One of the oldest cryptocurrencies, Litecoin has been around for over 6 years, a veritable senior citizen in the world of cryptocurrencies. It seems like Litecoin has always been in Bitcoin’s shadow; even in the original announcement for the project, the concept of Litecoin was described as being the “silver to Bitcoin’s gold,” which seems to suit this unassuming altcoin just fine. While Litecoin may never become as valuable as Bitcoin, it shares a lot of the same practical uses. Throughout its history, Litecoin has been a reliable coin for transactions and a relatively stable store of value.
Litecoin was created in 2011 by Charlie Lee, launching on October 13 of that year. By the end of 2013, it already reached a $1 Billion USD market cap. Like Bitcoin, Litecoin has seen both rapid price rises and dramatic drops. Most recently, in December 2017, the price climbed from roughly $100 per coin to over $350 in less than 5 days. Much of those gains have already been wiped out however in the recent cryptocurrency crash, sinking the value of Litecoin to as low as $145.
While Litecoin is slightly different than Bitcoin – it features bigger blocks and a shorter block confirmation time to allow it to process more transactions for lower fees – Litecoin still uses much of the same underlying technology and principles as Bitcoin. One important difference from Bitcoin is Litecoin’s use of Scrypt (pronounced “ess crypt”) as part of its proof-of-work algorithm, as opposed to a more straightforward version of Hashcash which is used by Bitcoin. One result of using Scrypt for Litecoin’s proof-of-work is that in most cases ASIC machines designed for Bitcoin mining are incompatible with Litecoin mining.
Litecoin is not an exact copy of Bitcoin, but it is similar enough that people have asked if there is even a need for Litecoin to exist. Throughout its history, and especially in the past year, Litecoin has not only shown that there is room for Bitcoin alternatives, but also how important Bitcoin clones can be when trying to solve core cryptocurrency issues.
The Need for Bitcoin Alternatives
While many altcoins look to challenge Bitcoin’s dominance as the top cryptocurrency, Litecoin came about as more of a companion coin. Even in 2011, Charlie Lee realized that Bitcoin had limitations, especially for merchants who wanted to accept small value transactions relatively quickly.
In 2017, Bitcoin’s rise in popularity led to scaling problems that congested the network and led to high transaction fees, making it an inefficient cryptocurrency for low-value transactions. In December, when Bitcoin transaction fees spiked, many cryptocurrency enthusiasts turned to alternatives such as Litecoin for faster, less costly transactions.
With the Bitcoin network saturated, Litecoin transactions climbed from fewer than 40,000 per day throughout 2017 to over 50,000 per day in early December, topping 100,000 per day later in the month! Litecoin daily transactions peaked at more than 225,000 transactions on January 4, 2018, an impressive figure but still lower than Bitcoin’s daily transactions even during calm periods.
Segwit, Lightning Network, and Litecoin as Technological Testing Ground
When Bitcoin began growing faster than its network could scale and a change had to be made, the community turned to Segregated Witness (SegWit), a solution that Litecoin had already successfully implemented.
When Litecoin activated SegWit in May 2017, its price doubled almost immediately. With SegWit activated, developers could take advantage of the upgrade to test out even more ambitious technology, including the Lightning Network. Lightning Network creates ‘channels’ between users, allowing them to exchange cryptocurrency instantly without waiting for blockchain confirmation.
Both SegWit and Lightning Network were first introduced to Litecoin before eventually being adopted by Bitcoin, demonstrating the benefits of having stable Bitcoin alternatives within the cryptocurrency ecosystem.
Charlie Lee’s Controversial Sell
2017 saw incredible highs for many cryptocurrencies, with many coins peaking in late December. On December 20, Lee announced via Twitter and Reddit that he had sold almost all of his Litecoin. At the time, Litecoin was trading at an all-time high, briefly crossing over $350 per coin.
In a brief post, Lee stated that holding Litecoin while frequently discussing the price movement of Litecoin created a conflict of interest. He realized that he had considerable power over potential price moves with his statements, so to resolve this conflict he decided to sell his Litecoins.
Statement from Charlie Lee:
Soon after Lee’s declaration, the price of Litecoin retreated about 33% and eventually fell as much as 60% from its all-time high, dropping below $150 in January.
Since his initial announcement, Lee clarified that he will continue to play an important role in Litecoin’s development and hopes to be a part of the project long enough to help it surpass its all-time high from late 2017. However, he also said that he believes for Litecoin to succeed in its ultimate goal and become truly decentralized, he will eventually need to take a step back.
Seeing how people lost trust because I sold makes me more convinced that it was the right move. Litecoin was too centralized and dependent on me. Eventually, for Litecoin to succeed, I need to step away. But I promise I won’t do that until I’ve helped LTC climb back past the ATH.
— Charlie Lee [LTC] (@SatoshiLite) December 31, 2017
Here’s a look at some of the important milestones in Litecoin’s history:
While Litecoin may have a long way to go before returning to its all-time high, this coin’s long history and relative stability make it one of the backbones of the cryptocurrency market. Several exchanges use Litecoin as a base trading pair, meaning users can trade less popular altcoins into Litecoin and then use Litecoin to buy other emerging coins.