One of the most fundamental and technical differences between the two is their mining procedure. Both use Proof-of-work consensus mechanism. Proof-of-work is pretty straightforward to understand.
The miners use their computational power to solve extremely hard cryptographic puzzles. The puzzle solving needs to be extremely hard, if it is simple then miners will keep mining blocks and drain out the entire bitcoin supply.
However, while the puzzle solving part is difficult, checking to see if the solution of the puzzle is correct or not should be simple.
And that, in a nutshell, is proof of work.
Solving the puzzles and getting a solution should be tough.
Checking to see if the solution is correct or not should be difficult.
Now, both bitcoin and litecoin go about this a little differently.
Bitcoin uses the SHA-256 hashing algorithm for its mining purposes. Before long, miners discovered that they could exponentially increase their mining power by joining together and forming mining pools via parallel processing.
In parallel processing, program instructions are divided among multiple processors. By doing this, the running time of that program decreases greatly and that is basically what the mining pools are doing.
The SHA 256 puzzles require a lot of processing power, and that gave rise to specialized “application-specific integrated circuits aka ASICs. The only purpose that these ASICs served was bitcoin mining.
These mining pools would basically have an entire powerplant of ASICs designed specifically for bitcoin mining.
Mining, as originally envisioned by Satoshi, was supposed to be a very democratic process. The idea was that any average Joe can sit on his laptop and contribute to the system by becoming a miner. However, with the rise of the ASIC plants, the average Joes have no chance to compete with the big companies.
Mining is also an extremely wasteful process. The amount of power wastage that happens via mining is humongous.
What is Scrypt
Scrypt was originally named “s-crypt” however it is pronounced as “script”. While this algorithm does, in fact, utilize the SHA 256 algorithm, its calculations are way more serialized than the SHA-256 in bitcoin. As such, parallelizing the calculations is not possible.
What does this mean?
Suppose we have two processes A and B.
In bitcoin, it will be possible for the ASICs to do A and B together at the same time by parallelizing them.
However, in Litecoin, you will need to do A and then B serially. If you try to parallelize them, the memory required becomes way too much too handle.
Scrypt is called a “memory hard problem” since the main limiting factor isn’t the raw processing power but the memory. This is specifically the reason why parallelization becomes an issue. Running 5 memory hard processes in parallel requires 5 times as much memory. Now, of course there can be devices manufactured with tons of memory in it, but two factors mitigate this effect:
- Normal people can compete by buying simple day-to-day memory cards instead of super-specialized ASICs.
- Pound-for-pound, memory is way more expensive to produce than SHA-256 hashing chips.
- Scrypt has been deliberately designed to make sure that mining is accessible and democratized as possible. However, recently companies like Zeus and Flower Technology have managed to create Scrypt ASICs. This would, unfortunately, mean the demise of their dream of democratized mining.
What exactly are orphaned blocks?
Mining, in every sense, is a competition between miners. You have a bunch of miners and pools desperately trying to mine the next block that will be added to the chain. There have been instances when more than one miner was able to come up with a blockchain which could be added the chain.
In situations like these, the network decides which block is to be added next. The other block then proceeds to become an orphan i.e. a perfectly legitimate block which won’t have any transactions in it
In litecoin, since the downtime between the blocks is so low, the chance of miners mining orphaned blocks increases exponentially. Orphaned blocks are just a drain on the system.
Secondly, there is an immense strain on the blockchain. Look at the number of transactions happening in the litecoin chain.
Now, while it is true that litecoin was made specifically for transaction volume, it still puts immense strain and clogs up the blockchain.
Litecoin solved this problem to the great extent by introducing Segwit. We have covered Segwit in great detail before. In here we are just going to give you a brief overview of what it is.