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Litecoin marks its tenth anniversary this year - Charlie Lee reveals his nine favourite things about Litecoin - the "silver to Bitcoin's gold".
By Adriana Hamacher - Decrypt
It’s a big year for Bitcoin spin-off Litecoin. The cryptocurrency—often described as the silver to Bitcoin’s gold—celebrates its tenth anniversary in October.
Recently, Decrypt sat down with Litecoin’s founder Charlie Lee, an MIT graduate and Google veteran, to find out just what’s so great about the cryptocurrency he designed. We’ve boiled his answers down into nice handy facts.
1. In nine years, Litecoin had zero downtime
Bitcoin and Ethereum, the top two ranking cryptocurrencies by market cap, have both experienced downtime—but not Litecoin, according to Lee.
"Litecoin has been running nonstop for almost 10 years," Lee told Decrypt. "It's one of the few coins that can claim that. Even Bitcoin has had issues where there's been like a fork and a certain amount of downtime. Litecoin has not had any downtime since I launched it in October of 2011."
2. It’s been a top-10-ranking cryptocurrency ever since it was invented
It may have gone up and down in rank, but Litecoin has been in the top 10 cryptocurrencies by market cap for pretty much the whole time since it launched. It’s currently at number eight, between Chainlink and Bitcoin Cash. But Decentralized Finance (DeFi) coins, such as Wrapped Bitcoin (WBTC) and Uniswap’s governance token UNI, are rising fast.
"There's a lot of coins that have had their 15 minutes of fame but receded," said Lee."Litecoin has never really left the spotlight; it's quite impressive."
3. Litecoin’s mining algorithm gives it a security advantage
Litecoin uses a different mining algorithm to Bitcoin. This means that it can dominate the so-called "hashrate" of the algorithm it uses, which is called Scrypt.
That’s not an option available to Bitcoin Cash, for example; like Bitcoin, it uses the SHA-256 algorithm, but only has around 2% dominance, making it vulnerable to attack. In contrast, LTC’s Scrypt dominance is at around 99%, said Lee.
"There's no incentive for Litecoin miners to attack Litecoin because they're basically attacking their own, whereas for SHA-256 miners, if they attack Bitcoin Cash and Bitcoin Cash dies because of it, they don’t really lose much money at all, because they can go back [to mining Bitcoin]," he explained.
4. Litecoin has high liquidity
Litecoin is listed on every major cryptocurrency exchange. Like Bitcoin, it’s used as a store of value, but its super-low fees and faster transaction rate have boosted its popularity as means of exchange.
"Today, the market cap is $9 billion, but the volume is $8.5 million dollars. The trading volume exceeding the market cap is pretty impressive, so it's very liquid," said Lee.
5. It has more ATM support than any crypto, except Bitcoin
The latest data from CoinATM Radar puts the number of ATMs supporting Litecoin at 9,425, while almost 15,000 ATMs now offer Bitcoin. Reports last year suggested that LTC was set to be enabled in 13,000 ATMs in Korea, which would mean it has more support worldwide than even Bitcoin.
"There are a lot of places where you can buy and sell Litecoin, it’s the second-best supported [cryptocurrency,]" said Lee.
6. Litecoin is supported by PayPal
In October 2020, PayPal introduced support for Bitcoin, Ethereum, Bitcoin Cash, and Litecoin, which means that its 350 million US customers can now buy and pay for goods and services in these cryptocurrencies.
Litecoin's value proposition:
- High liquidity & on every exchange
- #2 supported on ATMs
- 350m @PayPal users
- $104m @Grayscale LTCN trust
- 99% Scrypt hashrate dominance
- MWEB fungibility/privacy
- Low fees & fast txns
- $500b+ value transferred
- 9+ years w/ zero downtime
🚀 pic.twitter.com/YSCwxA57Lb— Charlie Lee [LTC⚡] (@SatoshiLite) December 21, 2020
"People chose to support Litecoin because it's a useful currency and it's one of the top currencies," said Lee.
Of course, not everyone in the crypto community is head-over-heels in love with PayPal. It's come in for criticism over its terms and conditions, which state that the crypto in your account "cannot be transferred to other accounts on or off PayPal." Still, though, it's opened the doors for some 26 million merchants to accept payments in cryptocurrency—including Litecoin.
7. Privacy features are coming to Litecoin
Litecoin is getting a major upgrade over the coming months to give it so-called "fungibility," where one coin is indistinguishable from another.
"This is what makes money powerful because every coin or any bill is the same—it's fungible. Currently, that's not the case with Litecoin and Bitcoin," said Lee. "There are stories you hear that people deposit some coins to Coinbase and their account gets banned, because the coins are linked to a dark market, for example," he explained.
MWEB, the opt-in privacy and fungibility feature being introduced, means the coins can’t be ‘tainted’ by what they’ve been used for in the past. It’s an optional feature and functions as a kind of sidechain. Lee believes it’s going to be a major selling point.
8. Almost 2% of LTC is locked up in the Grayscale Litecoin Trust
Digital asset manager Grayscale Investment made headlines when it announced a record $27.1 billion in assets under management last week. It’s one of the few ways institutional investors can get exposure to Bitcoin without having to hold the asset itself.
The Grayscale Bitcoin Trust has pulled in the bulk of the funds—and generated the majority of the headlines—but the asset manager also operates trusts for a small number of other cryptocurrencies, including Litecoin.
"The Grayscale Litecoin Trust is doing really well," said Lee, pointing out that $173 million LTC is currently locked in it—which represents almost 2% of all Litecoin in existence. "It’s hard to know what a complex demand there is on the institutional side for Litecoin, but looking at this, it’s pretty impressive."
9. Litecoin survived after Lee cashed out
Litecoin was perhaps the first major cryptocurrency to raise the thorny issue of what happens when a founder cashes out.
But I thought you sold out of ltc... 🤔
— [฿it]coin Accumulation on Capitulation (@Crypto_Nerd) March 2, 2018
Lee sold his LTC at the end of 2017, near the peak of the cryptocurrency boom, citing conflict of interest and other reasons. He said that—even three years later—people still hate on him for selling out, and some even blame him for crashing the whole crypto market, which is "ridiculous," he insists.
"It's kind of human nature for that to happen; I should have expected it," he said ruefully. "A lot of people think I quit Litecoin because I have no incentives to work on anymore. But it's kind of the opposite because it's my baby, so to speak. It's my legacy."
Article produced by Adriana Hamacher - Read the full article:
By GREG MCFARLANE - Investopedia
Litecoin functions in one sense as an online payment system.
Like PayPal or a bank’s online network, users can use it to transfer currency to one another. But instead of using U.S. dollars, litecoin conducts transactions in units of litecoin. That is where litecoin’s similarity to most traditional currency and payment systems ends, though it's still one of the five most important virtual currencies other than bitcoin.
Like all cryptocurrencies, litecoin is not issued by a government, which historically has been the only entity that society trusts to issue money. Instead, being regulated by a Federal Reserve and coming off a press at the Bureau of Engraving and Printing, litecoins are created by the elaborate procedure called mining, which consists of processing a list of litecoin transactions.
Unlike traditional currencies, the supply of litecoins is fixed. There will ultimately be only 84 million litecoins in circulation and not one more. Every 2.5 minutes (as opposed to 10 minutes for bitcoin), the litecoin network generates a what is called a block – a ledger entry of recent litecoin transactions throughout the world. And here is where litecoin’s inherent value derives.
The block is verified by mining software and made visible to any “miner” who wants to see it. Once a miner verifies it, the next block enters the chain, which is a record of every litecoin transaction ever made.
The incentive for mining is that the first miner to successfully verify a block is rewarded with 50 litecoins. The number of litecoins awarded for such a task reduces with time. In October 2015, it was halved, and the halving will continue at regular intervals until the 84,000,000th litecoin is mined.
But could one unscrupulous miner change the block, enabling the same litecoins to be spent twice? No. The scam would be detected immediately by some other miner, anonymous to the first. The only way to truly game the system would be to get a majority of miners to agree to process the false transaction, which is practically impossible.
Mining cryptocurrency at a rate worthwhile to the miners requires ungodly processing power, courtesy of specialized hardware. To mine most cryptocurrencies, the central processing unit in your Dell Inspiron isn’t anywhere near fast enough to complete the task. Which brings us to another point of differentiation for litecoins; they can be mined with ordinary off-the-shelf computers more so than other cryptocurrencies can. Although the greater a machine’s capacity for mining, the better the chance it’ll earn something of value for a miner.
Any currency – even the U.S. dollar or gold bullion – is only as valuable as society thinks it is. If the Federal Reserve started circulating too many banknotes, the value of the dollar would plummet in short order. This phenomenon transcends currency. Any good or service becomes less valuable the more readily and cheaply available it is. The creators of litecoin understood from the start that it would be difficult for a new currency to develop a reputation in the marketplace. But by restricting the number of litecoins in circulation, the founders could at least allay people’s fears of overproduction.
There are advantages inherent to litecoin over bitcoin. Litecoin can handle more transactions, given the shorter block generation time. Litecoin also has a barely perceptible transaction fee. It costs 1/1000 of a litecoin to process a transaction, regardless of its size. Contrast that with PayPal’s 3% fee.
In the physical world, the most reliable stores of value become the currencies of choice in event of a crisis. In the late 1990s and early 2000s, Zimbabwe became synonymous with hyperinflation. When inflation reached 89.7 sextillion percent (give or take a few points) and rendered the Zimbabwean dollar worthless, that wiped out the fortunes of many people unfortunate enough to have held liquid assets. People had no choice but to use something more stable – primarily the U.S. dollar and South African rand – for daily commerce. Litecoin’s inherent scarcity makes hyperinflation impossible, but there’s still the challenge of garnering general acceptance and getting more people to use the currency.
Once a currency reaches a critical mass of users who are confident that the currency is indeed what it represents and probably won’t lose its value, it can sustain itself as a method of payment. Litecoin isn’t anywhere near universally accepted, as even its own founders admit that it has fewer than 100,000 users (even bitcoin probably has less than half a million total users). But as cryptocurrencies become more readily accepted and their values stabilize, one or two of them – possibly including litecoin – will emerge as the standard currencies of the digital realm.
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