Complete Guide to Litecoin and LTC Token: How do they work?



Today, we will discuss a project that was born in 2011, not to compete with Bitcoin but to complement it. We are talking about Litecoin, the recognized heir to Bitcoin that aims to address the issues attributed to it. The similarity between both cryptocurrencies is such that Litecoin was born as a fork of the Bitcoin Core software.

On its own website, Litecoin is described as “a peer-to-peer (P2P) internet currency that enables instant, near-zero cost payments to anyone in the world.” To get to know it in more detail, let’s analyze its most characteristic elements.


Consensus Algorithm

The consensus algorithm used by Litecoin is, like Bitcoin, Proof of Work (PoW). This algorithm is considered the most secure by the community. However, its energy cost raises centralization concerns because it acts as a barrier to entry for new nodes. The computational demand of this algorithm arises from the use of the SHA-256 mathematical function. This function requires constant trial and error to solve the hash, resulting in a high energy cost.

To address this issue, Litecoin uses a different function that is less energy-intensive, which is the Scrypt function. It could be said that Scrypt is easier to solve than SHA-256, leading to lower energy costs. Additionally, as the consensus algorithm remains unchanged, the network’s security is not compromised.

sCrypt protocol

The use of this function improves the performance of the Litecoin network, leading to more efficient use.


Transaction processing is one of the most relevant aspects of any cryptocurrency’s development. In this regard, the adoption of the Scrypt function within the consensus algorithm is a significant step in Litecoin’s project. It allows for faster transactions (each block takes 2.5 minutes to mine, compared to Bitcoin’s 10 minutes). Additionally, Litecoin supports 56 transactions per second (tps), which is much higher than the 7 tps currently supported by Bitcoin.

The aforementioned point has an additional implication, which is the time until a transaction is considered final. In a distributed network like a blockchain, this point is of great importance because it marks the point at which the possibility of a double-spending attack is eliminated. Assuming that the recording of 6 blocks is required for a transaction to be considered final, the waiting time would go from 60 minutes in Bitcoin to just 15 minutes in Litecoin.

There is always the possibility of a network attack leading to a fork, which could result in our transaction, theoretically recorded, not being recognized as such in the new network. That’s why it’s crucial to wait for a specific number of blocks to be registered after ours. The more blocks that have been registered, the more challenging it becomes to create a parallel network without those blocks.


Similar to Bitcoin, the issuance of Litecoin is capped at approximately 84 million LTC. This represents a total issuance four times greater than that of Bitcoin. Additionally, Litecoin also incorporates the “halving” process to maintain the cryptocurrency’s value.

Although basic mining in Litecoin is very similar to that of Bitcoin, there are some small differences. Firstly, blocks are mined much faster (to be precise, 4 times faster). To maintain halving periods at 4 years, it is necessary to mine 4 times more blocks than what Bitcoin requires (840,000 compared to Bitcoin’s 210,000).

bitcoin and litecoin

Additionally, the use of the “Scrypt” function we explained earlier makes the equipment needed for cryptocurrency mining less expensive. This means that mining is not as centralized as with BTC, and more users have the potential to access it.

Active Projects

Currently, Litecoin has a roadmap designed to meet its long-term objectives. These objectives are easily recognizable in the plans of other cryptocurrencies like Ethereum or Bitcoin. Let’s look at the most relevant ones:

Lightning Network

This is one of the most widely accepted solutions for Proof of Work-based blockchains. The Lightning Network is a second-layer network that allows the creation of bilateral payment channels, reducing transactions on the main network. This reduces network congestion and increases the number of transactions processed per minute.

This is achieved by using Smart Contracts between pairs of participants who must trust each other. The state of the main network can be updated at any time but doesn’t require the inclusion of all transactions. This significantly improves network scalability. Additionally, the cost of these bilateral transactions is low, and under certain conditions, they can occur across different blockchains.


Litewallet is the wallet developed by the Litecoin Foundation. By launching its own wallet, Litecoin aims to promote the adoption of its cryptocurrency as a means of exchange. The main features of this wallet include faster transactions (which, once again, improves scalability), low costs, and the anonymity of personal balances.


Just as Litecoin aims to be an improved version of Bitcoin, Omnilite aims to be an improved version of Ethereum. This platform allows the creation of smart contracts, decentralized tokens, and NFTs. Moreover, tokens created using this platform are integrated into Litecoin in such a way that associated transactions are recorded on its main network.

With this platform, Litecoin aims to compete with Ethereum in the realm of decentralized applications. However, Omnilite’s level of implementation is still far from reaching the development of its predecessor.


In light of the data, Litecoin presents some clear improvements over Bitcoin in terms of scalability and transaction processing. Both cryptocurrencies aim for widespread adoption as methods of exchange, so it’s easy to see their similarities and differences. While Litecoin retains the same benefits and enhances transaction speed, it is still far from traditional payment systems. Therefore, we will need to await further solutions for its candidacy to make more sense.

On the other hand, in terms of current acceptance level, Litecoin cannot compete with Bitcoin. The number of transactions is far from challenging its sustainability, and the number of businesses accepting it is still low. Additionally, they are making efforts to enter the decentralized applications market. In this regard, Omnilite is their major bet to challenge Ethereum’s dominance, although it is currently in a very early stage.

For all these reasons, both coins are very similar, but their current adoption as a medium of exchange and for the development of Smart Contracts cannot be compared to their counterparts. Therefore, at this point in time, they cannot be considered real competitors to Bitcoin or Ethereum.

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