Disclaimer: The information in this blog represents the opinions of its author and is for educational purposes only. It is not intended as investment advice. Cryptocurrency markets are extremely risky so you should only invest money you are willing to lose.
The Future Of Money
Any 7-year-old can tell you that cryptocurrencies are the future of money - but which one? As you might imagine, they each have their strengths and weaknesses.
Bitcoin has proven to be an astonishingly profitable speculative investment and is also being treated more and more like digital gold - as a store of value, reserve currency, and safe haven in uncertain economic times or when a country's fiat currency is collapsing.
Falling Short Of Satoshi's Dream
As a borderless global payment system, bitcoin may be falling short of Satoshi's dream of a peer-to-peer digital cash system. While it is useful for large transactions, when it comes to the everyday stuff it's expensive, slow, and inefficient. On top of that, the bitcoin community seems to be constantly bickering over how to address these issues.
From The Ground Up
Enter litecoin - the cryptocurrency that was built from the ground up for small, high-frequency transactions with fast confirmation times.
Litecoin, founded by Charlie Lee, an MIT graduate and former Google engineer, is built on a blockchain that processes a block about every 2.5 minutes, compared to bitcoin's 10 minute delay (a significant backlog on the bitcoin network may increase the delay to several hours).
For The Little Guy
Its blockchain uses the Scrypt protocol, which precludes the possibility of mining supercomputers switching over from bitcoin to litecoin. This essentially reserves mining for the little guy and maintains decentralization.
Litecoin also has bigger blocks than bitcoin, and 4 times more coins in circulation (84 million vs. bitcoin's 21 million).
Off The Chain
Perhaps the most important technical difference that makes litecoin preferable for small, everyday transactions is it's early embrace and smooth integration of the available technology for off-chain transactions.
You might have heard about the big kerfuffle in the bitcoin community over SegWit, a kind of data compression that separates digital signatures from transactions, freeing up block space. Bitcoin split over this disagreement, into bitcoin and bitcoin cash. Litecoin, on the other hand, was an early adopter of SegWit, easing strain on the blockchain and speeding up transaction and confirmation times.
SegWit will also allow litecoin to use the Lightning Network, which facilitates off-chain peer-to-peer transactions governed by smart contracts which are executed through private channels. Since only the final outcome of these transactions would be broadcast to the blockchain, there is a huge savings in on-chain data storage and processing power.
But Can It Buy Coffee?
It seems like the real question people want answered about cryptocurrencies is "can I use it to buy a coffee at Starbucks?"
The beauty of the lightning network is not only that confirmations would be instantaneous, but in a recent test a version of it was used to buy coffee at Starbucks with zero fees - now that's the cryptocurrency dream!
The day after bitcoin mania drove its price briefly above $19,000, litecoin took off on a wild ride of it's own. After breaking out of a trading range around $100, its price quickly doubled. After a retracement to the 61.8% Fibonacci zone that lasted about 48 hours, its price doubled again.
From Undervalued To Dominant?
Since litecoin excels at the one thing it was designed to do best - small, fast, inexpensive, high-frequency transactions - it may be the most undervalued cryptocurrency out there, with much more potential on the upside. Technical chart analysis and momentum indicators show that litecoin is just beginning a powerful uptrend and retracement zones are great opportunities to invest in what may become the dominant global borderless currency for everyday transactions.