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A beginner’s guide to Litecoin


What is Litecoin?

According to the Litecoin website, “Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world.” If you’re familiar with the digital currency Bitcoin, the above definition might sound similar. That’s because Litecoin is based on Bitcoin’s open source codebase, but with a few technological differences. Litecoin was never intended to replace Bitcoin but to complement it like the silver to Bitcoin’s gold. This beginner’s guide should help those who are new to Litecoin to understand the high level differences between these two digital currencies.


The great thing about open source software projects such as Bitcoin is that anyone in the world can fork the original codebase to include new features they want. The value assigned to each digital currency is determined by the community of adopters that decide to hold and use it. While Bitcoin is currently the largest digital currency by market capitalization, this doesn’t mean that there isn’t room for other digital currencies to coexist or to serve a specific use case or community.

Litecoin founder Charlie Lee wanted to modify Bitcoin’s rules in ways he considered beneficial. Specifically Charlie wanted to reduce the amount of time required to confirm a new transaction as well as change the Bitcoin mining algorithm (the way new coins are generated) to ensure anyone could participate in the network. Bitcoin’s transaction confirmation time is 10 minutes while Litecoin’s is only 2.5 minutes. Litecoin is able to process a higher volume of transactions due to the faster transaction confirmation time.

Bitcoin mining uses the algorithm SHA-256 which is processor intensive while Litecoin mining uses scrypt which is more memory intensive. Early on Bitcoin was able to be mined using regular computers (CPUs) and later on more powerful gaming computers (GPUs). Now due to the increase in mining difficulty created by competition within the network the only way mining is profitable after accounting for electricity and mining equipment costs is through the use of Application Specific Integrated Circuit (ASIC) miners. These are expensive machines built specifically for mining and won’t be able to be used for anything else. Since only some people have the resources to buy and operate ASICs, Charlie did not want Litecoin mining to be dominated by ASICs. Therefore he created Litecoin with a more memory intensive mining algorithm to make mining Litecoin less efficient for ASICs and was more accessible to everyone.


One important aspect of Litecoin is that its creator, Charlie Lee, is publicly known and actively participates in the cryptocurrency community. The anonymous creator of Bitcoin, Satoshi Nakamoto, who has since disappeared, isn’t available to provide guidance and leadership over the technical direction of Bitcoin. Having the founder available is important when it comes to helping others understand and rally behind Litecoin’s vision.

Currently, Charlie is pushing the community to support adding an upgrade to Litecoin called Segregated Witness (SegWit) that he and others believe will set the foundation for implementing future innovations. SegWit is essentially a change to the transaction data format that requires less storage space. This upgrade would allow for adding additional scaling innovations like Lightning Networks (LN) where transactions can quickly settle off blockchain meaning not all transactions will have to go through the public ledger. This upgrade is applicable to both Bitcoin and Litecoin. However Bitcoin requires 95% of miners to signal they are ready to support SegWit for activation to occur while Litecoin only requires 75%. This lower consensus threshold in addition to an active founder means that it will be easier for Litecoin to push forward this change.

Charlie wrote a letter to the Litecoin mining community to convince them to support SegWit. The benefits of having decentralized currencies is the creator can’t just implement things on their own. However, there are benefits to having a vocal leader to guide technological progress within a community, especially during a time when it is clear there needs to be a change or there is a major disagreement. The exciting part is that Litecoin can serve as a way for Bitcoin to see how these changes go.


Litecoin has existed for almost as long as Bitcoin. There is already established infrastructure for Litecoin and exciting news that there might be major new developments on it soon. Below are some links that may help you understand Litecoin further and keep up with the development.

Understanding Litecoin

Keeping up with Litecoin

Thank you to Will Warren and many Coinbase employees especially Charlie Lee and Jordan Clifford.

A beginner’s guide to Litecoin was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.