9
Oct

Litecoin Mining Algorithm Failed To Be Accessible | Blockchain Central


Hey everybody and welcome to another episode
of BLOCKCHAIN CENTRAL! In this video we’ll take a closer look at
the cryptocurrency with the name Litecoin. Litecoin is a fork of Bitcoin and stands out
with faster transaction times and a different mining algorithm. The coin is often called “the silver to
Bitcoin’s gold” and supposed to function as a payment and store-of-value cryptocurrency. Over the course of this video, we will take
a closer look at the main specifications of Litecoin and draw comparisons to Bitcoin. We will also analyze the development of the
hash rate of the Litecoin network and explain how this contradicts with the initial mission
of Litecoin. So, let’s get started. Litecoin was first introduced in 2011 by a
former Google employee: Charlie Lee. Litecoin is a fork of the Bitcoin core client,
with several changes to the technology. By searching the Litecoin website, you can
find the following definition: “Litecoin is a peer-to-peer Internet currency that enables
instant, near-zero cost payments to anyone in the world.” As is the case with Bitcoin, every transaction
in the Litecoin network is stored on a public ledger and has to be verified by a decentralized
network of computers. Furthermore, miners are rewarded with new
Litecoins for verifying the transactions, until the maximum of 84 million released coins
is reached. So far so good, but what makes Litecoin so
different from Bitcoin? A common issue with the Bitcoin protocol is
the speed at which transactions are confirmed. It depends on the frequency of block creation
on the blockchain. The Litecoin network creates a new block every
2.5 minutes. As a consequence, Litecoin can handle a higher
volume of transactions than Bitcoin, which enables faster payments. In addition, Litecoin makes use of a different
mining algorithm, which is responsible for the creation of new coins. Bitcoin uses a resource-intensive “SHA-256”
algorithm, while Litecoin is powered by a memory intensive “scrypt” algorithm. Over the time, the mining of Bitcoin requires
more and more computing power and standard CPUs or GPUs are unable to perform the calculations
profitably. Therefore, the mining of Bitcoins requires
Application Specific Integrated Circuits (ASIC), which are specially designed for the purpose
of mining and are mostly operated by larger mining facilities. Litecoin, on the other hand, was designed
to be mined sustainably on normal devices to make it accessible to everyone on the network. The “scrypt” algorithm, which is memory-intensive,
makes mining less efficient on ASIC devices and makes it possible for everyone to participate
in the Litecoin mining process. That’s in theory, at least. According to Charlie Lee, the founder of Litecoin
himself, the script algorithm is not ASIC-proof, but rather ASIC-unattractive. This means that mining Litecoins with ASICs
is not impossible, it is just more expensive and complex to build them specifically to
mine Litecoins As soon as Litecoin increased in value, manufacturers started the development
of ASICs and today most of the miners use such devices. The difficulty of mining is—of course—connected
to the hash rate of Litecoin, so let’s analyze this aspect of the blockchain. A hash is the output of a hash function. During the mining process, computers have
to solve a mathematical problem of finding the correct hash, which allows for the creation
of the next block and rewards the miner with a new Litecoin. The hash rate defines how many functions a
computer can solve per second, meaning a higher hash rate indicates a higher computing power. With increasing popularity of a cryptocurrency,
the number of miners increases and–as a result–the total computer power in the network grows. To re-balance the fluctuating computing power,
the difficulty of finding the next block adjusts automatically over time. In the case of Litecoin, the change in the
average daily hash rate indicates the increasing adoption of ASICs over the course of time. Contrary to the initial mission of Litecoin,
the network is now dominated by ASICs instead of normal devices. The popularity and value of Litecoin incentivized
miners to develop and use ASICs. Even though Litecoin’s confirmation time
for transactions is four times faster compared to Bitcoin, users have to wait several minutes
until a payment is confirmed. One solution for this scalability problem
is the so-called lightning network. This technology uses a second layer on top
of the blockchain and creates separate payment channels between network participants. These payment channels are controlled by smart
contracts and allow for instant transactions between the parties. Only the opening and closing of payment channels
are recorded and confirmed on the blockchain; the transactions within the channels are not. This makes small transactions more efficient
and increases the scalability of the blockchain solution. Over time, a network of payment channels arises,
and the payments are routed to the recipients in the fastest and most efficient way. Such a network is called “Lightning Network”. The technology was originally developed for
Bitcoin but, since Litecoin is a fork of Bitcoin, it was also adopted by Litecoin. Ok, so what can we take away from this video? Well, first of all, we know that Litecoin
is a fork of the Bitcoin core client and both blockchains have many similarities. Litecoin, has shorter confirmation times and
uses a memory-intensive mining algorithm. The initial idea of enabling normal devices
to mine Litecoin and to prevent ASICs from dominating the network fell victim to the
success of Litecoin. As a result, Litecoin has a high average hash
rate and professional miners are now providing the computing power. The cryptocurrency was among the first to
implement the lightning network function, which increased the scalability and allowed
for faster transactions. That’s it for this episode of Blockchain
Central make sure to hit that like button if you liked this video and don’t forget
to subscribe to Blockchain Central to never miss a beat! Happy investing!

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