Litecoin — the Silver to Bitcoin’s Gold (Part III)

The last two parts of this series cover the Litecoin’s development history, working mechanism, the transaction speed in Litecoin network, mining distribution including the block reward halving of Litecoin.

In the final segment of this series, we will take a deep dive into Litecoin’s market performance, network performance, and its ecosystem building.

1. Market Performance

As of now, the commercial transactions clearing and settlements have to go through multiple procedures, involving many organizations, and this becomes even more complicated when it comes to cross-border payment. Cryptocurrency payments led by Bitcoin(BTC) , on the other hand, present another alternative for people through peer-to-peer exchange, eliminating the middleman and cutting down the costs as well.

However, Bitcoin payment is still in its nascent phase and is grappling with the challenges of slow confirmation speed, limited throughput, concentrated hash power, scalability dilemma and other issues. To put it simply, Bitcoin is still struggling to meet people’s demands for payment.

Litecoin was developed to solve these dilemmas like other altcoins. Enlightened buy Bitcoin’s whitepaper, Charlie Li developed a lighter version of Bitcoin that enhanced Bitcoin’s confirmation speed thanks to its unique technologies in Scrypt algorithm and Segwit mechanism. As of this writing, Litecoin ranks in the top five coins on the CoinMarketCap by its market cap of up to 5.012B dollars, a 5.4% of Bitcoin’s value.

2. Technology Analysis

2.1 Lighting Network and SegWit

Both Lighting Network and SegWit (short for Segregated Witness) were hailed as the solutions to scalability issues. Segwit was activated on litecoin on May 10, 2017, and on Bitcoin on 23 August, 2017. SegWit’s initial intention was to fix a bug in the bitcoin code called transaction malleability. SegWit fixed transaction malleability by removing the signature information and storing it outside the base transaction block. In fact, Segwit does not increase the block size but only increases the number of transactions within the 1MB blocks, thus improving the scalability to some extent.

Lighting Network, on the other hand, is a protocol where high-frequent and small amount of transactions will be carried out of the main blockchain. Users could make high-frequent and small amount of BTC transactions in the Lighting Network. Litecoin has successfully implemented Lighting Network and Segwit.

As per the data analysis on 1ml.com, the carrying capacity of Lighting Network has reached 302.9 LTC, with 184 nodes, up by 6.36% in the past 30 days. Plus, channels have reached 1,339, surging by 21% in the past 30 days, and the staked LTC also amounts to 291.09. In comparison, Bitcoin network carrying capacity has reached 1,063.42 BTC, and the number of nodes have reached 8065, up by 7.48% in the past 24 hours. Plus, channels in the Bitcoin network have declined to 38,637, down by 1.6%. In a word, Bitcoin’s Lighting Network is performing far better than that of Litecoin.

2.2 Script Algorithm

Script is a memory intensive POW algorithm. Litecoin, however, was not the first coin to use Scrypt algorithm and Tenebrix is the first coin to pioneer Scrypt algorithm and was only proved more successful by Litecoin.

The Scrypt algorithm uses the idle time of the CPU to mine the blocks. Scrypt algorithm generates an array with several block elements, each block element must first perform a series of operations to generate a hash value, and then operate the entire array to get the final result.

Scrypt is memory intensive because it carries out both the functions of requiring miners to generate numbers rapidly and storing these generated numbers in the Random Access Memory (RAM) of the processor, which then needs to be accessed before submitting a result. The Scrypt hash function was initially implemented by the Litecoin development team to Application-Specific Integrated Circuits (ASICs) which makes the mining power easily concentrated in the large mining pools. However, Scrypt algorithm makes the hash power more distributed, thus reducing the possibility of 51% attacks.

Scrpyt’s memory intensive design makes it hard for ASIC miners to exert more power in the Litecoin ecosystem, which aligns with blockchain’s core principle of decentralization and distribution. Scrypt algorithm makes people to work towards a more decentralized direction and was generally recognized among the Litecoin community.

3. Network Performance

3.1. TPS/Block

Source: http://explorer.litecoin.net

According to the above chart, transactions per Litecoin block has not yet reached its full limit of its block size.

3.2. Block Size

Source: LTC Block Explorer

The block size of LTC stays within 50000Byte and has witnessed two marked rises pre and post Apr.7th.

3.3. Time Consumption for Block Generation

Source: LTC Block Explorer

Litecoin block was generated about every 200s and is delivered at a stable rate.

3.4. Transaction Fees

Source: LTC Block Explorer

The graph shows the average daily miners’ fee curve. A miner’s daily income partly comes from transactions fees for packing the blocks. After the block reward halving event, miners’ rewards from mining the news blocks will decrease and their dependence on transaction fees will increase as a result. Beyond, miners’ income will all come from transaction fees. The transaction fees of Litecoin is mostly below 0.04 at the moment.

3.5. The Active and Newly Added Addresses

Source: LTC Block Explorer

The active addresses in Litecoin network is increasing steadily, and more users are joining the network on Apr.7th, thanks to its relatively lower transactions fees and faster confirmation speed than Bitcoin.

4. Token Analysis

4.1. Distribution of Litecoin Holders

Regarding the distribution of Litecoin holding, the top 100 addresses cover 42% of all supply, displaying the concentration issues just like other mainstream altcoins. The holding amount the top 10 Litecoin addresses account for about 9.4% of the total supply and the biggest holder accounts about 1.57%.

Source: https://chainz.cryptoid.info/ltc/#!rich,As of Feb.19th

4.2. Exchanges that List Litecoin

According to data from coinmarketcap on April 19, a total of 400 LTC trading pairs are currently on 164 exchanges. Of these 164 exchanges, 86 have LTC records and are listed on the top ten exchanges by volume. As the below table shows, of all the 22 trades with a volume share of more than 1 percent, OKEX launched LTC trades in October 2017 and currently accounts for 4 percent of the total.

Litecoin Transaction on Major Exchanges

5. Ecosystem Building

5.1 Code Commits

Code commits shows a technology development and iteration of a project. Till Apr.19, Litecoin has a follower base of 3,292, showcasing a high level of interest among the community. Litecoin has reached 18,119 commits as of this writing, with 572 contributors.

Litecoin Performance on Github, Apr.19th

From the above chart, you can see the number of commits of Litecoin between 2010 through 2011 stayed under 20, and saw certain rise after 2011 above 20. However, from the mid-2018, its code commits show only the downtrend to barely any commits in a few months, and the last commit happened on Feb,20, 2018.

In fact, the commit numbers are highly correlated with the development of the Lighting Network technology. So far, Litecoin seems to have been stuck in a period of stagnation in its public chain development, and is countering with the competition from other emerging public blockchains.

Source: Github, Apr.19th, 2019
Source: Github, Apr.19th, 2019

5.2 Litecoin’s Media Attention

Litecoin’s followers on Reddit, Twitter and Facebook totalled to 73,891(possibility of overlap exists). Litecoin’s media attention pumped from the end of 2017 through the early 2018,and have become flat since the late half of 2018, which coincides with the bear and bull cycle switches.

Litecoin’s Media Attention: Coingecko

5.3 Offline Payment Ecosystem

Integrating Litecoin into the merchant’s payment system and other applications are the necessary steps to achieve its mass adoption. As a utility token, LTC’s offline payment ecology is a key part of the focus. According to the information on Litecoin.com, Litecoin have partnered with institutions, including cryptocurrency payment gateways, debit card institutions, other blockchain projects, and the brick and motar retailers. We will analyze Litecoin’s adoption from the dimensions of its partner institutions, merchants and ATMs.

5.3.1 Debit Card

In May 2018, Wirex, a longtime cryptocurrency debit-card provider, announced that they would begin supporting Litecoin and even allow users to exchange dozens of counterfeit coins to Litecoin, which would simplify the process of withdrawing cash from an ICO or cryptocurrency.

In September, Bitnovo launched Litecoin debit card, which allows users to easily deposit cryptocurrencies and immediately receive euros that can be used at any traditional institution. TenX, another provider of cryptocurrency debit CARDS, announced plans for Litecoin’s future on its blog.

5.3.2 Cooperative Merchants

Hundreds of e-commerce sites and brick-and mortar have accepted Litecoin payments in the past year, according to data compiled by cryptocurrency enthusiasts on Reddit. Litecoin merchants offer a wide range of goods and services, including art, clothing, food and beverage, precious metals, electronics and more services, spreading across multiple industries. However, the payment adoption is still very limited, with some stores closed due to various factors. Obviously, Litecoin still has a long way to go before becoming a large-scale application.

5.3.3 ATM Machine

Crypto ATMs help users with fait-crypto exchanges and crypto-to-crypto exchanges. As of Apr.19th, 2019, there are 4,607 crypto ATMs worldwide, spreading across 81 countries, most of which concentrated in the North America and the Europe, covering 72.6% and 23.1% respectively.

ATMs Number as of Apr. 19, Coinatmradar

The world’s first Litecoin-enabled ATM was put into operation in May 2017. At present, there are 2,999 ATMs around the world providing Litecoin deposit and withdrawal services, accounting to 65.1% of all cryptocurrency ATMs, also ranking third in total number of all cryptocurrency ATMs. Litecoin ATMs are also mainly distributed in North America and Europe.

Litecoin ATM Map, as of Apr.19th, 2019

According to Coinmap, org, there are 14,650 brick-and-mortar stores around the world where Bitcoin is accepted as payment method. These include merchants and ATMs that support Bitcoin payments. Though Litecoin’s payment ecology is constantly enriched and its ATMs are increasingly expanding, Litecoin is not the top choice of merchants in most cases due to the common consensus of flagship cryptocurrency-Bitcoin.

Bitcoin Payment Ecology as of Apr. 16th, CoinMap

6. Conclusion

Both using the POW consensus, the faster confirmation speed and its advanced technologies in SegWit and Lighting Network gives it the edge over Bitcoin that helped Litecoin to gain traction and consensus among the community.

Although litecoin is no longer functionally superior, the fifth-most valuable litecoin in circulation by market value has taken up a lot of network effects and is highly accepted on exchanges. The consensus on Litecoin has become the prop for its value. And Litecoin’s time-built consensus, capital and calculation still makes it hard to be overtaken any time soon.



References

1. Litecoin Rating (TokenInsight)

2. Cryptocurrency Mining Industry Report 2019 Q1

3. Reshuffle History of Top 10 Cryptocurrencies

4. Mining Industry Research Report: Turning Point and Economic Cycle of Bitcoin Mining Industry

5. Bitcoin Gold and Litecoin Silver: What are the Implications for Litecoin’s Block Reward Halving Event?