Is Litecoin a great funding? Why haters could also be unsuitable concerning the controversial cryptocurrency

Ushered into existence by Google engineer Charlie Lee on October 13, 2011, Litecoin is the 10th largest cryptocurrency by market capitalization immediately.

Litecoin coin is an “OG” crypto. Aside from Bitcoin, no different coin has stayed in the top ten longer. BTC and LTC have held locations in the charts for 410 and 409 weeks, respectively (different high performers embrace XRP at 396 weeks and ETH at 291).

It was created following a source code “fork” of the Bitcoin Core blockchain (a fork is when a blockchain diverges into two separate paths, creating two distinct cash). Litecoin’s greatest variations from Bitcoin embrace:

  1. Lower transaction charges
  2. A special hashing algorithm
  3. A decreased block technology time
  4. An elevated most cap of cash

Don’t be deterred! We’ll get into the specifics of those variations beneath and likewise take a look at how these components contributed to Litecoin’s success as a extra “spendable” cryptocurrency. You might have heard Bitcoin described as “digital gold,” and following that line of pondering, Litecoin might be thought of “digital silver.” But the cryptocurrency’s historical past isn’t as spotless as you would possibly suppose.

In an April 26 interview with CNBC’s Worldwide Exchange, Lee mentioned Litecoin, evaluating and contrasting its attributes with these of Bitcoin. Although Lee is one thing of a polarizing entity within the cryptosphere, it’s price listening to what he has to say concerning the cryptocurrency he invented. Let’s dive in.

CRYPTO-SAVVY is an occasional collection from Inverse that explains the world of cryptocurrency and the place it’s going subsequent.

Litecoin vs. Bitcoin

The worth of Litecoin over the previous two yearsCoinDesk

One of the primary variations between the 2 cryptocurrencies is transaction charges (1). Cryptocurrency miners select to validate the transactions that pay essentially the most. The current average transaction fee for Litecoin, on the time of writing, is simply $0.04. With Bitcoin, that quantity is far larger, with its common transaction payment being $26.89.

“The Bitcoin blockchain is congested,” says Lee. “Everyone is competing to get their transactions into the next block, and the way they do that is by paying more fees.”

Another elementary distinction between Litecoin and Bitcoin is their mining algorithms (2). Litecoin employs Scrypt, one of many first hashing algorithms applied on blockchain networks. Developers of Scrypt meant it to be an enchancment on an excellent earlier hashing algorithm, SHA-256 (the one utilized by Bitcoin). Lee selected Scrypt for good cause, however now we have to take a deeper take a look at cryptocurrency mining to know why.

The fundamentals: mining may be carried out utilizing a central processing unit (CPU), graphics processing unit (GPU), or application-specific built-in circuit (ASIC) miners. ASIC miners have the benefit of with the ability to clear up the advanced knowledge strings wanted to mine (suppose “win”) the block a lot faster – producing significantly extra hashes (suppose “tries”) per second than CPUs or GPUs.

Consequently, Bitcoin mining, utilizing the costlier and hard-to-find ASICs, is now a kind of arms race. On April 28, Core Scientific, the most important mining pool in North America, announced it had bought 112,800 Antminer mining machines from ASIC producer Bitmain. Core Scientific’s CEO says this most up-to-date buy may assist his firm enhance its world share of Bitcoin’s hash fee from 5% to 12%. To be clear, this could imply one group may plausibly be processing greater than 1/10 of all of the Bitcoin blocks and, within the opinion of many, this goes in opposition to a philosophy on the very core of cryptocurrencies: decentralization.

This is the place Litecoin’s hashing algorithm is available in: Lee went with Scrypt as a result of the algorithm is much less inclined to ASIC mining. While through the years, Scrypt ASIC miners have turn into extra prevalent, nearly all of the mining on the Litecoin blockchain nonetheless makes use of CPUs and GPUs, making it far more accessible to the common individual and fewer inclined to “control” by aforementioned centralized mining swimming pools.

“Digital Gold” versus “Digital Silver”

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In his CNBC interview, Lee additionally explains why he calls Litecoin the “digital silver” to Bitcoin’s “digital gold.” As we all know, all through historical past, each gold and silver have been used as currencies, and since gold is price a lot greater than silver, it is higher suited to big-ticket objects. Gold is essentially the most marketable good when massive values are traded (like shopping for a automotive), with silver being essentially the most marketable good for smaller transactions (shopping for groceries).

Arguably, this “spendability” is what Lee is referring to with this “digital silver” narrative. Because of the low transaction charges for Litecoin, the coin can be utilized extra readily. Transactions on the Litecoin community additionally occur sooner (3) than these on the Bitcoin community, on common each 2.5 minutes versus 10 minutes for Bitcoin.

But from a technical standpoint, it is not all excellent news. While the Litecoin community could also be 4 instances sooner, there are additionally 4 instances as many cash (4). As per Coin Market Cap, the present circulating provide of LTC is 66,752,415 (with the max provide being 84,000,000). Conversely, the circulating provide of BTC is 18,694,375 (with the max provide being 21,000,000).

For Litecoin, this might be seen as a damaging attribute as a result of a part of the explanation Bitcoin is so priceless is its shortage, and this shortage is why the highest cryptocurrency by market cap is commonly touted as being the final word hedge against inflation.

That stated, issues might be worse: there’s no restrict or max provide cap on Ethereum’s native cryptocurrency Ether or one other latest favourite, Dogecoin. Instead, supply increases every year. While supporters of Ether is perhaps fast to level out that there are proposed financial insurance policies within the works aimed toward curbing inflation over time with out counting on a provide cap, nothing concrete has materialized but, as Ethereum’s monetary policy is in flux.

“Why do people hate LTC?”

As touched on briefly within the introduction, a contributing issue to the anti-Litecoin sentiment surrounds its founder Lee, who bought all of his LTC holdings in December 2017 when the coin was nearing its all-time high of $310. It is because of this some folks accuse him of pumping and dumping his holdings for his personal private profit.

Another perspective, in accordance with Ilir Gashi of their Medium piece “Defeating the FUD: Charlie Lee selling his Litecoin due to Conflict of Interest,” is that Lee “sold his Litecoins due to a growing perceived conflict of interest.” Gashi’s article goes on to offer particular causes that assist “clarify why Lee selling was the best thing for Litecoin moving forward, to remain decentralized.”

This rationalization is smart. Distancing oneself from a challenge to alleviate issues of battle of curiosity is typically par for the course in enterprise, and looks like a fairly reliable cause for Lee’s sale.

A fast Google search reveals a Reddit thread titled “Why do people hate LTC?” The thread helps shed some more light on where this anti-Litecoin sentiment comes from. As per contributors, this perspective stems primarily from so-called “Bitcoin Maximalists” – BTC supporters who believe the Bitcoin network provides any and everything that investors want or need in a digital currency. Some of them see Litecoin as just a copy/paste version of the world’s leading crypto.

Perhaps at first glance, there’s some truth to that. But in reality, when one dives a little deeper (and as I think I have shown in this piece) there are several significant differences, use cases, and applications for both coins. Don’t @ me!

CRYPTO-SAVVY is an occasional series from Inverse that explains the world of cryptocurrency and where it’s going next.

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