, which helps prevent 51% attacks. It is because the scrypt algorithm of Litecoin is different from that of Bitcoin that Bitcoin chip miners cannot be used to mine Litecoin, which makes Litecoin immune to attacks and keeps it on track.

Block processing speed

LiteCoin is 2.5 minutes and Bitcoin is 10 minutes. One of the drawbacks of Bitcoin is the slow confirmation of transactions. It takes 10 minutes for a block to be packed, and after it is packed, the whole network of nodes has to verify it, which takes even longer, and the two times together take about 40 to 50 minutes in total. LiteCoin’s block packing speed is four times faster than Bitcoin’s, and with the transaction confirmation time, it can be completed in about 20 minutes total.

Volume Cap

The total volume limit for LiteCoin is 84 million, while the total volume limit for Bitcoin is 21 million, meaning that the total volume limit for Litecoin is four times that of Bitcoin.

Security

In May 2013, Bitcoin’s network-wide arithmetic power was eight times greater than the sum of the world’s top 500 supercomputers, at 158 THash/s. Due to the performance limitations of cPu mining, LiteCoin’s network-wide arithmetic power is only 15 GHas/s. LiteCoin processes a block every 2.5 minutes, while Bitcoin’s is 10 minutes, and the progress of a double-payment attack on the blockchain obeys a Poisson distribution, and the probability of its success decreases exponentially with the number of blocks.

This is precisely why Bitcoin recommends 6 confirmations for secure transactions. When the block processing speed increases to 4 times that of Bitcoin, the probability of an attacker creating a fake node also rises dramatically. By calculating the probability density of the Poisson distribution, the number of node confirmations required to avoid a double payment attack also rises to 4 times that of Bitcoin, i.e., 24 node confirmations are required for Bitcoin to achieve the security of 6 node confirmations.

Prospect Analysis

From the legal level of each country, Litecoin is legal, but it is not a legal tender in any country, and it is still straying between currency and virtual goods, so it is impossible to make a precise definition, and most countries have a wait-and-see attitude towards virtual currencies. However, in terms of its fundamental properties to study, Litecoin does not yet have the conditions to become legal tender

1. There is still no unified consensus in the academic community on the definition of the nature of Litecoin, and there are many debates on whether it is a currency or not. It is only a value symbol. The paper currency of each country can act as an effective value symbol because it is backed by the highest credit commitment of a government and has a large number of items with real use-value as a reserve, such as the most common gold reserve. Litecoin has no use value and no equivalent reserves, so it is extremely irrational to use Litecoin as a currency.

Litecoin to RMB rose to 1:138 in 2014, and Bitcoin was as high as 1:3400 and is still going strong, which has far exceeded its own value, resulting in two factors for the high price of Litecoin: one is retail investors blindly following the trend of investment, and the other is the high strength of arbitrageurs deliberately spending money to speculate high. The second is the intentional speculation of high-powered arbitrageurs. Once Litecoin rises to a certain height, arbitrageurs will have the opportunity to sell short and return their funds, and the Litecoin market will face a “Black Friday” diving collapse. The current virtual currency market, including Bitcoin and Litecoin, has a general price bubble, and with the increase in the size of the virtual money market, Litecoin has the risk of implicating the real financial market.

2. The regulatory blind spot of the Wright market is prone to fostering criminal activities. Many countries have not yet introduced relevant regulations to regulate Litecoin, and the completely anonymous payment method makes it the preferred choice of criminals, who can use Litecoin as a cover for money laundering activities and purchase illegal goods, a side effect that has been initially revealed, and Thailand and Russia have taken a warning attitude towards virtual currencies. Even if a country were to enact laws to regulate Litecoin, it would be difficult to do so because its decentralized, anonymous payments and public key characteristics would make government regulation impossible, which is clearly an insurmountable obstacle on the road to Litecoin’s legalization.

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