Is Litecoin a Good Investment? Why haters can be wrong about controversial cryptocurrency

Litecoin was launched on October 13, 2011 by Google engineer Charlie Lee and is now the 10th largest cryptocurrency by market capitalization.

The Litecoin coin is an “OG” crypto. Apart from Bitcoin, no other coin has stayed in the top ten. BTC and LTC occupied places in the charts for 410 and 409 weeks respectively (other top performers are XRP with 396 weeks and ETH with 291 weeks).

It was created from a source code “fork” of the Bitcoin Core blockchain (a fork is when a blockchain breaks into two separate paths and creates two different coins). The biggest differences between Litecoin and Bitcoin are:

  1. Lower transaction fees
  2. Another hashing algorithm
  3. A reduced block generation time
  4. An increased maximum cap on coins

Do not be put off! We’ll go into the specifics of these differences below and also look at how these factors contributed to Litecoin’s success as a more “spendable” cryptocurrency. You may have heard Bitcoin described as “digital gold,” and with that mindset, Litecoin could be viewed as “digital silver”. But the history of cryptocurrency isn’t as flawless as you might think.

In an interview with CNBC’s Worldwide Exchange on April 26th, Lee discussed Litecoin and compared and contrasted its attributes with those of Bitcoin. Although Lee is a polarizing entity in the cryptosphere, it’s worth hearing what he has to say about the cryptocurrency he invented. Let’s dive in.

CRYPTO-SAVVY is an occasional series of Inverse that explains the world of cryptocurrency and where it’s going next.

Litecoin versus Bitcoin

The value of Litecoin over the past two years at CoinDesk

One of the main differences between the two cryptocurrencies is Transaction Fees (1). Cryptocurrency miners validate the transactions that pay the most. The current average transaction fee for Litecoin is only $ 0.04 at the time of writing. With Bitcoin, that number is much higher, with an average transaction fee of $ 26.89.

“The Bitcoin blockchain is overloaded,” says Lee. “Everyone is competing to get their transactions to the next block and the way they do it is by paying more fees.”

Another fundamental difference between Litecoin and Bitcoin is theirs Mining Algorithms (2). Litecoin uses Scrypt, one of the first hashing algorithms implemented on blockchain networks. Scrypt’s developers intended to improve on the even earlier SHA-256 hashing algorithm (the one used by Bitcoin). Lee chose Scrypt for good reason, but we need to take a closer look at cryptocurrency mining to understand why.

The basics: Mining can be carried out with a central processing unit (CPU), a graphics processing unit (GPU) or application-specific integrated circuits (ASIC). ASIC miners have the advantage that they can solve the complex data strings required to mine (think “win”) the block much faster and generate significantly more hashes (think “tries”) per second than CPUs or GPUs.

As a result, bitcoin mining using the more expensive and hard-to-find ASICs is now something of an arms race. On April 28, Core Scientific, the largest mining pool in North America, announced it had purchased 112,800 Antminer mining machines from ASIC manufacturer Bitmain. According to the CEO of Core Scientific, this latest purchase could help his company increase its global share of Bitcoin’s hash rate from 5% to 12%. To put it bluntly, this would mean that an organization could plausibly process more than 1/10 of all Bitcoin blocks, and according to many, this contradicts a philosophy at the core of cryptocurrencies: decentralization.

This is where Litecoin’s hashing algorithm comes in: Lee chose Scrypt because the algorithm is less susceptible to ASIC mining. While Scrypt ASIC miners have become more and more popular over the years, most of the mining on the Litecoin blockchain still uses CPUs and GPUs, making them much more accessible to the average person and less prone to “control” by the above centralized ones Mining pools are.

“Digital Gold” versus “Digital Silver”


In his CNBC interview, Lee also explains why he calls Litecoin the “digital silver” to Bitcoin’s “digital gold”. As we know, both gold and silver have been used as currencies throughout history. Since gold is so much more valuable than silver, it is better suited for big ticket items. Gold is the most marketable good when large values ​​are being traded (like buying a car), while silver is the most marketable good for smaller transactions (buying groceries).

This “spending ability” is arguably what Lee is referring to with this “digital silver” narrative. Due to the low transaction fees for Litecoin, the coin can be used more easily. Transactions in the Litecoin network are also faster (3) Compared to those on the Bitcoin network, every 2.5 minutes on average as opposed to 10 minutes for Bitcoin.

But from a technical point of view, it’s not all good news. While the Litecoin network can be four times faster, there is too four times as many coins (4). According to the Coin Market Cap, the currently outstanding offer of LTC is 66,752,415 (with the maximum offer being 84,000,000). Conversely, the circulating supply of BTC is 18,694,375 (with the maximum supply being 21,000,000).

For Litecoin, this could be seen as a negative attribute as part of the reason Bitcoin is so valuable is its scarcity, and that scarcity is the reason why the highest cryptocurrency by market cap is often touted as the ultimate hedge against inflation.

That said, things could be worse: there is no limit or maximum delivery cap for Ethereum’s native cryptocurrency Ether or another current favorite, Dogecoin. Instead, the supply increases every year. While Ether’s proponents could be quick to point out that the paper suggests monetary policy aimed at containing inflation over time without relying on a supply cap, nothing concrete has come about as of Ethereum’s monetary policy is in the flow.

“Why do people hate LTC?”

As briefly touched on in the introduction, founder Lee, who sold all of his LTC holdings in December 2017 as the coin neared its all-time high of $ 310, is a factor that added to the anti-Litecoin sentiment. Because of this, some people accuse him of pumping and dumping his stocks for his own benefit.

Another perspective, according to Ilir Gashi in her medium piece “Defeating the FUD: Charlie Lee Sells His Litecoin Because of a Conflict of Interest”, is that Lee “is selling his Litecoins because of a growing perceived conflict of interest”. Gashi’s article cites specific reasons that help “clarify why selling Lee was the best thing for Litecoin to stay decentralized.”

This explanation makes sense. Distancing yourself from a project to address conflicts of interest concerns is sometimes taken for granted and seems like a pretty legitimate reason for Lee’s sale.

A quick Google search reveals a Reddit thread, “Why do people hate LTC?” The thread sheds some light on where this anti-Litecoin feeling came from. According to the contributors, this perspective comes mainly from so-called “Bitcoin maximalists”. – BTC supporters who believe that the Bitcoin network has everything investors want or need in a digital currency. Some of them see Litecoin as just a copy / paste version of the world’s leading crypto.

Maybe that’s true at first glance. But in reality, if you dive a little deeper (and as I believe have shown in this piece) there are some significant differences, use cases, and uses for both coins. Not with me!

CRYPTO-SAVVY is an occasional series of Inverse that explains the world of cryptocurrency and where it’s going next.

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