Litecoin was created by “forking” (copying) bitcoin in October 2011 and applying a simpler mining algorithm.
Litecoin aimed to be a better medium of exchange by offering faster transaction processing, lower transaction fees, as well as a lower denomination (i.e. a smaller amount required to buy one Litecoin, making it appear “more accessible”).
Maintaining their focus on faster transactions, Litecoin was also the first project to implement the scalability enhancing Segregated Witness (SegWit) and the Lightning Network. In some sense, Litecoin has been acting as a test environment for upgrades brought to bitcoin.
Litecoin has recently implemented a privacy feature where transactions and identity are truly anonymous, which is a utility that is uncommon among major coins
TECHNOLOGY
Other than the shorter block processing times, Litecoin uses a simpler algorithm (thus the name “Lite”) which uses less energy and can run on cheaper hardware. This may make it more resistant to centralisation as the barrier to entry for a miner is small but there are concerns that this algorithm is more susceptible to security issues. These concerns may be hypothetical as there has never been a security breach.
Development activity has accelerated recently with the roll out of the privacy feature (MimbleWimble), the most significant upgrade to the Litecoin network yet, and the Omnilite platform for smart contracts and minting tokens, including NFTs.
Litecoin merged its mining in 2014 with Dogecoin, a Litecoin fork.
KEY PEOPLE
Litecoin was created by a former Google engineer, Charlie Lee. It has a small developer community compared to other projects although they can benefit from a lot of the development on the Bitcoin chain as the protocol has the same roots.
At times developer activity on Litecoin has fallen off dramatically, and Charlie Lee has asked for Litecoin miners to voluntarily contribute to funding development. As Litecoin was created early on when crypto projects received very little attention, it did not start with a well funded ICO. The Litecoin Foundation, a Singapore based non-profit organisation created in 2017, has limited financial resources.
ECOSYSTEM
Litecoin was initially positioned as a better version of bitcoin that is more suited to be used in transactions.
The positioning of Litecoin later shifted to the claim that it is a store of value asset in the same way bitcoin is, and a complement to bitcoin. The “digital silver” narrative has been successful at creating a “brand” and name recognition but its validity is questionable, not least because Litecoin is based on the same code as bitcoin, which does not help with diversifying security risks.
Efforts at getting Litecoin adopted as a payment currency suffered a setback when the LitePay merchant payment processor project failed. However, since 2018 the number of merchants accepting Litecoin has increased steadily and is in the thousands now. PayPal includes Litecoin among the cryptocurrencies it accepts, and in November 2021 the Litecoin Visa debit card was launched.
Litecoin has not focused on decentralised finance (DeFi) applications, not least because of founder Charlie Lee’s negative views on DeFi which he called “the worst of both worlds” at the beginning of 2020. Nonetheless since 2021, Litecoin has been bridged through interoperability protocols to access Ethereum compatible DeFi applications.
In addition to focusing on being a payment provider, Litecoin has also been offering gaming applications since 2020 and established Litecoin Gaming, an esports organisation in 2021.
SUPPLY MODEL/TOKENOMICS
Litecoin’s supply model mirrors that of Bitcoin, except that the total number of coins that will eventually be available is 84 million. As with Bitcoin, the rate of issuance halves approximately every 4 years.
Project founder Charlie Lee sold his Litecoin holding at the end of 2017, claiming he wanted to avoid conflicts of interest. Because of selling close to the high, the reaction was generally negative at the time. However, the lack of supply overhang and large concentration of tokens with the founding team benefits the market for the coin. At the same time, Litecoin appears to be quite concentrated among larger holders, significantly more so than Bitcoin for example.
KEY VALUE DRIVERS
Litecoin’s name recognition and longevity work in its favour as it tries to build market share in the payment space.
At the same time, the marketing narrative that “Litecoin is like silver” does not appear to hold up as its price has not behaved like scarce commodities. The supply-based pricing models that predict price appreciation when supply growth slows (in Litecoin’s case when the rate of issuance halves) has not correlated with Litecoin’s price movements.
As concerns about censorship increase globally, the privacy feature may put Litecoin at an advantage versus other large cap cryptocurrencies.
Until recently, Litecoin focused on being a payment platform and did not seek to attract applications or offer smart contract functionality. This has changed with the release of the OmniLite platform, but it remains to be seen how much market share Litecoin will be able to take.
KEY METRICS
Market Cap
USD 9.04 billion
Price
USD 130.60
All time high price
USD 412.96
Total issued tokens
84 million
Circulating supply
69.38 million
Liquid supply
69.39 million
2050 supply
83.88 million
Updated on 10. January 2022
Price & market capitalisation
Total transaction volume
Active addresses
Volatility
Different moving averages
RSI
About Sygnum
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With Sygnum Bank AG’s Swiss banking licence, as well as Sygnum Pte Ltd’s capital markets services (CMS) licence in Singapore, Sygnum empowers institutional and private qualified investors, corporates, banks, and other financial institutions to invest in the digital asset economy with complete trust. Sygnum operates an independently controlled, scalable, and future-proof regulated banking platform. Our interdisciplinary team of banking, investment, and Distributed Ledger Technology (DLT) experts is shaping the development of a trusted digital asset ecosystem. The company is founded on Swiss and Singapore heritage, and operates globally.
Disclaimer
This document was prepared by Sygnum Bank AG. This document may contain forward looking statements and may be subject to change. The opinions expressed herein are those of Sygnum Bank AG, its affiliates, and partners at the time of writing. The document is for informational purposes only and contains general material. It is for use by the recipient only. It does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum Bank AG to purchase or sell assets or securities. It is not intended to be used as a general guide to investing, and should be used for informational purposes only. When making an investment decision, you should either conduct your own research and analysis or seek advice from an expert to make a calculated decision. The information and analyses contained in this document have been compiled from sources believed to be reliable. However, Sygnum Bank AG makes no representation as to its reliability or completeness and disclaims all liability for losses arising from the use of this information.