Alt-coinsCryptocurrencyPrice Analysis

Litecoin Leading Crypto Recovery Amidst Fork Confusion

By February 15, 2018 No Comments

Fork or Scam?

The nascent recovery from a 6-week-long plunge in cryptocurrency markets is being led by Litecoin and fueled at least in part by a planned hard fork that has been denounced as a "scam" by Litecoin creator Charlie Lee.  Since the low of Feb 6, Litecoin price has doubled in under 10 days.

Some investors are loading up on litecoin to take advantage of the promise of a 10-to-1 airdrop of litecoin cash tokens (LCC) on Feb 19th, although Lee's dismissal of the project may carry enough influence to put the kibosh on exchanges dealing with the LCC developers.

Global Payment Solutions

Other news that may be driving the spike in Litecoin price involve global payment services which will begin supporting Litecoin transactions.

On Feb. 12th, Litepay announced it would begin a service for merchants in more than 41 countries, analogous to the Bitpay system for bitcoin, that will allow them to accept litecoin transactions.   CNBC reported that Litepay CEO Kenneth Asare took up the challenge because merchants using bitpay were asking for support for litecoin.

In good news for the micro-payment sector,  Coinbase launched its ‘Coinbase Commerce’ system, allowing merchants to add crypto payment options for BTC, BCH, ETH, and LTC directly to their existing payment flow.  The service is international and independently hosted, so instead of the exchange holding the merchant's funds, they go straight to the merchant's own wallet.

Litecoin 101

Under the best of circumstances, a bitcoin block is mined every 10 minutes.  Six confirmations from miners before processing ensures end-of-chain-stability, so an average transaction should take about an hour.

But remember that bitcoin has a 1 Mb hard limit on block size, so blockspace demand exhausts supply almost continuously.  The result is an unconfirmed transaction (mempool) backlog that necessitates fees to incentivize miners, and wait times that may stretch into several hours.

The protocol used by bitcoin, the SHA-256 hashing algorithm, ensures the blockchain is very stable.  According to Litecoin creator Charlie Lee, "Bitcoin can be used for like moving millions of dollars between banks, buying houses, buying cars. It’s really secure… Litecoin can be used for cheaper things.”

Like Pizzas?

Cheaper things - like pizzas?  In a recent article entitled "Tech That Will Change Your Life in 2018", The Wall Street Journal reported "High transaction fees mean that Bitcoin is largely failing one of its original missions—to become easily transacted digital money. The crush of systems and alternative coins designed to fix that is going to be a major theme of 2018. By the end of the year, you might actually be able to use digital currency to buy a pizza."

The routine use of cryptocurrency to buy "cheaper things", as Lee calls them, is the dream of every crypto investor, but which coin will dominate this elusive goal.  Well... it's a tricky question ... the winner will be the coin that strikes the right balance between solutions to speed, cost, ease-of-use, and privacy.

Smaller Players

Lee designed Litecoin to be mined by smaller players, cut block time by more than 75%, and have a maximum circulating supply of 84 million coins, four times greater than bitcoin's 21-million-coin cap.

These technical and psychological advantages make litecoin literally lighter and more nimble than bitcoin.  One of its biggest advantages, that allows it to remain inexpensive and quick, is that it runs at a less than 10% blockspace demand-to-supply ratio.

Early Adopter

Litecoin was an early adopter of SegWit, which is a kind of data compression that takes digital signatures off the main chain to free up blockspace.  This not only enables faster transaction times (effectively bigger blocks), but also allows lightning network transactions, which are off-chain, private-channel swaps governed by specialized "hashed time-locked smart contracts" - ensuring that all parties meet their end of the bargain with no trusted intermediary required.

Playing Around

A fascinating wrinkle in the Litecoin story is that Lee didn't set out to create his own cryptocurrency.  “It was an excuse to kind of learn the Bitcoin code, I decided that I can actually create an altcoin that’s better than what’s out there, and lastly it was fun to play around with what’s out there.”

Litecoin currently has a market cap of $12 billion, roughly half that of bitcoin cash, the micro-crypto leader, and double that of DASH, its nearest competitor in the sector.  It is the best performing crypto across the board since the Feb 6 lows, with a gain of 112% - not bad for playing around.

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