When former Google engineer Charlie Lee forked Bitcoin’s genesis block to create a new cryptocurrency, he had a very ambitious plan: to replicate the qualities of silver and offer a cheaper and faster alternative to BTC. Seven years later, Litecoin is still a top 10 coin in terms of market capital, and ticks all the boxes for a solid project: it’s featured on all the major exchanges (with the triumphant addition to Gemini being made on October 13th, just 8 days after the coin’s 7th anniversary), it benefits from an impressive amount of merchant adoption for payments, it’s backed by an enthusiastic community, and it’s the second most decentralized crypto after king Bitcoin.
For those interested in the technology and the future of the project, Litecoin has all the qualities one might search for. That’s why Abra (a decentralized crypto trading platform) chose to run its smart contracts using LTC, and lots of industry insiders praise the potential of the digital silver project. Furthermore, Litecoin benefits from full support to be a part of the Lightning Network and will always be the cheapest way to transact within the second layer system, and the Litecoin Foundation has recently acquired a 9.99% stake in a German bank called WEG.
Nevertheless, Litecoin does have some issues which need to be addressed: firstly, some investors lost trust in the coin after founder Charlie Lee sold all of his coins in December 2017; secondly, there’s the entire LitePay saga which let down a lot of people and further stained the credibility of the project.inally, one can clearly observe that the price has significantly dropped from its all-time high of $375 – in spite of all the good news.
Therefore, this article will take a look at all of these elements and present facts about Litecoin’s status-quo in the space.
The best decision that Charlie Lee has ever made in this space was to support Bitcoin and not try to compete with it. In his vision, Litecoin is much like Vegeta from Dragon Ball Z: a strong Super Saiyan in his own right, but one who teams up with the objectively stronger protagonist Goku in order to defend the Earth from destructive invaders (aka the inflationary financial policies of central banks).
Therefore, Litecoin is a bona fide pioneer in many fields and does some testing for the more conservative Bitcoin. It happened in the case of SegWit (when Charlie Lee held an 8-hour meeting with the miners and succeeded to become part of the technological avant-garde), it’s happening now with the Lightning Network, and the future also holds lots of good news for us which may or may not involve BTC and LTC credit cards (depending on the stake of the Litecoin Foundation within the bank).
Now let’s talk about the fundamentals: Litecoin has 4 times the supply of Bitcoin, and generates new blocks 4 times faster. The principle doesn’t also get transferred to the price ratio, but as the market matures we might see other projects fail and more money getting moved to LTC.
It’s not like Litecoin is a niche project which is only subjected to lab tests either: it’s available on every cryptocurrency exchange, and the enthusiastic community has taken adoption to a whole new level by promoting the quick and reliable payments to merchants all over the world. If you check the website of the Litecoin Foundation, you will find a list of hundreds of businesses which accept LTC payments — and the number just keeps on growing. Moreover, thanks to the efforts of people like Jon Moore, the millions of Clover POS devices can be configured to accept Bitcoin and Litecoin payments – which brings the incredible potential for growth and brings us all closer to mainstream adoption of cryptocurrencies.
Last but not least, one must address the technical advantages: Litecoin uses the Scrypt mining algorithm and is the leader in terms of hashrate among coins using the same system. Therefore, unlike the BTC and BCH situation, there is no other great force which can attack the network. There’s also the fact that about $150 million worth of ASICs run continuous mining operations to ensure the security of the network, and there is no financial incentive to ever try to attack the system.
In my view, there are two types of bad aspects: the permanent and structural ones which make Litecoin lesser attractive than Bitcoin, and the temporary ones which are generated by situations that can change at any time.
From an organizational point of view, Litecoin is more centralized than Bitcoin. This can be something good when it comes to implementing new technologies and embracing changes, but its qualities as a store of value are not as great as BTC’s. The fact that there is a foundation to make decisions and act as the selected elite is in itself a centralizing element, yet that’s the tradeoff a blockchain must have in the name of efficiency.
While it’s true that nodes can (at least in theory) refuse to update the protocol to the latest release by the Foundation-financed Core developers, since the founder himself approves with the new code, it’s unlikely that anyone will rebel against the decision. Litecoin could get overtaken by the community, but at this point, it seems like this kind of decision would be irrational from a financial and technological point of view.
But now let’s talk about the most controversial topics surrounding Litecoin: Charlie Lee’s decision to sell all of his coins, and the failure of LitePay. First of all, there’s a lot of criticism surrounding Satoshi Lite and his lack of “skin in the game”. Much like unhappy shareholders who get upset at their CEO who doesn’t trust the company’s vision to the extent that he holds a large percentage of stocks, some members of the LTC community just wouldn’t come to terms with Charlie Lee’s decision to sell his coins.
Since December 2017, Mr. Lee has been living in a recurring nightmare where he gets asked all the time “Why did you sell?”. He’s constantly tried to get away from this situation by explaining that Litecoin has become much more decentralized and inclusive as soon as the founder got rid of his coins, and the moment of the sell wasn’t even the all-time high. Furthermore, Satoshi Lite completely resents the “CEO mindset” and has implied many times that he felt uncomfortable knowing that his actions would only make him richer.
The price of Litecoin has dropped in the days following the unexpected sell-off, but a careful analysis might point out to the fact that the entire market collapsed at the same time. It’s ridiculous to say that Charlie Lee has crashed the market with his actions, and it’s also reckless and short-sighted to blame Litecoin’s movements on the sell-off when it’s clear that the price has had similar fluctuations with the rest of the market. As a matter of fact, LTC has remained a top 10 coin at all points of the bear market and has suffered value losses relative to the USD that is proportional with the movement of every other cryptocurrency.
But now let’s move on to the case of LitePay – a payment processor which was surrounded by lots of great expectations, but was shut down shortly after lunch. The project was mostly financed by the Litecoin Foundation, and Xinxi Wang has also invested some of his personal money. Nevertheless, the outcome was disastrous, and one month after the launch there were lots of broken promises which disappointed the entire community and pushed the Foundation to pull the plug on the funding.
LitePay, a community project which benefited from a lot of media exposure thanks to the charisma and presence of CEO Kenneth Asare, operated with very little transparency, had a shady website which featured no real details about the company and failed to deliver its main promise: the Litecoin debit card. A lot of people saw this as the ultimate gateway to mainstream adoption, and one that will fulfill Charlie Lee’s dream of turning LTC into the ultimate coin for payments. But after having registered thousands of merchants, being opaque about employees and legal affairs, and doing a disastrous Reddit AMA which turned the entire community against the project, it all became history. The entire situation did affect the reputation of Litecoin and made a lot of people turn their backs on the project, but the fundamentals of the coin remain the same with or without a payments processor which provides crypto debit cards.
Most of the Litecoin FUD revolves around the failures the coin have gone through (detailed in the previous section), but also the questionable future of the coin. A lot of people ask themselves what purpose LTC is going to be serving after Bitcoin’s implementation of the Lightning Network becomes user-friendly and ready to provide a cheap and instant payment method for merchants around the world. After all, what is the point of a currency which provides cheap on-chain transactions on a regular basis and chooses to take the same scalability route as Bitcoin? Also, FUDsters constantly refer to Litecoin as nothing more than a testnet for BTC, an experiment that will get buried as soon as the king gets fully upgraded.
Charlie Lee himself has taken on Twitter (@SatoshiLite) to address this type of existential FUD and explain that Litecoin is fully supported by the Lightning Network, it’s the cheapest way to enter the system, and lots of clients and apps will have full support for Bitcoin’s little brother in order to perform atomic swaps or quick transactions. The objective advantage of Litecoin is the quicker block time, which means that transactions will get written into blocks four times quicker than BTC.
Furthermore, Mr. Lee has explained that there’s a lot of use for Litecoin in microtransactions both on-chain and via LN, as the increasing price of Bitcoin will generate greater expenses and will make it more suitable to buy cars, houses, or other objects that aren’t on the everyday shopping list. To quote Charlie Lee himself, “the possibilities are endless”.
7/ Litecoin will always be the cheapest and fastest on ramp to Lightning Network. And with solutions like submarine swaps, you can use on chain LTC to pay for a BTC lightning invoice!
We will also have decentralized exchanges using atomic swaps. The possibilities are endless. ⚡
— Charlie Lee [LTC⚡] (@SatoshiLite) September 20, 2018
And if you think that Litecoin can’t be differentiated from other altcoins which offer the same technology, then you should know that it’s supported by more exchanges than even Ethereum and Bitcoin Cash, and its immutability and censorship resistance are protected by dedicated ASICs that monopolize the hash power for the Scrypt algorithm. Therefore, there are still plenty of reasons to hold Litecoin through the rest of 2018 and further on —and if the price isn’t such a strong indicator —then you should also pay a close look to merchant adoption and the volumes that are being traded every day. In order for a technology to be successful, it must prove its usefulness in a certain field. In the case of Litecoin, one can observe lots of developments. Too bad the price doesn’t reflect them and the market sentiment is still affected by a couple of drawbacks and the attractiveness of promising whitepapers which have yet to prove themselves.