LearnLitecoin

What is Litecoin?

  • Litecoin (LTC) is a peer-to-peer cryptocurrency that aims to enable fast and low-cost payments to anyone within the world.
  • The Litecoin Project was conceived and created by Charles Lee, a former Coinbase employee, with the support of multiple members within the Bitcoin community. it had been launched on October 13th 2011, and has introduced variety of modifications supported the first Bitcoin protocol.
  • The most prominent of those is Litecoin’s Proof-of-Work consensus: its algorithm is predicated on Scrypt, rather than SHA-256d. Furthermore, Litecoin features a target block time of two .5 minutes, and a complete supply of 84 million.
  • In May 2017, Litecoin adopted Segregated Witness (SegWit). within the same month, the primary Lightning Network transaction was completed on Litecoin, transferring 0.00000001 LTC from Zürich to San Francisco in under one second.
  • Future development areas include the addition of privacy-features (an implementation of the MimbleWimble protocol), the support of Schnorr Signatures, and Taproot (a privacy preserving switchable scripting feature).

Litecoin (LTC) is a peer-to-peer cryptocurrency powered by the Scrypt Proof-of-Work algorithm. The project aims to supply an alternate to Bitcoin by making modifications to the first Bitcoin Protocol.

A Proof-of-Work algorithm creates a computational challenge to be solved by the network of computers so as to verify a block of transactions. The Scrypt algorithm was developed in 2009 by Colin Percival (Tarsnap Inc.). In contrast with Bitcoin’s SHA-256d, it serves to inhibit hardware scalability by requiring a big amount of memory when performing its calculations.

This change aimed to scale back the efficiency gain and economic incentive to develop custom hardware like Application Specific Integrated Circuits (“ASIC”). While this initially prevented ASIC mining, new machines are more performant than GPU mining, resulting in most of LTC mining activities being conducted by ASIC machines (e.g., Antminer L3+).

Litecoin has a mean block time of 2.5 minutes, and a complete supply of 84 million. The short block time inevitably results in a rise in orphaned blocks.

Besides total supply and block time, other Bitcoin parameters have remained largely unchanged. as an example , the amount of blocks between difficulty changes1 and therefore the target number of years between block reward halving on Litecoin (4 years) remains an equivalent as those on the Bitcoin protocol.

Unlike public blockchain infrastructures supporting the event of decentralized applications, like Ethereum, Litecoin is primarily used only as a currency and doesn’t support smart contracts.

2. Litecoin’s key features

Core concepts of Bitcoin, blockchains, and therefore the Nakamoto consensus aren’t discussed during this report. Please read our report about Bitcoin (BTC) (section “core features”). 

Segregated Witness (shared with Bitcoin)

Segregated Witness (often abbreviated to SegWit) may be a protocol upgrade proposal that went sleep in May 2017 for Litecoin (vs. August 2017 for Bitcoin).

It separates witness signatures from transaction-related data. Witness signatures in “legacy Bitcoin blocks” often take quite 50% of the block size. By removing witness signatures from the transaction block, this protocol effectively increases the amount of transactions which will be stored during a single block, rendering the network capable of handling more transactions per second. As a result, SegWit increases the scalability of Nakamoto consensus-based blockchain networks Litecoin.

SegWit also makes transactions cheaper. Since transaction fees are derived from what proportion data is being processed by the block producer, the more transactions which will be stored during a 1MB block, the cheaper individual transactions become.

segwit

The legacy Bitcoin block features a block size limit of 1 megabyte, and any change on the block size would require a network hard-fork. On August 1st 2017, the primary chain split occurred, resulting in the creation of Bitcoin Cash (BCH), which introduced an 8 megabyte limit per block.

Conversely, Segregated Witness was a soft-fork: it never changed the transaction block-size limit of the network. Instead, it’s added an extended block with an upper limit of three megabytes, which contains solely witness signatures, to the 1-megabyte block that contains only transaction data. This new block type are often processed even by nodes that haven’t completed this protocol upgrade.

Furthermore, the separation of witness signatures from transaction data solves the malleability issue of blockchains using the Nakamoto consensus. Without Segregated Witness, these signatures might be altered before the block is validated by miners. Indeed, alterations are often wiped out such how that if the system does a mathematical check, the signature would still be valid. However, since the values within the signature are changed, the 2 signatures would create vastly different hash values.

For instance, if a witness signature states “6,” it’s a mathematical value of 6, and would create a hash value of 12345. However, if the witness signature were changed to “06”, it might maintain a mathematical value of 6 while creating a (faulty) hash value of 67890.

Since the mathematical values are an equivalent , the altered signature remains a legitimate signature. Hence, this is able to create a bookkeeping issue, as transactions in Nakamoto consensus-based blockchain networks are documented with these hash values or transaction IDs. Effectively, one can alter a transaction ID to a replacement one, and therefore the new ID can still be valid.

This can create many issues as illustrated below:

  1. Alice sends Bob 1 BTC, and Bob sends Merchant Carol this 1 BTC for a few goods.
  2. Bob sends Carols this 1 BTC, while the transaction from Alice to Bob isn’t yet validated. Carol sees this incoming transaction of 1 BTC to him, and immediately ships goods to B.
  3. At the instant , the transaction from Alice to Bob remains not confirmed by the network, and Bob can change the witness signature, therefore changing this transaction ID from 12345 to 67890.
  4. Now Carol won’t receive his 1 BTC, because the network looks for transaction 12345 to make sure that Bob’s wallet balance is valid.
  5. As this particular transaction ID changed from 12345 to 67890 the network won’t be ready to find this. The transaction from Bob to Carol will fail, and Bob gets his goods while still holding his BTC.

With the Segregated Witness update, such instances can’t happen again. this is often because the witness signatures are moved outside of the transaction block into an extended block, and altering the witness signature now won’t affect the transaction ID.

Since the transaction malleability issue is fixed, Segregated Witness also enables the right functioning of second-layer solutions, like the Lightning Network.

Lightning Network (shared with Bitcoin)

Lightning Network may be a micropayment solution supported the Bitcoin protocol. It aims to enable near-instant and low-cost payments between merchants and customers that use Bitcoin.

Specifically, Lightning Network aims to enable near-instant and low-cost payments between merchants and customers that wish to use bitcoins.

Lightning Network was conceptualized during a whitepaper by Joseph Poon and Thaddeus Dryja in 2015. Since then, it’s been implemented by multiple companies. the foremost prominent of them include Blockstream, Lightning Labs, and ACINQ.

In the Lightning Network, if a customer wishes to transact with a merchant, both of them got to open a payment channel, which operates off the Bitcoin blockchain (i.e., off-chain vs. on-chain). None of the transaction details from this payment channel are recorded on the blockchain. Hence, only the channel is closed will the top results of both party’s wallet balances be updated to the blockchain. The blockchain only is a settlement layer for Lightning transactions.

Since all transactions done via the payment channel are conducted independently of the Nakamoto consensus, both parties involved in transactions don’t got to await network confirmation on transactions. Instead, transacting parties would pay transaction fees to Bitcoin miners only they plan to close the channel.

lightning

One limitation to the Lightning Network is that it requires an individual to be online so as for him to receive transactions attributing towards him. Another limitation in user experience might be that one must lock up some funds whenever he wishes to open a payment channel, and is merely ready to use that fund within the channel.

However, this doesn’t mean he must create new channels whenever he wishes to transact with a special person on the Lightning Network. If Alice wants to send money to Carol, but they are doing not have a payment channel open, they will ask Bob, who has payment channels hospitable both A and C, to assist make that transaction. Alice are going to be ready to send funds to Bob, and Bob to Carol. Hence, the amount of “payment hubs” (i.e., Bob within the previous example) correlates with both the convenience and therefore the usability of the Lightning Network for real-world applications.

MimbleWimble as a privacy feature (in implementation)

MimbleWimble may be a data storage and transaction structure that aims to reinforce privacy and fungibility while reducing network bloating and improving scalability. The Mimblewimble design was introduced in 2016 by pseudonymous Tom Elvis Jedusor. As of April 2020, MimbleWimble’s main stand-alone implementations are Grin (GRIN) and Beam (BEAM).

MimbleWimble is predicated on the UTXO model. However, in MimbleWimble there are not any addresses, and UTXO values are encrypted by the “blinding factors”. Blinding factors are private keys which are only known to the UTXO owner. it’s impossible for an observer to deduce any information on ownership or value of a MinbleWimble UTXO.

To create a transaction within the original MimbleWimble design, the sender and therefore the receiver wallets got to first establish communication. Once the communication is established, the sender provides the transaction inputs, and both sender and receiver create their respective outputs with range proofs attesting that the values are non-negative. Both parties sign the transaction before sending bent the nodes.

Hence, transaction validity is achieved by having nodes verifying that the sum of inputs and outputs is strictly zero which the range proofs and signatures are correct. Finally, the inputs are faraway from the present UTXO set while the outputs are saved.However, Litecoin’s MimbleWimble implementation via extension blocks would enable transactions “without the necessity to create a transaction interactively with the receiving party.” Specifically, Litecoin aims to realize an identical result with Diffie-Hellman Key Exchange.

3. Economics and provide distribution

Litecoin utilizes the Nakamoto consensus, and nodes validate blocks via Proof-of-Work mining.

Litecoin wasn’t pre-mined, and features a maximum supply of 84 million, exactly 4 times that of Bitcoin. The initial reward for a block is 50 litecoins, and halves every 840,000 blocks. Since the target time for block production on the Litecoin blockchain is 2.5 minutes, it implies that Litecoin block reward halving will happen every 4 years.

About author

Experienced Founder with a demonstrated history of working in the newspapers industry. Skilled in Data Research, Management, Investment Research, Teamwork, and Leadership. Influencing the technology, people, and technical analysis of the Cryptocurrency and Blockchain world.
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