Litecoin
LTC to USD
Project history
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.
Disclaimer: The information in this publication pertaining to Sygnum Bank AG (“Sygnum”) is for general information purposes only, as per date of publication, and should not be considered exhaustive. This publication does not consider the financial situation of any natural or legal person, nor does it provide any tax, legal or investment advice. This publication does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum to purchase or sell any assets. No elements of precontractual or contractual relationship are intended. While the information is believed to be from accurate and reliable sources, Sygnum makes no representation or warranties, expressed or implied, as to the accuracy of the information. Sygnum expressly disclaims any and all liability that may be based on such information, omissions, or errors thereof. Any statements contained in this publication attributed to a third party represent Sygnum‘s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Sygnum reserves the right to amend or replace the information, in part or entirely, at any time, and without any obligation to notify the recipient of such amendment / replacement or to provide the recipient with access to the information. Simultaneously, there is no obligation of Sygnum to inform recipients of information, if before provided information later becomes outdated, inaccurate or obsolete, unless otherwise provided by applicable law. The information provided is not intended for use by or distributed to any individual or legal entity in any jurisdiction or country where such distribution, publication or use would be contrary to the law or regulatory provisions or in which Sygnum does not hold the necessary registration, approval authorisation or license. Except as otherwise provided by Sygnum, it is not allowed to modify, copy, distribute or reproduce, display, license, or otherwise use any content for commercial purposes.