How to get started with litecoin?

How to get started with litecoin?
 
If you're new to the cryptocurrency world, you'd be forgiven for not having heard of litecoin. The currency, which was created by Charles Lee in 2011, is the second largest digital currency next to bitcoin.




Here is our guide to what you need to know about litecoin.

SO LET'S TALK ABOUT LITECOIN.

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How does the Bitcoin Network actually work?

The Bitcoin network is a peer to peer network (P2P) or a decentralised network with no central point of failure or command. All the nodes, or computers, that participate in the network are equal – there is no hierarchy – or no topology as the network is flat. 

The Bitcoin network is a collection of nodes running the Bitcoin P2P protocol with other protocols such as stratum, used for lightweight mobile wallets (where the full block chain is not downloaded) or for mining. 

Although the network is flat, and all nodes are equal, some nodes or computers perform a different task.  

A full node does routing, holds a full copy of the blockchain database, performs mining and provides wallet services. Any node has to provide the routing function to participate in the network. Routing is just another way of saying that the node validates and passes on transactions and block as well as discovering and maintaining connections to other nodes, whether they are full nodes or not. 

Some nodes don’t hold a full copy of the blockchain and verify transactions by using the Simplified Payment Verification, or SPV. 

Mining nodes, that run specialised application specific integrated chips to solve the proof of work algorithm. Some of the mining nodes are full nodes whilst others are lightweight participating in pool mining and using a pool server to maintain a full node. 

Wallets can be a full node – as is the case with downloading the full bitcoin client onto your desktop. Mobile wallets however can’t hold the entire blockchain through space requirements and are essentially simplified payment verification nodes or lightweight nodes. 

Apart from these main classifications there are other servers and nodes running other protocols - such as alternative wallets and specialised mining pools. The main Bitcoin network contains about 7000-10000 nodes at a time! 

When joining the network for the first time a new node must discover at least one other existing node – geographical location takes no precedence in this procedure. The new node sends a series of messages and then if the other node wishes to form a connection it replies. 

The new node must form new connections to the network, as sometimes some nodes go offline from time to time as people switch their computers off. Then the new node is meshed into the network and resilience is created. 

If you want to run a full node you’re now in for a bit of a wait - all the transactions since Bitcoins genesis in 2009 need to be downloaded. This is done by requesting other nodes to send all their information over to you, and so as not to overload them, this can be done in conjunction with other nodes. 

But the good news is if you want your own wallet on your phone and don’t want, or need to run the Bitcoin full client, you can simply just use Coinbase’s or blockchain.io’s simplified version and set it up in seconds. 

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Transaction malleability is a loophole in the bitcoin protocol that was most famously used in February 2014 to allegedly withdraw funds from Mt Gox.  

The idea behind transaction malleability is that a user who is tracking transactions via their hash would not be able to trace the transaction if the hash was changed. read more here.

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NEWS: CryptoCurrency Protocols are like Onions.

One common design philosophy among many cryptocurrency 2.0 protocols is the idea that, just like the internet, cryptocurrency design would work best if protocols split off into different layers. Under this strain of thought, Bitcoin is to be thought of as a sort of TCP/IP of the cryptocurrency ecosystem, and other next-generation protocols can be built on top of Bitcoin much like we have SMTP for email, HTTP for webpages and XMPP for chat all on top of TCP as a common underlying data layer. 

So far, the three main protocols that have followed this model are colored coins, Mastercoin and Counterparty. The way the colored coins protocol works is simple. First, in order to create colored coins, a user tags specific bitcoins as having a special meaning; for example, if Bob is a gold issuer, he may wish to tag some set of bitcoins and say that each satoshi represents 0.1 grams of gold redeemable from him. The protocol then tracks those bitcoins through the blockchain, and in that way it is possible to calculate who owns them at any time.

Mastercoin and Counterparty are somewhat more abstract; they use the Bitcoin blockchain to store data, so a Mastercoin or Counterparty transaction is a Bitcoin transaction, but the protocols interpret the transactions in a completely different way. One can have two Mastercoin transactions, one sending 1 MSC and the other 100000 MSC, but from the point of view of a Bitcoin user that does not know how that Mastercoin protocol works they both look like small transactions sending 0.0006 BTC each; the Mastercoin-specific metadata is encoded in the transaction outputs. A Mastercoin client then needs to search the Bitcoin blockchain for Mastercoin transactions in order to determine the current Mastercoin balance sheet.

I personally have had the privilege of talking directly to many of the originators of the colored coins and Mastercoin protocol, and have participated considerably in the development of both projects. However, over about two months of research and particpation, what I eventually came to realize is that, while the underlying idea of having such high-level protocols on top of low-level protocols is laudable, there are fundamental flaws in the implementations, as they stand today, that may well prevent the projects from ever gaining anything more than a small amount of traction. The reason is not that the ideas behind the protocols themselves are bad; the ideas are excellent, and the response of the community alone is proof that they are trying to do something that is very much needed. Rather, the reason is that the low-level protocol that they are trying to build their high-level protocols on top of, Bitcoin, is simply not cut out for the task. This is not to say that Bitcoin is bad, or is not a revolutionary invention; as a protocol for storing and transferring value, Bitcoin is excellent. However, as far as being an effective low-level protocol is concerned, Bitcoin is less effective; rather than being like a TCP on top of which one can build HTTP, Bitcoin is like SMTP: a protocol that is good at its intended task (in SMTP’s case email, in Bitcoin’s case money), but not particularly good as a foundation for anything else.

The specific failure of Bitcoin is particularly concentrated in one place: scalability. Bitcoin itself is as scalable as a cryptocurrency can be; even if the blockchain balloons to over a terabyte, there is a protocol called “simplified payment verification”, described in the Bitcoin whitepaper that allows “light clients” with only a few megabytes of bandwidth and storage to securely determine whether or not they have received transactions. With colored coins and Mastercoin, however, this possibility disappears. The reason is this. In order to determine what color a colored coin is, you need to not just use Bitcoin simplified payment verification to prove that it exists; you also need to trace it all the way back to its genesis, and do an SPV check each step of the way. Sometimes, the backward scan is exponential; and with metacoin protocols there is no way to know anything at all without verifying every single transaction. And this is what Ethereum intends to fix. Ethereum does not intend to be a Swiss Army knife protocol with hundreds of features to suit every need; instead, Ethereum aims to be a superior foundational protocol, and allow other decentralized applications to build on top of it instead of Bitcoin, giving them more tools to work with and allowing them to gain the full benefits of Ethereum’s scalability and efficiency.

bitcoinmagazine: SOURCE: Ethereum: A Next-Generation Cryptocurrency and Decentralized Application Platform