Introduction to Litecoin – Part 1

Charles Lee, a former Google employee, introduced Litecoin to the world in October of 2013. To understand why he decided to create Litecoin, you first need to understand how the bitcoin network works and what issues it has.

 

Validation and confirmation of transaction on the bitcoin network

For a transaction to occur on the bitcoin network, a miner or a mining pool needs to include the transaction into a block of the blockchain and other miners need to validate it. Sometimes, the term “confirmation” is used instead of the term “validation.” Typically, both of these terms describe the same process.

Here’s how this process works: Every block on the blockchain network has information about transactions that have just occurred on the network right before the block was created. The network then determines the validity of these transactions by checking where the funds are coming from. If the network can check the chain and see that the funds that are leaving a wallet came to the wallet previously and didn’t leave the wallet before, then the network will deem the transaction as valid.

Every subsequent block on the network that confirms the validity of a transaction provides the network with a confirmation. For the network to accept the transaction, it needs at least six confirmations, which means that it needs to be able to check at least six blocks going back. When the network gets at least six confirmations, it considers the transaction to be “spendable.”

Without the confirmations, the transaction is still “in between” users. This is similar to what happens when you send a wire transfer to someone. The funds leave your account yet it takes them some time to get to the account of the receiving party. Many of the bitcoin wallets will show the transaction as “spent” even though in reality the transaction is still awaiting confirmations from the networks. Some wallets will show the status of the transaction as “n/unconfirmed,” where n is the number of confirmations that the transaction has already received. One of the goals of the bitcoin network is to create a block on the blockchain every 10 minutes or so.

 

Speed of transaction confirmation on the bitcoin network

Because it takes on average 10 minutes for the bitcoin blockchain network to create a block and the network needs at least 6 different blocks to confirm a transaction, this means that it can up to an hour or even longer for the network to confirm a transaction. There is no way for the users to force the network to produce confirmations faster than it does. The speed depends entirely on the network itself.

This is how Satoshi Nakamoto created the software for the network and this is what currently is becoming a problem. Here’s why it is a problem: as the popularity of the bitcoin network grows, so does the number of transactions on the network.

However, what is not growing is the size of bitcoin blockchain blocks and the speed of their creation, which means that the network can only include so many transactions in one block. Therefore, when there are a lot of transactions on the network, their confirmation starts taking a lot of time. This is making the use of the bitcoin network for small day-to-day transactions inconvenient and not practical.

 

The differences between Litecoin and Bitcoin

Charles Lee realized that the size of the blocks and the speed of their creation were a big problem back in 2013, which is why he created Litecoin. The biggest difference for end users is that it takes the Litecoin network about 2.5 minutes to mine a new block, instead of Bitcoin’s 10 minutes, meaning faster speeds when sending funds in Litecoin.

Charles Lee also increased the number of coins that the Litecoin network can have by 4x compared to Bitcoin. This means that there can be 84 million Litecoins in circulation. The Litecoin network is going to achieve this goal in the same way the Bitcoin network is going to achieve the goal of allowing miners to create 21 million bitcoins, which is by gradually decreasing the size of the reward for mining a block on the Litecoin network. Initially, the number of Litecoins awarded by the network for block mining was 50 coins. This number went down to 25 in October of 2015. The reward is going to be cut in half again some time in 2019. As of the writing of this article, the exact date is August 10, 2019. You can check the current prediction for this date as well as the explanation for how the decrease of the reward process works at www.LiteCoinBlockHalf.com