Litecoin, The Challenger to BTC Dominance

Litecoin, the “silver Bitcoin”

When it comes to cryptocurrency, the most well known are Bitcoin BTC and Ethereum ETH. BTC and ETH have achieved plenty of support from financiers and adoption in the market. Purchases can be easily made now using these while more vendors are warming up to the idea. There are other cryptocurrencies though, just not as well known to the mainstream. They are called Altcoins and there is one in particular I have been following that I sense may have great potential. I am talking about Litecoin aka LTC aka “silver Bitcoin”, another digital cryptocurrency that is a P2P based open source system with no central authority. Exchanges like Coinbase have thrown support for Litecoin and it is being used for many transactions by individuals and businesses around the world.

Most of the comparison I make will be with BTC, since that is the cryptocurrency it has plenty of similarities with. The advantage Litecoin has over BTC, is the algorithm uses a simpler method that provides faster transaction confirmation times and improved storage efficiency. Simplicity does not trade off with security however, the mathematics still secures the network with encrypted information. Since it uses a simpler algorithm, it is more ideal to run with a GPU like ETH, which are more affordable than most ASIC cards running on BTC rigs. That also translates to less power consumption and lower electricity bills as well as less wear and tear on hardware resources. This feature can make Litecoin mining more opportunistic to resource constrained individuals.

Litecoin has a faster block generation speed than BTC. BTC takes 10 minutes to generate a block (as of pre-August 1, 2017), while Litecoin can generate a block in 2.5 minutes. That decreases transaction fees which looks good on paper for would be investors. That is also good for consumers who want to buy products from a vendor using a cryptocurrency.

The so called “Lightning Network” is going to launch Litecoin with the aim of improving it’s abilities to adapt to changes. The network offers scaling for Litecoin to gain more traction. The Lightning Network was actually first envisioned to expand BTC. Now developers have taken it to the Litecoin blockchain. The Lightning Network will provide Litecoin with instant payments via smart-contracts that don’t need on-blockchain transaction for individual payments. Scalability is another feature that will be capable of billions of transactions per second (TPS). Low fees to transaction are always a plus, and that is another attractive feature. The network will also support what are called “cross blockchains” so long as the chains support the same cryptographic hash function. That makes it possible to make transactions across blockchains without requiring a third party custodian. On another note, In May 2017 Litecoin had adopted SegWit, which splits a transaction signature from the actual transaction and appending it at the end.

Litecoin also has a cap like BTC, but it is higher. Litecoin caps at 84 million coins while BTC is at 21 million. Once that cap is reached, miners will no longer be a part of the process. Once the cap is reached, no new coins can be made and therefore no more can be mined. Now if a new protocol were made to increase the supply, then more coins can be made. This controlled supply model has underlying principles from monetary systems. It goes back to the days of gold as a monetary standard. Gold shares similarities to cryptocurrencies like BTC and Litecoin due to it being a fixed supply. By putting a cap on supply it allows market forces to determine it’s price based on the trading and selling, and this cannot be manipulated since there are no central authorities like banks. The only problems that may arise since it is not regulated, is when there are sudden “flash crash” events due to large trades.

Another good thing about cryptocurrencies is they are all digital, and consume no physical space like paper or gold. The concern however is once all coins have been mined, there may no longer be incentives for miners since they will rely more on transaction fees to keep their rigs running. When miners leave the network it can lead to collapse, unless transaction fees are enough to keep miners running. Litecoin has a long way to reach it’s cap and some experts say it will not be reached anytime yet, so there are still plenty to mine.

These are my thoughts on Litecoin. The recent hard fork in BTC that created Bitcoin Cash may affect Litecoin. Whether it is here to stay or just a flash in the pan, the cryptocurrency market remains as volatile as ever so we will see down the road how these systems evolve.