Deep Dive Review into Litecoin (September 2018) - Crush Crypto

Deep Dive Review into Litecoin (September 2018)

Summary

  • Project name: Litecoin
  • Token ticker: LTC
  • Release date: October 2011

What is Litecoin?

Litecoin brands itself as an open source, peer-to-peer cryptocurrency that enables fast and near-zero payments between anyone, anywhere in the world.

It was created in October 2011 by an ex-Google and ex-Coinbase engineer, Charlie Lee, as an alternative to Bitcoin. He wanted to create a cryptocurrency that would solve some of the issues faced by Bitcoin, such as transaction times, high transaction fees, and concentrated mining pools. He also wanted to enable larger-scale adoption by individuals and businesses.

Litecoin can be used by individuals to make purchases in the real world more easily than most other cryptocurrencies because it is supported by a growing number of wallets and crypto debit cards.

Litecoin has also made progress on the merchant side as they have been expanding their point-of-sale payment gateway and banking services to make it easier for merchants to accept Litecoin as a form of payment.

The Litecoin network has decent usage. On average, Litecoin processes around 20,000 to 30,000 on-chain transactions a day. The chart below shows the usage of the Litecoin network for the past two years:


Litecoin versus Bitcoin

Considering that Litecoin was developed using Bitcoin’s code (it was a fork of the Bitcoin) with near-identical functions, it is often compared with Bitcoin. The key differences are highlighted below:

  • Hashing algorithm: Both Litecoin and Bitcoin use proof-of-work as its consensus algorithm, however, Litecoin uses a different hashing algorithm – scrypt instead of Secure Hash Algorithm (SHA) 256. Scrypt is more memory-intensive than an algorithm that is not memory-hard. This is because processes are run in parallel with scrypt as opposed to serially with SHA-256, and as a result, scrypt requires more memory. 
  • One of the benefits of using scrypt is having a network that is more accessible and democratized. To compete, miners can acquire more memory instead of having to acquire specialized application-specific integrated circuits (ASICs) as is the case with Bitcoin. This means that in theory, normal people can become miners with Litecoin, whereas concentrated mining pools / ASIC plants already dominate the Bitcoin mining.
  • Transaction fees: Transactions on Litecoin are significantly cheaper than Bitcoin. As of September 24, 2018, the average transaction fee for Bitcoin was $0.434 vs. $0.0483 for Litecoin, making Bitcoin 9 times more expensive. At the peak on December 22, 2017, average daily Bitcoin transaction fees surpassed $55 while Litecoin fees were only $0.931.
  • Speed: Litecoin is designed to be 4x faster than Bitcoin as average block confirmation times are 2.5 minutes, instead of 10 minutes.
  • Supply: Litecoin has a total supply of 84 million coins, compared with 21 million coins for Bitcoin.

Summary table comparing Bitcoin and Litecoin:


Key Features

  • Proof-of-work: Litecoin uses proof-of-work, which is a consensus mechanism that relies on a difficult computational task to secure the network from malicious actors. Miners compete to solve the task the fastest and are rewarded accordingly. (For more information, see our article “What is Proof of Work?”) 
  • Scrypt: As discussed above, Litecoin uses the scrypt hashing algorithm.
  • Segregated Witness (SegWit): SegWit increased the block size limit of Litecoin from 1 MB to 4 MB by removing signature data (i.e. the “segregated” part) a transaction while ensuring the transaction is still safe and secure (i.e. the “witness” part). SegWit allows for increased transaction output and enables other features and applications, such as the Lightning Network, MAST, Confidential Transactions, and Schnorr Signatures, to be implemented.

Key Milestones

Litecoin is an open source project and its source code can be viewed here: https://github.com/litecoin-project/litecoin

  • October 2011: Litecoin was officially released on GitHub and the network goes live shortly after.
  • November 2013: Litecoin reached a market cap of $1 billion for the first time.
  • December 2013: Litecoin v0.8.6.1 was released. This was a significant release with a number of improvements, including popular wallet features like Coin Control, faster validation, faster propagation, etc.
  • January 2014: Litecoin wallet for Android was officially released.
  • April 2014: The beta of Electrum, a Litecoin wallet, was released.
  • June 2015: Litecoin v0.10.2.2 was released and represented the official release version of Litecoin Core. This was a significant release, and was the technical equivalent of Bitcoin v0.10.2. Major changes include watch-only wallet support, faster blockchain synchronization, improved signing security, new utility apps, etc.
  • January 2017: Litecoin Core v0.13.2 was released, a major release with a number of protocol level improvements, code optimizations, the ability to roll out several soft forks at once, etc. Segwit was activated on testnet. 
  • May 2017: Litecoin activated SegWit and completed the first payment transaction on the Lightning Network with the transfer executed in under one second.
  • August 2017: Litecoin Core v0.14.2 was released. This was a major version release with new features, various bug fixes, and various performance improvements (e.g. shorter sync and initial block download times).
  • May 2018: Litecoin Core v0.16.0 was released, a major release that provided full support for segwit in its wallet and user interfaces.

For more details and for future technical updates, please check out Litecoin’s official blog at https://blog.litecoin.org.

Download the Free Checklist for Crushing ICOs!

This is the guide that help me find the most promising ICOs!


Future Development

Following the activation of SegWit, Charlie Lee had spoken about adding features such as Lightning Network, MAST, Confidential Transactions, and Schnorr Signatures, however, no roadmap has been provided yet. In fact, all the proposed upgrades are features from other blockchain and not unique to Litecoin. Most of the upgrades are also being developed on Bitcoin as well.

In the 2018 Litecoin Summit, Charlie Lee presented his metrics of success for Litecoin: (1) network security, (2) market capitalization, (3) exchange liquidity, (4) merchant support, and (5) currency usage. Therefore, we believe the future developments will focus on improving these metrics.


Token Economics

Litecoin currently has a block reward of 25 LTC per block. Halving occurs every 840,000 blocks (approximately every four years) based on a block time of 2.5 minutes so the block reward is expected to drop to 12.5 LTC in around August 2019.

The circulating supply is currently 58,544,952 (as of October 1, 2018); this figure will gradually increase to the total supply of 84 million LTC sometime in the mid-2100s after which no new coins will be minted.


Team

The Litecoin Foundation is a non-profit organization that supports the development of Litecoin. It is comprised of four people on the Board of Directors (see below) as well as other directors, developers and volunteers.

The Litecoin Foundation works with the Litecoin Core development team, which includes developers behind the Litecoin project, and provides them financial support.

The biographies of the key people behind Litecoin are summarized below:

Charlie Lee, Founder of Litecoin, and Managing Director of the Litecoin Foundation – He was previously the Director of Engineering at Coinbase where he worked for 4 years. Before that, he worked at Google for 6 years as a Software Engineer on numerous projects including YouTube Mobile, Chrome OS and Google Play Games. Prior positions include Senior Software Engineer at Guidewire Software and Software Engineer at Kana Communications. He obtained his Master’s degree in Computer Science from M.I.T. in 2000.

Xinxi Wang, Litecoin Foundation Director – Xinyi Wang was one of the Founding Member of the Litecoin Foundation and is one of the developers behind Litecoin Core. He is also the Founder and CEO of Coinut Exchange, a Singapore-based cryptocurrency trading platform that was established in December 2013. He obtained his Bachelor’s degree in Computer Science from the Harbin Institute of Technology in 2009 and his Ph.D. in Computer Science from the National University of Singapore in 2014.

Franklyn Richards, Litecoin Foundation Director – Franklyn Richards was one of the Founding Members of the Litecoin Foundation and currently operates Litecoin.com. He is the COO of Zulu Republic, a blockchain startup that aims to create an ecosystem of digital platforms built on the Ethereum blockchain.

Zing Yang, Litecoin Foundation Director – Zing Yang has been a Director of the Litecoin Foundation since May 2018 and was previously at BlockAsset Ventures, a blockchain-focused VC firm, from January to May 2018. Prior positions include Associate Director of Investments at Temasek and Director and Co-Founder of Greenergy Global at Biomax Technologies. She obtained her Bachelor’s degree in Business Administration from the Singapore Management University in 2007.


Analysis

Strengths

  • Community – Having started out in 2011, Litecoin is among the oldest and most mature blockchain projects and has built a large community. Looking at the number of subscribers on the respective subreddits, Litecoin’s community is only behind Bitcoin and Ethereum.
  • Litecoin has made good progress in terms of merchant adoption with point of sale, merchant payment gateways and banking services via Coingate, Coinpayments, Coinify, Coinbase Commerce, Gocoin, Paybear, etc.
  • Due to its similarity with Bitcoin with the core code being essentially the same, Litecoin could potentially piggyback from research and development breakthroughs achieved by the Bitcoin community.

Weaknesses

  • Because it is a fork of Bitcoin, Litecoin does not have unique and/or superior features compared to other blockchains. Some consider Litecoin as a test network of Bitcoin and therefore, a lot of upgrades applying to Litecoin will also be implemented in Bitcoin as well (SegWit is an example). While this would add features to Litecoin that it otherwise would not enjoy, it also makes it less probable to have superior features unique only to Litecoin, making it difficult to standout.
  • As a store of value, Litecoin falls behind Bitcoin significantly in terms of transaction volume and brand recognition, without any major differentiating features.
  • As a medium of exchange, Litecoin had an advantage against Bitcoin in the early years because it has faster confirmation time, but the newer generation blockchains are even faster. The advantage Litecoin has versus the newer blockchains is in merchant adoption.
  • Layer 2 solutions are being developed which arguably is better for small transactions because of privacy and speed. Lightning Network, which was launched earlier in 2018, already has over 3,600 nodes. Should it become successful, paying with Litecoin is even less compelling.

Conclusion

Overall Rating: ​B

We have a neutral view on Litecoin because while Litecoin enjoys a large community supporting the coin, there is no technical features unique to it. With stable coins and layer 2 solutions becoming more and more popular, Litecoin’s value proposition as a sound medium of exchange diminishes.

If Litecoin is successful in upgrading certain features, those features will be copied to Bitcoin soon, just like how SegWit was done. If the upgrade fails, then it would negatively impact the cryptocurrency.

Therefore, going forward, we believe Litecoin would not have any major unique advantage that could differentiate itself from other cryptocurrencies. 


Video Summary


Additional Resources


* The content on this webpage at www.crushcrypto.com is provided for general information purposes only and does not constitute legal, financial or other professional advice or an opinion of any kind. Users of this blog are advised to seek specific independent legal, financial, or other professional advice regarding any specific legal, investment and/or financial issues, and opinion of any kind. Crush Crypto does not warrant or guarantee the quality, accuracy or completeness of any information on this webpage. The articles published on this webpage are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.

Our rating system is based on 5 tiers: S/A/B/C/D, with S being the highest and D being the lowest rating.

  •  
    30
    Shares
  • 30
  •  
  •  
  •  
  •  
  •  
  •  
  •  

Click Here to Leave a Comment Below