Blockchain Basics

How a Litecoin address is created

A Litecoin address is in some ways like an E-Mail address. It is used to interact with other people. However, there are some differences.

From private key to public key

The creation of a Litecoin address starts with the private key. It is a randomly generated string of numbers and letters and it is used to create a corresponding public key. Even if the public key is derived from the private key, it would take the most powerful supercomputer many trillion years to crack the private key.

While P2SH is by far the newest address format only a fraction of people already use it.

Pay to public key hash aka Litecoin addresses with prefix “L”

From the beginning, transactions between wallets used the “Pay to Public Key Hash” (P2PKH) method. These hashes are created by running the public key through several hash algorithms.

Pay to script hash aka Litecoin addresses with prefix “3” and “M”

Pay to script hash (P2SH) is more difficult to understand than the P2PKH method. It helps to keep in mind that payments do not have a recipient per se, but define a rule of how the transferred coins can be spent.

How an address is created using the P2PKH method. source: bitcoinwiki.org

P2WPKH aka Litecoin addresses with prefix “ltc1”

P2SH addresses also allow the processing of other scripts besides multisig. For example, the SegWit protocol upgrade was introduced via the P2SH addresses.

How an address is created using the P2SH method. source: bitcoinwiki.org

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