The advent of Bitcoin was obviously a huge step forward for crypto currencies, but as with all new developments, those that come after can improve upon the initial concepts.
In the case of alt coins, Litecoin was the next step. Its founders used many of the same concepts but simply added some tweaks to create improvements. This means that Litecoin shares many of the same protocols as BTC. For example, it is peer to peer and open source.
However, the founder, Charles Lee, created it in the hope of improving upon BTC with several clear differences. The most obvious to lay people is that the total amount of coins to be created by the algorithm will be 84 million (four times greater than Bitcoin). This factor alone may make LTC a much more usable digital currency for the long-term.
The second important difference is that the processing time for a block (authenticating transactions) is aimed to be every two and half minutes instead of every ten minutes. This should allow transactions to be processed more quickly.
The cryptography is slightly different as well, using scrypt1. The original aim was to enable miners to mine both BTC and LTC at the same time. Considering that the mining experts I have spoken to explain that to mine BTC a mining rig needs to work at 100% processing speed constantly, it is not clear to me how both coins could be mined, but that is one of life’s technical mysteries for the true geeks…
The rate of creation of coins will halve every four years, with coins being created at a rate of 840,000 blocks in those four years.
At the time of writing, Cryptsy.com lists 170 crypto currencies with Litecoin having the second largest market capitalisation. While it is much less valuable than BTC, it’s value rose quickly in 2013 and it has become a serious player.
The real question will be whether the increasing rate of adoption for merchants accepting BTC will also extend to LTC. If it does, then LTC has a real future and may one day become a very important element of the internet economy.
One serious issue faced by LTC though is that it does not have the wide base of evangelists that BTC does. In fact, some of the founders of Litecoin are more often involved in higher profile Bitcoin projects. There is more funding, more fame, more fortune to be attached to the main coin.
This means that LTC really does live in the shadow of its older brother. Until this can be changed, it looks less likely that there is a real future. However, the coins are much cheaper, so if there is a real future, they probably make a very interesting speculative punt!
However, for people buying for longer term investment, or perhaps looking to diversify away from stock market investment, then Litecoin, or one of the other smaller alt coins, such as Dash, or perhaps Ethereum, might be both intellectually and financially rewarding.