Litecoin

Litecoin is an open-source, peer-to-peer cryptocurrency launched in 2011. Created as a fork of Bitcoin, it uses a different mining algorithm and faster block times. The network's native currency is Litecoin (LTC).

This article explains Litecoin's technology, its evolution, and practical considerations for holding and using Litecoin with a Trezor device.

What is Litecoin?

Litecoin is a decentralized, open-source cryptocurrency that launched in October 2011 as a fork of the Bitcoin codebase with modified parameters.

The key difference from Bitcoin is Litecoin's use of the Scrypt hashing algorithm instead of SHA-256. This change was made to allow more accessible mining in the early days, though specialized mining hardware (Scrypt ASICs) eventually emerged.

Litecoin is maintained by the Litecoin Foundation and a global community of open-source developers. Anyone can review the code, run a node, or contribute to the project.

Technology and purpose

Litecoin shares much of Bitcoin's core architecture but makes different parameter choices. Block generation occurs every 2.5 minutes compared to Bitcoin's 10 minutes, allowing for faster initial confirmations.

The network processes transactions using the same UTXO model as Bitcoin. All transactions are recorded on a public blockchain maintained by a decentralized network of nodes and miners.

In practice, Litecoin is sometimes used as a bridge asset for moving value between cryptocurrency exchanges due to its relatively low fees and widespread exchange support.

History and key upgrades

Litecoin's development has been marked by several significant technical milestones that shaped its current form.

Origins and launch (2011)

Litecoin was announced on the Bitcointalk forum in October 2011 and launched shortly after as a fork of Bitcoin. The project was originally positioned as "silver to Bitcoin's gold." The primary technical changes were the adoption of the Scrypt mining algorithm and faster block times.

In December 2017, Litecoin's creator sold his entire LTC holdings near the all-time high price. He stated this was to avoid conflicts of interest, as his public statements about Litecoin were perceived to influence the market. Litecoin has not returned to those price levels since. The Litecoin Foundation continues to maintain and develop the project.

Merged mining with Dogecoin (2014–present)

In 2014, Litecoin implemented Auxiliary Proof-of-Work (AuxPoW), allowing miners to simultaneously mine both Litecoin and Dogecoin with the same computational work.

This arrangement strengthened both networks by combining their mining hashrate. Miners solve Scrypt hashes that are valid for both blockchains, improving security for both networks without requiring additional energy expenditure.

Merged mining continues today and represents one of the most successful implementations of AuxPoW in cryptocurrency.

SegWit activation (2017)

On May 10, 2017, Litecoin became the first major cryptocurrency to activate Segregated Witness. This upgrade separated signature data from transaction data, effectively increasing block capacity without changing the block size limit.

SegWit activation also fixed transaction malleability, a prerequisite for secure second-layer protocols. This made Litecoin compatible with the Lightning Network, though adoption of Lightning on Litecoin remains low.

MimbleWimble Extension Blocks (2022)

In May 2022, Litecoin activated MimbleWimble Extension Blocks (MWEB), an optional privacy upgrade. MWEB uses a separate address space and transaction format that obscures transaction amounts.

Users can move LTC into MWEB addresses for confidential transactions, then move them back to standard addresses when needed. The privacy features are opt-in rather than mandatory.

MWEB transactions use a different cryptographic structure than standard Litecoin transactions, which creates some technical compatibility considerations for wallets and services.

Litecoin's monetary policy

Litecoin has a fixed maximum supply of 84 million LTC. This is exactly four times Bitcoin's 21 million supply, maintaining the proportional relationship across several network parameters.

New LTC is created through block rewards paid to miners. These rewards halve every 840,000 blocks, which occurs approximately every four years. This predictable reduction in issuance follows the same model as Bitcoin.

This issuance schedule will continue until approximately 2142, when all 84 million LTC will have been mined. After that point, miners will be compensated through transaction fees alone.

Mining and network security

Scrypt Proof-of-Work

Litecoin uses the Scrypt hashing algorithm for its Proof-of-Work system. Scrypt was originally chosen as an alternative to Bitcoin's SHA-256 to make mining more memory-intensive and resistant to certain optimizations.

In the early years, this allowed mining on consumer-grade CPUs and GPUs. However, Scrypt ASIC miners were eventually developed, and today's Litecoin mining is dominated by specialized hardware, similar to Bitcoin.

Miners compete to find valid block hashes by repeatedly running Scrypt computations. The first miner to find a valid solution broadcasts their block to the network and receives the block reward plus transaction fees.

The network automatically adjusts mining difficulty every 2,016 blocks (approximately 3.5 days) to maintain the target 2.5-minute block time.

Merged mining with Dogecoin

Auxiliary Proof-of-Work allows Litecoin and Dogecoin to share mining infrastructure without competing for hashrate. Miners perform Scrypt calculations that simultaneously satisfy both networks' difficulty requirements.

When a miner finds a valid Scrypt hash, they can submit it to both the Litecoin and Dogecoin blockchains if it meets each network's respective difficulty target. This means miners earn rewards from both networks for the same computational work.

This arrangement significantly increased security for both blockchains. The combined hashrate makes both networks more resistant to potential 51% attacks, as an attacker would need to overcome the total combined mining power.

Merged mining represents one of the most effective real-world implementations of shared blockchain security.

Network resilience

Litecoin has operated continuously since October 2011 without any successful attacks or extended downtime. The network has processed hundreds of millions of transactions over more than a decade.

The blockchain is maintained by thousands of independent nodes running Litecoin Core software. Anyone can download and run a full node to independently verify all transactions and blocks.

This decentralized infrastructure means no single entity controls the network or can unilaterally change its rules. Changes require coordination and consensus across miners, node operators, and the broader community.

Privacy features (MWEB)

MimbleWimble Extension Blocks provide optional privacy features for Litecoin users who want confidential transactions.

MWEB addresses use a different format than standard Litecoin addresses. When you send LTC to an MWEB address, the transaction amount becomes confidential. Subsequent transfers between MWEB addresses maintain this privacy.

The technical implementation uses Pedersen commitments to hide amounts while still allowing the network to verify that no coins are created or destroyed. Transaction outputs are aggregated, making it difficult to trace specific coins through the MWEB space.

To use MWEB, you move coins from a standard Litecoin address into an MWEB address (called "pegging in"). You can later move them back to a standard address ("pegging out") when you need compatibility with services that don't support MWEB.

Not all cryptocurrency services support MWEB. Some exchanges and wallet providers have chosen not to integrate MWEB due to compliance considerations. Always verify MWEB support before attempting to send to or from these addresses.

Litecoin and Trezor

Your Trezor hardware wallet provides self-custody for your Litecoin assets. It secures the private keys for your standard LTC addresses on the Litecoin mainnet. You can view and manage your LTC directly in Trezor Suite. The software displays your balances, generates receiving addresses, and allows you to create transactions. Your Trezor device must physically approve every transaction before it's broadcast to the network.

To interact with services or features not available in Trezor Suite, you can connect your Trezor to compatible third-party wallets. Your keys remain secure on your device throughout this process. For more information on using Litecoin with Trezor, please visit our guides on managing cryptocurrency accounts in Trezor Suite.

Key takeaways

• Litecoin is an open-source cryptocurrency that launched in 2011 as a Bitcoin fork with modified parameters

• Uses Scrypt Proof-of-Work with 2.5-minute block times and a fixed supply of 84 million LTC.

• Successfully activated SegWit in 2017, enabling Lightning Network compatibility

• Shares mining security with Dogecoin through merged mining (AuxPoW)

• Offers optional privacy through MimbleWimble Extension Blocks (MWEB), which has limited support in Trezor Suite

• Has operated continuously for over a decade with a predictable halving schedule

• Trezor secures your private keys for standard Litecoin addresses, giving you full ownership of your LTC.