1. What is Litecoin?
Created by former Google employee, Charlie Lee, Litecoin is intended to be the silver to Bitcoin’s gold. It is an open-source, peer-to-peer digital currency that can be used for instant and near costless transactions. Litecoin is a fork of the Bitcoin protocol and therefore has many similarities with it. However, the differences between Litecoin and Bitcoin include: A faster block generation time of 2.5 minutes versus Bitcoin’s 10 minutes, a different hashing algorithm known as Scrypt and a maximum circulating supply of 84 million.
2. Segregated Witness (SegWit)
The Litecoin protocol has implemented a piece of technology known as, segregated witness (SegWit). SegWit is a soft fork method than can be used to increase the capacity of a blockchain by removing signature data from transactions. This has the effect of freeing up space in a block, which allows for more transactions to be added to the block. Litecoin’s activation of SegWit has then allowed for the implementation of another piece of technology known as the Lightning Network. The Lightening Network is an off-chain protocol that allows users to make instant transactions with each other through the use of peer-to-peer payment channels. The Lightening Network is meant as a possible solution to the scalability problems being faced by some blockchain based cryptocurrencies. Implementation of the Lightening Network would allow for millions of transactions to be processed each second. However, The Lightening Network is dependent on the activation of SegWit.
To find out more about SegWit and what it is, check out this article here.
3. Hashing Algorithm
Litecoin utilises a proof-of-work hashing algorithm known as scrypt. The srypt algorithm works by creating numerous pusedorandom random numbers in the Random Access memory of a device (RAM), that then need to be accessed in-order to return a result. The scrypt hash function differs from the SHA-256 hash function used by Bitcoin because it requires fast access to the memory for every hash attempt. This is in contrast to the SHA-256 hash function, which requires the solving of a numerical problem for every hash attempt. As a result, the specialised hardware used for Bitcoin mining known as, ASICs, is much more expensive to use for Litecoin mining. This is because, memory as a resource is more expensive to produce for an ASIC, therefore it becomes impractical to use ASICs for Litecoin mining.