Why Litecoin? Here are 6 reasons!

How Litecoin has differentiated itself within the market

Litecoin is a secure peer-to-peer cryptocurrency that was created back in October 2011. It has consistently remained a top performer throughout its 7+ years of existence and has stood the test of time where other earlier cryptocurrencies have failed. This article will present six ways in how Litecoin has differentiated itself in order to fulfil a specific role within the market and how this role aims to compliment Bitcoin as a global payment system.

1. Duality of Nature

The duality of nature has always existed throughout human history. It stems from our earliest ancestry who started to formulate words such as night/day and hot/cold to associate sensory experiences with the world around them. It is this duality that has helped shape the way we think and in some cases the way we should behave and act. For example, many religious and philosophical ideologies are based on this duality of nature such as heaven/hell and yin/yang.

This duality is also prevalent in other areas of our lives. Money is another example. Lets go back many hundreds or thousands of years ago when people predominately traded using precious metals. Gold was mostly traded as it was perceived as extremely valuable however it was often quite difficult to carry and transport. This led to the adoption of Silver as a more convenient medium of exchange because it was more divisible and cheaper but still contained elements of store of value like Gold. However, the fact that Gold was more scarce made Gold the ultimate storage of value metal. This duality of nature shows itself within money as Gold has fulfilled a more store of value quality and Silver a more medium of exchange. Both Gold and Silver has helped shaped the current monetary system we see today.

With the introduction of cryptocurrency which is a completely digital version of money, it allows for a whole new framework for his duality of nature. For start, Bitcoin was the very first cryptocurrency to be created and is often compared to digital Gold because it shares many qualities such as its scarcity and its perceived value. However, unlike Gold, Bitcoin can theoretically be used as a daily medium of exchange. Yet, this duality of nature still prevails within the human psyche. For example, most if not all Bitcoin holders tend to use Bitcoin as a storage of value, not as a daily medium of exchange. Ask anyone — do they spend their Bitcoins? Most will say no. Why would people spend their Bitcoin if there is a limited supply and that is also extremely valuable? People have subconsciously associated Bitcoin with this idea of storage of value like Gold.

This very fundamental human nature supersedes any technological or scaling advancements within Bitcoin. To put it in layman’s terms, most people only hold Bitcoin and will not spend it regardless of the high tech that is being developed. It is for this reason that Litecoin was created. Charlie Lee, the creator of Litecoin, saw a need for an alternative cryptocurrency that would be dual in nature with Bitcoin and that would compliment it as a medium of exchange. This is shown in the following comparison table:

As shown above, Litecoin has 4x the total supply. You may think this is a bad thing because they are not as rare but it keeps Litecoin more affordable (Bitcoin price is currently $3,870 whereas Litecoin is $46.28). Often people want to invest but they see Bitcoin being too expensive so Litecoin is aimed as a ‘lighter’ alternative that appeals as a more convenient medium of exchange. Also, due to its larger supply, people will not feel constrained to only hold their Litecoin but will choose to spend.

Litecoin transactions are also 4x faster than Bitcoin (it takes Bitcoin ~10 minutes to generate a new block of coins whereas it only takes Litecoin ~2.5 minutes) so Litecoin is 4x theoretically more scalable on-chain than Bitcoin. This means that transaction fees tend to also be 4x cheaper. The faster block time of Litecoin makes it more convenient as a daily medium of exchange and the cheaper fees allows Litecoin to reflect the role of Silver. As we already have a digital Gold with Bitcoin it makes sense to have a digital Silver to balance this duality of nature as psychologically we need another store of value that’s aimed more towards medium of exchange.

2. Scrypt Mining

Mining is an extremely important process within cryptocurrencies as it helps to keep the network secure. Historically, there’s generally been two main chips that have been used to process information — CPUs (central processing units) which are geared more towards brute force processing such as in encryption and GPUs (graphics processing units) which are geared towards more visual rendering such as in video game consoles. Every chip exists on a spectrum and there’s always been this duality within computers: CPU and GPU.

When Litecoin was created back in 2011, Bitcoin had already shifted towards GPU mining as it was not efficient to mine Bitcoin using CPUs any longer. Instead of competing with Bitcoin directly which uses SHA256 mining, Litecoin adopted another form of mining called Scrypt to attract the other end of this chip spectrum — CPU mining. This was the main reason why Litecoin adopted Scrypt to balance this duality of nature between CPU and GPU mining and also prevent miner competition with Bitcoin.

CPU vs GPU mining

This provided economic incentive for people to mine Litecoin as it enabled use case for the previously obsolete CPU mining equipment. In addition, since Litecoin adopted Scrypt which does not compete with SHA256 there is no ‘zero-sum’ competition between Bitcoin and Litecoin miners. Scrypt mining also tends to be more memory intensive as it is known to be approximately 1000x slower hardware wise in comparison to SHA256. But the fact is for most of Litecoin’s history the hashrate has been relatively high and secure. In fact, as Litecoin mining has continued to strengthen, most Litecoin mining is done through ASICs which is more stronger than CPU or GPU mining and this has continued to keep Litecoin extremely secure. Just like it is difficult for any other SHA256 based cryptocurrency to overcome the hashpower of Bitcoin, it is extremely difficult for any Scrypt based cryptocurrency to overcome the hashpower of Litecoin.

Since both Bitcoin and Litecoin sit in opposite ends of the mining spectrum and dominate both their respective mining markets, there will always be a demand for Litecoin mining as well as Bitcoin mining. As such, Bitcoin tends to fulfil its role as digital Gold and Litecoin the same as digital Silver. This ties in with the psychologically role and need for another cryptocurrency that is geared more towards means of exchange. Both Bitcoin and Litecoin dominate their respective mining algorithms and like Gold and Silver, they will work together to form the dual qualities of store of value and medium of exchange.

3. Bitcoin Testnet

Litecoin is a source fork from Bitcoin so it shares many similar characteristics to Bitcoin and this makes it highly useful for many reasons. For start, Litecoin tends to adopt a major upgrade to its network before Bitcoin and since it’s closely compatible it can serve as a useful testnet for upgrades onto the Bitcoin network. An example of this is Segregated Witness (SegWit) which was quite a controversial proposed upgrade for Bitcoin back in 2017. Litecoin implemented SegWit first many months before Bitcoin which mitigated a lot of the fear and uncertainty with the upgrade. This also was followed by a price surge as it was an important upgrade technologically.

Another example of this is confidential transactions which is a missing property of Sound Money for Bitcoin which was proposed many years ago but it is likely that Litecoin will again implement this first. More specifically, the use of MimbleWimble via extension blocks which may help serve as a useful upgrade for Bitcoin. Both sidechains and extension blocks upgrades on Litecoin offers the many possibilities for off-chain solutions such as confidential transactions and smart contracts without the possibility of corrupting the original non-turing complete blockchain. As a Bitcoin testnet, Litecoin serves a very useful role. Litecoin can push innovation a bit more even though Litecoin and Bitcoin are similar and have similar roadmaps. However, Litecoin is a bit ahead of Bitcoin in terms of becoming Sound version of Money.

It is highly important that Bitcoin which is the largest cryptocurrency to maintain its security and decentralized but the problem that comes from this is that it become more difficult to push for major upgrades onto the Bitcoin network — as it may risk the current infrastructure. Even though Bitcoin does have its own testnet there is no real economic incentive to attack or test the upgrade internally as the Bitcoin testnet coins are not worth anything. As Litecoins are worth monetary value there is real economic incentive for people to try and attack the chain.

Alongside this, as the Bitcoin price tends to increase and as the community gets larger it becomes even more difficult to achieve consensus. History dictates that humans tend to become more risk averse as something becomes more valuable and higher priced. That’s why Litecoin is extremely useful as a Bitcoin testnet as it can be bit more aggressive in terms of innovation and provide solutions for both the Bitcoin and Litecoin network.

4. Atomic and Submarine Swaps

The Lightning Network is a Layer 2 payment protocol that operates on top of a blockchain-based cryptocurrency. The smartest Bitcoin developers and engineers are working on enhancing Bitcoin on the Lightning Network. This is because it will enable fast transactions between participating nodes and has been touted as a solution to the Bitcoin scalability problem.

Although the Bitcoin Lightning Network does allow for some scalability, it is limited in its scope and unable to cater for the global and growing mass population. As such, many in-built applications are being built within the Lightning Network to help achieve more scalable and interoperable solutions such as Atomic Swaps and Submarine Swaps. For example, let’s say a merchant only accepts Bitcoin through the Lightning Network.

With an Atomic Swap, you can pay the merchant with a Litecoin Invoice and they will automatically receive a Bitcoin Invoice. How it works is that you have Litecoin on a Lightning wallet and then through this Atomic Swap it exchanges your Litecoin automatically to Bitcoin through the Lightning Network. Even though you sent the merchant Litecoin they will receive a Bitcoin and it will do this seamlessly. The reason why you would open a Lightning channel with Litecoin or pay using a Litecoin invoice is because it will always be cheaper on-ramp than Bitcoin within the Lightning Network. Since it is cheaper it will incentivize merchants to pay with Litecoin even if they want to receive Bitcoin as they are in the business of reducing costs.

With a Submarine Swap, you can also pay the merchant using Litecoin on-chain and they will automatically receive a Bitcoin Invoice. This enables customers and merchants to move in-and-out of the Litecoin blockchain and Lightning Network instantly which enables value to move across multiple chains seamlessly. The reason why people would choose Submarine Swaps is to take advantage of Litecoin’s secure blockchain as well as its cheap on-chain fees which would extremely useful for settling high payment transactions. Submarine swaps effectively allows Litecoin to act like Bitcoin’s sidechain but with much better security via decentralized proof-of-work mining compared to federated or merge mining of regular sidechains.

As the Lightning network continues to advance the end user will not necessarily know whether a Atomic Swap or Submarine Swap is actually happening. All they will experience is the payment going through and the merchant accepting it. As such, many of the existing Lightning Network clients and applications have already started to implement both Bitcoin and Litecoin, for example CoinGate and Neutrino. The Lightning Network is a very development for Litecoin as it can continue to compliment Bitcoin as a payment system through Atomic and Submarine swaps.

5. Adoption

Litecoin is only one of three cryptocurrencies to be listed on every major exchange and wallet offering (Bitcoin and Ethereum are the other two). This makes Litecoin highly accessible and liquid to get in and out. As a result, Litecoin processes $1B in volume daily and works as a global decentralized sound money today — that can’t be censored, can’t be reversed or taken away, can’t be counterfeited and can’t be devalued.

Whilst other cryptocurrencies in the industry are dedicating their time and resources on achieving this level of integration, Litecoin has spent 7 years successfully doing this already. And the results speak for itself — Litecoin is becoming more globally integrated. For example, you can sell thousands on a specific exchange and not crash the market and this helps Litecoin maintain its value. The speed, liquidity and value of Litecoin is useful to traders seeking arbitrage opportunities between exchanges.

In over a year, Litecoin has been integrated into 9 new merchant processors and 5 debit card providers in order to help grow the adoption of the Litecoin network globally. These merchant integration providers include: Paybear, CoinGate, Aliant Payment Systems, Travel By Bit, Coinbase Commerce, Coin Payments, Nation Merchant Solutions, Coinify and GoCoin. The Debit Card issuers include: Bitnovo, Wirex, MCO, Revolut and CryptoPay.

Because of this vast network of merchant processors and card producers, you can also pay with Litecoin at many hundreds of thousands of places worldwide ranging from art & collectables, to clothing stores, to jewellery & accessories, to health & beauty, to domains & other digital services, to food & drinks, to games, to furniture, to education, to motor vehicles & accessories, to music & electronics, to travel, to property. It is also expected that Litecoin can reach a potential 1 million merchants through Clover POS+ as stated here. Some of these recents places are:

Litecoin continues to evolve and grow globally with the focus towards mainstream adoption. This effort can be seen through the organic marketing growth of #PayWithLitecoin within the community that helps to ensure that future businesses and merchants receive a decent amount of online attention — should they choose to add Bitcoin and Litecoin to their payment options. A recent example of this is Bitcasino adding Litecoin as payment due to the rise in player demand. This strong grass-roots approach by the Litecoin community sets it apart from most other communities in this space and continues to gather a huge net effect within the market.

6. Fairness and Sound

Litecoin is amongst a select few cryptocurrencies to be launched fairly. This is because Litecoin had no premine so there was no inequality in the way it was initially distributed. In addition, the Litecoin code was made available a week prior to the genesis block was released so that people were given enough time to set up their mining hardware and get onto the network. This allowed for all participants to have the same chances when the coin was then launched.

Today, we tend to see a lot of unfair cryptocurrencies where a select group of individuals (including the founders) have premined the coins secretly prior to the public and in some cases without letting anyone know. In extreme cases, some of these individuals have premined a significant portion of the supply that the coin effectively becomes centralized around them which can lead to artificial price fluctuations so that the founders are rewarded. In all these cases, these coins are not accurate representations of Sound Money. Although they can create hype due to the founder’s huge marketing budget they are often (or will become) short lived as they are not building fundamental grass-root communities which is essential for growing a cryptocurrency.

Litecoin has had one of the most fairest launches in this market as it did not benefit its creator or any select group of individuals when it was created. Litecoin has also grown its community from the ground up as well as instilling sustainable growth that will ensure it continues to keep growing. This reason is somewhat esoteric but people often overlook these qualities within a global payment system — such as its fairness, soundness, reliability, security and community as all these qualities are reflected within Litecoin and will play a vital role within mainstream adoption.

In summary, Litecoin is extremely secure and the fact that it doesn’t compete directly with Bitcoin miners allows Litecoin to continue being in demand. We also know that it is actually cheaper to send Bitcoin using Litecoin (whether on-chain or off-chain) so there will always be utility for Litecoin. Litecoin is also still continuing to develop and innovate which is useful for Bitcoin and as it progresses on its roadmap as Sound Money it will continue to maintain and grow its value in the long term. Litecoin is also 4x faster on-chain and has 4x the total supply so there is 4x times as many coins that can be mined — if the networks become more seamlessly interoperable in the future then we may Litecoin move closer towards the monetary value of 4:1 ratio to Bitcoin.

Join Litecoin now as it aims to connect the world with sound money.

References

Gashi, I. (2019). Defeating the Fud: Litecoin Githib Commits Activity. [Online]. Available from: https://medium.com/@mrilirgashi/defeating-the-fud-litecoin-github-commits-activity-727befce5944. [Accessed 21 Feb 2019].

Gashi, I. (2019). Litecoin focuses on Connecting the World. [Online]. Available from: https://medium.com/@mrilirgashi/litecoin-focuses-on-connecting-the-world-18fd6d69f3d0. [Accessed 21 Feb 2019].

Pryor, L. (2019). The Value of Litecoin. [Online]. Available from: https://www.youtube.com/watch?v=xUCwTXVPcr0. [Accessed 21 Feb 2019].