Litecoin is a decentralized cryptocurrency and open-source blockchain network that facilitates peer-to-peer transactions with a proof-of-work consensus mechanism. It offers optimised block generation times and a different hashing algorithm than Bitcoin, enabling competitive transaction fees and scalability for digital payments.

History

Litecoin was launched on Oct. 13, 2011, with the Genesis block being produced on Oct. 7, 2011. Charlie Lee created Litecoin as a fork of Bitcoin's source code. It is nearly identical to Bitcoin, with key differences being faster block times, a higher maximum token supply, and a different hash function. According to Litecoin’s whitepaper, the network’s faster block times are designed to increase transaction throughput and reduce the time between merchants receiving and confirming transactions.

Major upgrades to Litecoin are summarized below:

• On Jan. 6, 2017, Charlie Lee posted his vision for Segregated Witness (SegWit) and Lightning Network upgrades to Litecoin. On May 10, 2017, SegWit was activated through a soft fork and was a precursor to Bitcoin’s activation of SegWit on Aug. 24, 2017.
  • SegWit provided upgrades, including transaction malleability fixes, reducing the maximum number of transaction hashes, increasing block capacity, and more. One result of SegWit was that it allowed for the Lightning Network, a network of offchain payment channels that allow users to transact outside of the main blockchain, to be built atop the network. Only the final state transition is broadcast to Litecoin once a payment channel is closed. This enables transactions to be executed at faster speeds, with lower fees, and unlocks the potential for cross-chain swaps between Litecoin and Bitcoin, the first of which was performed on Nov. 16, 2017.
• On Jan. 31, 2022, the Mimblewimble Extension Block (MWEB) and Taproot network upgrades were released and activated through a soft fork on May 20, 2022. Mimblewimble is exclusive to Litecoin, though Taproot was a previous upgrade to Bitcoin that was activated on Nov. 14, 2021. A timeline of events can be seen here.
  • The update to Litecoin Core 0.21.2 included both MWEB and Taproot. MWEB consists of two main technologies, Mimblewimble and Extension Blocks. MWEB provides an optional feature for network participants that enhances privacy between the senders and receivers in a transaction. This is done through an extension of the main blockchain, hence the term “extension blocks,” which does not publicly display the amount of LTC sent nor the amount held in an MWEB-enabled address. Taproot provides enhanced security, privacy improvements, and lower fees.

Block rewards are subject to “halving” and have since decreased to 6.25 LTC per block. Halving refers to the decreasing rate of Litecoin’s inflation. For every 840,000 blocks mined (roughly four years), the reward of newly minted LTC decreases by half. Rewards will continue to decrease until the maximum token supply (84.00 million LTC) is mined around the year 2142. The next halving event will occur on July 2027 at block 3.36 million, when the block reward will be further reduced to 3.125 LTC.