“Near-Zero Payment Cost”
Litecoin is a clone of Bitcoin, with minor technical differences which contribute to its underlying value proposition.
Published as open source in October 2011 by a former Google engineer (Charlie Lee), the system quickly took up pace with a “market cap” of $1bn being adopted by November 2013.
It has been likened to the silver of the crypto world (with Bitcoin as gold) due to the similarities between the two. Unfortunately, the lack of transparency with its founding team, and the general problem between being able to develop massive scale have left this coin hovering in the shadow of Bitcoin.
It must be stated that whilst this might seem like a legitimate investment, the simple reality here is that the majority of people who are gambling on the coin are only interested in trying to trade for a profit.
This article is not a recommendation nor financial advice. Everything outlined on this article is for education and entertainment purposes only…
What is Litecoin?
Litecoin was released deliberately as a less-valued currency to Bitcoin (silver to gold).
The point of this was that when you’re invested (as a consumer) into the world of cryptocurrency, you may end up with a large number of coins which – in theory – you’d be able to interchange and spend with different people.
The problem that Charlie Lee saw was that whilst Bitcoin was able to hold its value relatively well (as opposed to some of the other “currencies” which were somewhat volatile), it wasn’t that good at being transacted in either small or frequent amounts.
This issue has been exacerbated with the explosion in popularity of the Bitcoin coin – as it has become more popular, processing times on its blockchain have become increasingly strained, as well as other issues with the likes of security and privacy.
Litecoin was introduced to try and solve that – with a strong emphasis on speed and small increments. Whilst almost identical to Bitcoin, there are subtle differences in its cryptographic algorithm which have basically defined how the coin would work on the open market:
- Circulation
- Bitcoin: 21 Million
- Litecoin: 84 Million
- Algorithm
- Bitcoin: SHA-256
- Litecoin: Scrypt
- Reward
- Bitcoin: Halved every 210,000 blocks
- Litecoin: Halved every 840,000 blocks
The point here is that larger circulation numbers (more coins) and higher rewards for processing transactions put the Litecoin’s focus squarely on the speed and scalability of transactions. Whilst not a cash derivative, it will certainly indicate an easier means of transaction than the likes of Bitcoin. This is also highlighted with the Litecoin 2.5 minute block creation time, as opposed to Bitcoin’s 10 minute.
Ultimately, whilst the consensus is that the majority of altcoins are pretty much lame ducks (piggybacking the success of Bitcoin), the likes of Litecoin did introduce a large number of improvements to the underlying Bitcoin infrastructure.
Such advances as the Lightning network (which handled its first transaction via Litecoin) and adoption of the Segregated Witness update have put Litecoin (with several of the other Bitcoin clones) squarely in innovator territory. If they fix many of the underlying problems that Bitcoin has, it would undoubtedly be good for the crypto market in general (increased adoption).
Another big advantage of the system is its near-zero payment cost. The main issue that people are finding with Bitcoin is that it requires an increased amount of money to perform a transaction. Since BTC has been trading so highly, this fee could be anywhere from $5 to $20 PER transaction. Litecoin removed that requirement with minimal payment infrastructure, which again adds to the coin’s focus on being light and quick.
Who created it?
Former Google engineer Charlie Lee created Litecoin in 2011.
Unlike most other coins (namely the likes of Ripple and Dash), Litecoin’s community has remained relatively small & its decentralized nature has prevented a large central committee from forming around it.
The coin started out as a fork of Bitcoin (which basically makes it a clone) and thus the brainpower required to determine how it should work etc was much less than if the project had been developed from scratch – as Bitcoin and Ripple were.
Why Does it Exist?
The main reason for the existence & development of Litecoin was to improve on where Lee felt Bitcoin had fallen short, specifically with the speed of transaction and ease of processing on the network.
Unfortunately, most of the people who want to use cryptocurrency will disregard these minor improvements and focus entirely on Bitcoin (as it’s most trusted).
According to the creator, this didn’t really matter, as the following is what he posted on BitcoinTalk.org:
Litecoin is the result of some of us who joined together on IRC in an effort to create a real alternative currency similar to Bitcoin. We wanted to make a coin that is silver to Bitcoin’s gold. Various alternative currencies have come and gone. Some brought innovation, but they all had problems…
– ixcoin – Nasakioto premined 580k coins. Seemed like a pump and dump. Competed with Bitcoin for GPU resources – Dead (~2 gh/s)
– i0coin – Basically ixcoin without the premine. Not much support was given to this coin after it was released. – Dead (~5 gh/s)
– SolidCoin – Innovative quick transaction times. Appears to have been run aground by CoinHunter, its creator, due to insecure changes and immature forum presence. – Dead, shutdown by CoinHunter
– GeistGeld – Lolcust premined 7.7 million coins. 15 second block time is probably a bit extreme. – Alive, but limping (~15 gh/s)
– Tenebrix – Lolcust premined 7.7 million coins. CPU proof of work using scrypt is very innovative. Price doing fairly well on btc-e.com. – Alive (~0.003 gh/s)
– Fairbrix – Basically Tenebrix without the premine. First launch was crippled due to bad config. Relaunch attacked initially – Doing OK now, but no exchange so far. – Alive, but limping (~0.0001 gh/s)
We wanted the best innovations of Bitcoin and these other currencies to create a coin with all of their benefits, but nearly none of their problems.
No whitepaper for Litecoin exists.
Trajectory
It’s our opinion that the majority of altcoins out there will eventually become unsustainable and there will be one – or maybe two – currencies that survive to the next wave of development.
At the moment, it’s looking like Bitcoin is going to be the winner of the crypto wars, with all the other altcoins falling by the wayside. As such, judging the trajectory of the likes of Litecoin, or even Dash, is difficult as they are invariably linked to the Bitcoin trajectory growth.
As such, the current metrics for the transactions of Litecoin show a sharp increase from mid 2017, which is around the time Bitcoin’s price started to rise sharply.
This, to us, indicates the adoption of the coin became apparent after that of Bitcoin was also experiencing uptake.
However, the problem with this is that you would expect a coin that’s designed to be more effective in lower quantities than Bitcoin to be traded more than its parent. This doesn’t seem to be the case, enforcing the myriad of warnings that the price of its coins will soon reach critical mass.
Ultimately, the consensus is that – like the Sirens to Odysseus – keeping track of the many Bitcoin clones is a great way to verify the health of the main asset. If Litecoin and Dash are trading well, it typically indicates that Bitcoin will be relatively healthy too (obviously excluding external and technical influences).
