Litecoin’s Dream Of Being Digital Silver Alongside Bitcoin In The Future Will Not Happen
Litecoin’s potential for the future is clearly limited.
The Litecoin cryptocurrency was created in October 2011 by Charlie Lee, a former Google employee and also former engineering director at Coinbase. Litecoin is a fork of Bitcoin Core with some slight technical differences. By creating Litecoin via a fork, Charlie Lee was among the first to surf on the emerging success of Bitcoin.
A Quick Success For This Self-Proclaimed Bitcoin 2.0
Success was achieved quite quickly since, by presenting itself as the Bitcoin 2.0, Litecoin was able to convince many users wishing to diversify their investments in cryptocurrencies. Driven by the euphoric success of Bitcoin at the end of 2017, Litecoin reached its highest price at $358 with a market capitalization of over $19 billion.
Like Bitcoin and other cryptocurrencies, Litecoin experienced a sharp correction in 2018 but managed to remain in 6th place in the Top of the most capitalized cryptocurrencies with a capitalization of 2.8 billion dollars on December 6, 2019.
Back on earth, Litecoin no longer seeks to be seen as a Bitcoin 2.0 but rather to be seen as a companion that can perfectly complement the Bitcoin in its future success.
Thus, while many compare Bitcoin to digital gold, Litecoin would like to be considered as digital silver. This comparison allows Litecoin’s creator to defend the future of his project since gold and silver have coexisted for a very long time now.
Slight Technical Differences With Bitcoin
Created as a fork of the Bitcoin, Litecoin is almost identical to the Bitcoin with just a few technical differences. These differences are as follows:
- The block generation time is reduced to 2.5 minutes on the Litecoin Blockchain compared to 10 minutes on the Bitcoin Blockchain.
- The maximum quantity of LTC that will be put into circulation is 84 million against 21 million BTC.
- Litecoin is based on the scrypt cryptographic hash algorithm while Bitcoin is based on the SHA-256.
Thus, Litecoin allows to confirm more transactions per second than Bitcoin while having a lower scarcity due to a higher quantity of LTC that can be mined.
Besides, the use of the scrypt algorithm makes the computer equipment needed to mine Litecoins much more expensive than that needed to mine Bitcoins.
Finally, Litecoin’s source code is almost identical to that of Bitcoin and continues to be updated accordingly. This implies that it benefits from the advances of Bitcoin Core but also exposes itself to the same security risks in the event of discovering vulnerabilities.
Litecoin Wants To Be Seen As A Ground Of Experimentation For Bitcoin
In its desire to be perceived as a companion of the Bitcoin for the future, Litecoin seeks to experiment first hand all the evolutions that the Bitcoin community is discussing to improve its scalability.
Litecoin was the first cryptocurrency in the Top 5 to adopt Segregated Witness (SegWit) which is a format change in Bitcoin Blockchain transactions.
Always driven by this desire to constitute a ground of experimentation for Bitcoin, Litecoin began to implement the Lightning Network on its Blockchain in May 2017.
Litecoin Wants To Be Digital Silver
While it presented itself as a Bitcoin without its flaws in its early years, a kind of Bitcoin 2.0, the Litecoin project has since revised its objectives downwards as I just explained to you.
From now on, Litecoin wants to be perceived as digital money.
Since Bitcoin is often perceived as digital gold because of its technical characteristics and the fact that it has proven to be a real store of value for several years now, Litecoin sees a perspective for its future as digital silver.
Charlie Lee’s reasoning is as follows: Bitcoin is a store of value more than a medium of exchange because of excessive transaction fees when the number of users becomes too large on its network.
Charlie Lee takes the example of what happened at the end of 2017 when the market euphoria caused a terrible bottleneck in the Bitcoin network.
Transaction fees had literally exploded, as had the time it took to confirm transactions.
Since Bitcoin is above all a store of value for Chalie Lee, there will be a need in the future for a cryptocurrency for daily transactions, a kind of digital silver. For Charlie Lee, Litecoin clearly meets this need with its slightly different technical characteristics than Bitcoin.
Indeed, transaction times are much faster on the Litecoin Blockchain, which should allow for better scalability.
Litecoin Wants To Surf The Bitcoin Wave But It Won’t Last
Everything I have just described clearly shows Litecoin’s willingness to surf the Bitcoin wave for taking benefit of its bright future. If the idea behind this one is finally smart enough, it will not last in time.
To this, I see three main arguments:
1. Litecoin Has A Leader Unlike Bitcoin
Litecoin has a leader in the person of Charlie Lee. However, the great strength of Bitcoin is that it has no leader. Bitcoin belongs to everyone, not Litecoin.
Why is it a problem that Litecoin has a leader?
Quite simply because this mode of operation only reproduces the failures of the current monetary system, which is in the hands of a few people abusing their power.
Thus, Charliee Lee did not hesitate to sell the majority of the LTC he owned at the same time as their price reached an all-time high at the end of 2017, posting a performance of over 7,000 percent in 2017.
The reason given was to avoid any conflict of interest. For many, this decision was more than doubtful. I leave you only judges.
2. Litecoin Is Nothing More Than A Copy Of Bitcoin
Litecoin is nothing more than a copy of Bitcoin with just few differences. Since the source code of Litecoin is nearly identical to that of Bitcoin, the vulnerabilities of its Blockchain are generally the same.
Investors have no interest in buying Litecoins with the same security risks as with their Bitcoins.
Charlie Lee keeps repeating himself that if a major security breach is discovered on the Bitcoin, it could be fatal to Litecoin and its $2.8 billion capitalization.
As an investor, you do not even have an interest in diversifying your investment in cryptocurrencies with Litecoin since it represents the same risks as Bitcoin without the advantage of having the same perspectives in terms of price growth.
3. Bitcoin Does Not Need A Companion Playing The Role Of Digital Silver
Bitcoin is already a phenomenal success. It has proven that it can play the role of a store of value in the same way as a digital gold. As far as everyday transactions are concerned, it is clearly not to be believed that Bitcoin is out of the game.
The adoption of Bitcoin by merchants as a means of payment continues to grow.
The year 2020 will see things accelerate in many major developed countries. The Bitcoin clearly does not need a companion to play the role of digital silver.
It can itself be used as a daily means of payment in the future and the building of the financial system of the future continues with Bitcoin. Bitcoiners will probably be able to put in place solutions that will allow Bitcoin to achieve mass adoption by the general public.
If the Bitcoiners don’t succeed, it’s certainly not the Litecoin that will be able to resist and still be worth something since it’s only a copy of the Bitcoin.
Litecoin hopes to be a digital silver alongside Bitcoin which would be the digital gold in the world of the future.
As I have just explained to you through three main reasons, all this will not happen. Litecoin will certainly remain in the Top 10 of cryptocurrencies for some time to come, but its future is clearly not alongside a Bitcoin that could revolutionize the monetary and financial system in the future.