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

Abstract: We plan to introduce Litecoin in three articles to help our readers understand Litecoin comprehensively. The first part of this series covers the Litecoin from the perspective of its development history and current status quo, mainly focusing on its milestones reached so far, work algorithm, block reward halving, price trend, mining pool distribution, Github commits and google search trend.

I. Introduction to Litecoin(LTC)

Litecoin(LTC or Ł), was created by Charlie Li, a former Google employee, who devoted himself in a quest to fulfill his vision of creating a lighter version of Bitcoin (BTC). Technically, Litecoin nearly resembles Bitcoin.

Akin to bitcoin, creation, and transfer of Litecoin is based on an open source cryptographic protocol and is not managed by any central authority. The Litecoin network is scheduled to produce 84 million Litecoins(LTC), which is 4 times as many currency units as Bitcoin, with the current circulating supply stand at 61,276,211 LTC.

1. Litecoin’s Chronicle of Milestones

  • Litecoin was released via an open source client on Github on Oct.th, 2011.
  • On Aug.26th 2015, the Litecoin block reward halved for the first time, with the Litecoin output per block reducing from 50 to 25.
  • On July 3rd, 2016, the Litecoin Association, that advocates for Litecoin, teamed up with the Litecoin’s core development team and released a Road Map 2016 outlining its plans for the future. One of their prime prospects from their roadmap includes launching a new version of Litecoin with features of Segregated Witness (SegWit), Lighting Network and Smart Contract.
  • On May 11th, 2017, Segregated Witness (SegWit) was activated in the 1,201,536th block, and Litecoin hodlers were since then able to make Segregated Witness (SegWit) transactions.
  • On June. 21st, 2017, Charlie Lee announced that Lightning Network of Litecoin was officially launched. The Lightning Network is one of the most anticipated technologies for scaling payments in a long term and sustainable method.

Litecoin(LTC) leverages the underlying values of blockchain infrastructure and enjoys deep liquidity in crypto market. Also, the number of Litecoin(LTC) ATM’s has seen exponential growth lately and now stands second only to Bitcoin(BTC) globally.

Litecoin, also has seen significant spurt in the number of miners, the cryptocurrency transaction platforms, developers, merchants who accept Litecoins and users since its evolution.

2. Litecoin vs Bitcoin: Understanding the core difference

Dubbed as “the Silver to Bitcoin’s Gold”, Litecoin is the first peer-to-peer internet currency based on Scrypt algorithm. Although the functions of Litecoin are almost identical to Bitcoin, there are salient differences between them:

  • The Litecoin Network aims to process a block every 2.5 minutes whereas the processing time for Bitcoin is 10 minutes. Hence, the developers claim that this allows Litecoin to have faster transaction confirmation.
  • Litecoin has a supply limit of 8,400, 4 times of Bitcoin’s supply limit.
  • Litecoin uses scrypt in its proof-of-work algorithm, a sequential memory-hard function requiring asymptotically more memory than Bitcoin’s not-memory-hard SHA256 algorithm. The memory-hard scrypt encryption algorithm could compete with the capacity of the professional mining equipment. Scrypt algorithm reminds people to address the centralization issues in hash computing as it prevents what are known as ASICs from dominating Litecoin’s hash rate, thus pushing forward the industry to head towards a more decentralized direction.

3. Litecoin Block Reward Halving

Litecoin undergoes a reward halving roughly every four years, with the latest happening on Aug.26th, 2015 when Litecoin reward reducing from 50 LTC to 25 LTC. Theoretically, the block generation halving may lead to imbalanced supply & demand and triggers a price rally. Since Litecoin’s price is largely influenced by supply and demand, some had speculated that a cut in supply would lead to a subsequent increase in the price of Litecoin. In reality, however, a reverse trend happened as more factors and variables had come into play. Historical data in 2015 have shown that Litecoin have seen its price dropping to some extent after halving event. Based on the analysis, the following factors might have contributed to its downward trend:

Price Trend of LTC Two Months after Block Reward Halving in 2015

  • Firstly, based on Litecoin’s price trend chart in 2015, Litecoin (LTC) has rallied sharply months ahead of its reward halving, clocked a high of $8.967, far exceeding the market expectations.
  • Secondly, the-then total market cap value of the entire crypto market was relatively small and also the real use cases were still limited. Based on our research, the sharp price rally is a speculation rather than the real reflection of its value.
  • Thirdly, the block production halving also forced miners to close their servers due to the shrinking rewards and high costs. However, the computing power also witnessed some decline following halving event, which pushed Litecoin price into a bear trend for quite some time. Litecoin difficulty went through its first adjustment on Aug. 27nd the same year after halving to keep the block generation time at 150 seconds, down 7.61%

Cryptocurrency market has witnessed numerous bulls and bears since 2015, so did Litecoin. Litecoin has been progressing faster than many other major coins in terms of technology, ecosystem building, and other aspects.

II. Current Litecoin Fundamentals Status Quo

  1. Current Litecoin Fundamentals
LTC Price Trend

Litecoin is currently trading at around $60 at press time, with a total market cap of $3.67B

2. Transactions on Litecoin Chain

3. Comparison of Transaction Data of Major Blockchains

Average Transaction Fees within 3 Months

Trading volume on Litecoin chain still has a gap to be narrowed in order to catch up with that of BTC and ETH. However, Litecoin is still resilient thanks to its large market cap, large user base and a coverage of 5.51% of total market cap by its 24-hour trading volume. Plus, Litecoin currently has 55,822 active addresses. Besides, judging from its rising trend of transaction fees, Litecoin is showing a stable and continuous growth in its transaction volume.

4. LTC Distribution

Litecoin Distribution

5. LTC holding % vs. total market cap by the top 10, top 100 and top 1,000 LTC addresses

Similar to other mainstream coins, LTC is also concentrated in a few top addresses. In fact, asset value of top 500 addresses alone has covered over 60% of total LTC supply, including the addresses of some centralized exchanges, which is the common case for other top coins.

6. LTC Mining Pool

LTC Mining Pool Distribution

LTC mining pool distribution is relative even among big players, with the top mining pool F2Pool covering 20.45% of all mining output, followed closely by other major pools such as Poolin, LTC Top, and ViaBTC. The relatively even distribution of mining pools delivers better stability and safety to its miners. However, Litecoin still has a long way to go when it comes to improving its computing power compared with Bitcoin’s 47.31 EH/s and BCH’s 1.6EH/s.

Hashrate Distribution for the last 100 Blocks

7. Liecoin’s Github Commits Frequency

LTC code commits on Github have been continuously active. However, there has been a slight dip in the recent three months.

8. Google Trend

Litecoin’s Google Trend
Google Trend Distribution

Litecoin is ranking high on Google trend as data shows interest in Litecoin is strong among the major coins, concentrated in North and South America, especially in the countries of Venezuela, America, and Canada.

III. Conclusion

As the world’s fourth largest cryptocurrency on the CoinMarketCap, Litecoin’s parameters as we mentioned above generally show its outstanding and resilient performance. The Litecoin blockchain has been fully functional which is mostly credited to its solid underlying technology advantages. However, Litecoin is also grappling with certain sore points compared to other top coins, such as the concentration of assets in the top addresses.

In the next article, we shall dive deep into its block reward halving event and its broad impacts on the Litecoin ecosystem.




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