Spotlight on: Litecoin

Tuesday 12 May 2015

Litecoin (LTC) is often billed as the silver to bitcoin’s gold. It’s second in trading volume only to bitcoin itself, and barring Ripple, which many people don’t consider a ‘true’ cryptocurrency, it’s the second largest crypto by market cap. For all that, the coin's future doesn't look bright... So, what’s the deal with Litecoin?

Spotlight on… takes a closer, slightly nerdier look at crypto terms, technologies and services, and their significance.

LTC crash

Read also: Spotlight on Dogecoin 

Litecoin has been around since October, 2011. It was created by Charles Lee, formerly an employee of Google. Like so many ‘new’ cryptocurrencies since, Litecoin differs from bitcoin in only small details. It is essentially the same code, with a handful of small tweaks intended to change its behaviour, arguably improving it.

These changes include:

  • Larger number of coins. Litecoin will have a total of 84 million coins. There will be a total of 21 million bitcoins, when they are all mined.
  • Faster block times. Litecoin has 2.5-minute blocktimes, in contrast to bitcoin’s 10-minute blocks. This means that transactions confirm more quickly. However, it also makes it less secure - though not to the degree that it fatally compromises it.
  • Scrypt mining, rather than SHA-256. Bitcoin is mined by computers that search for ‘hashes’ - answers to complex mathematical problems - that fit a certain profile. This has resulted in the creation of highly specialised computers that are designed for this purpose, and this purpose only. Litecoin was created as a more egalitarian currency, since Scrypt was not suited to the GPU and ASIC miners that were built for bitcoin. However, in recent months, ASIC miners have been developed for Litecoin, pushing smaller miners out of the market.

These differences are quantitative, not qualitative. In terms of offering something new, Litecoin is no trailblazer. What it does offer - as is promoted by the Litecoin website - is ‘substantial industry support, trade volume and liquidity’. After bitcoin, more exchanges trade in Litecoin and more merchants accept it than any other cryptocurrency. For merchants, this is an important point: if your business accepts crypto, you’d do well to add Litecoin, if only for its userbase.

LTC as an investment

From an investment perspective, Litecoin does not look like a great prospect. As an early complement to bitcoin, it still has a large user base and community. What it does not have is technical innovation. It is a bitcoin clone. It doesn’t bring anything significant to the table that bitcoin doesn’t already have.

LTC chart

Chart courtesy of CoinMarketCap.com

That’s borne out by the chart of Litecoin’s value since its inception. For a short period, it was a stellar investment, appreciating thousands of times over. Since the bitcoin bubble burst at the end of 2013, it’s been a one-way slope straight down. Other cryptos have rallied and fallen back as different features have been released and their value absorbed by the market, but Litecoin hasn’t had any real news for a long time. From the outsider’s perspective, it’s Dead Coin Walking. Right now, it has liquidity. Long term, the fundamentals don’t look healthy.

Note: before writing this article I tried to contact the Litecoin Foundation for more information, but received no reply.


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