Since the beginning of this year alone, the Litecoin network has already processed over 100 billion dollars worth of transactions, with recent daily amounts ranging between 150 million to over 1 billion dollars per day. Officially turning a decade old today, Litecoin has entrenched itself as a heavyweight in the world of cryptocurrency transactions, a feat that was accomplished by a combination of unique factors and notably, a multi-year process of building trust.
In the world of cryptocurrency, one in which only a handful of coins have persisted while most have failed, Litecoin’s success over the years can be described as an interesting case that’s worthy of being studied. The idea for Litecoin was first published by Charlie Lee on the Bitcointalk.org forums in 2011, only two years after the birth of Bitcoin.
At the time, there weren’t many cryptocurrencies around — in fact, there were less than 10. The following is a snippet of what CoinMarketcap.com looked like in Litecoin’s early days (2013).
Most of these coins are nowhere to be seen whereas Bitcoin and Litecoin have strongly persisted throughout the past decade. Why is this?
Upon building the idea for Litecoin, Charlie Lee had noticed how Bitcoin’s design had contributed to its near-flawless performance over the years while other coins (perhaps too adventurous), had suffered from catastrophic bugs or network design flaws, ultimately resulting in their demise.
To say the least, with the invention of Bitcoin in 2009, Satoshi Nakamoto created a well lubricated machine that simply performed as intended — an unstoppable engine. After Cypherpunks had made several failed attempts at creating digital money in the early 2000’s, Bitcoin was the first that not only survived, but thrived, having a vast ecosystem built around it and an increasing number of adopters.
In 2011, there was sufficient amount of data to have an idea of what was working and what wasn’t in regards to crypto network design. Since Bitcoin was the first successful execution at creating digital money, it seemed wise for its “recipe for success” to be followed closely. Because of its distinguished track record, Bitcoin became the blueprint for what Litecoin was to become.
As such, on October 2011, the idea for Litecoin was published on the Bitcointalk.org forums along with a public poll to decide which day would be best for its launch. On this post, Litecoin was described as a coin that’d maintain most of the features that contributed towards Bitcoin’s success, such as maintaining PoW mining, a fair launch and distribution (no pre-mine) and no central authority or institution controlling a vast percentage of coins. In other words, a coin that would be completely transparent, open source, and equally available to anyone willing to participate in it upon its launch.
Litecoin’s properties remained mostly the same as Bitcoin’s with a few tweaks — Litecoin was to have 4x faster blocks, 4x the amount of coins and utilize its own mining algorithm (Scrypt), giving it the opportunity to remain highly secure by not competing against Bitcoin miners.
After the vote on the publicly-held poll came to an end and participants had the chance to prepare themselves, Litecoin was officially launched on the 13th of October, 2011.
At first glance, some people were confused as to why it’d be necessary having another coin similar to Bitcoin. On the flip side, many were excited about this, even coining Litecoin the digital “silver to Bitcoin’s gold”, a role which Litecoin has increasingly been living up to amongst its continued persistence. The following will explain exactly how Litecoin has performed its duty as “digital silver” over the years, along with the interesting niche it’s created for itself.
Put simply, Litecoin is a Bitcoin network pressure relief valve. When the Bitcoin network heats up from over-usage, transactions begin to find their way onto the Litecoin network. A good way of imagining this is comparing the Bitcoin network to a train that departs every 10 minutes from the station, and Litecoin being a train that departs every 2.5 minutes.
Let’s say that Bitcoin is the most recognized name in the railroad space due to being the “original” train company — the one that started it all off. As travel by train became more popular by the day, Bitcoin remained firm in its stance to only have one train leave the station every 10 minutes, assuring it’d stick to its founding values that brought it success. Because of this increasing demand for travel, the fees to board the Bitcoin train highly increased (transaction fees). Still, some people remained loyal to Bitcoin even amidst this fee increase because it’s been the around the longest and has proven to be the most secure.
Two years after the Bitcoin train was created, the Litecoin train came to life. It was created with the intention of preserving the key features that made Bitcoin great, except, having a train leave the station every 2.5 minutes instead of 10 — filling the gap. No major changes had to be made.
Because the Litecoin train departs every 2.5 minutes instead of 10 (referring to block times), there tends to be a higher frequency of Litecoin trains and thus, more potential availability and space within each train car. This leads to a higher chance of on-boarding one of these at a cheaper price because when there’s more availability of something, prices tend to be lower (lower transaction fees).
Imagine Bitcoin being one train (orange) and Litecoin being another (blue). In a 10 minute interval, Litecoin’s blockchain provides a higher transaction capacity than Bitcoin’s, promoting a more competitive fee environment.
People have found great use in taking advantage of Litecoin’s cheaper fees, especially during times of high congestion and activity. In Litecoin’s case, it wasn’t necessary to completely re-build the concept of a Proof of Work blockchain if Bitcoin had proven to be highly reliable. Litecoin’s goal was to simply fill the void and keep most of Bitcoin’s well-working code. By doing so, Litecoin has seen 100% network uptime in its 10 years of existence. The network has never gone down.
In the above images (credit: bitinfocharts.com), one can see that during times of high activity (bull market peak years), Litecoin transactions and amount of money spent tend to spike against Bitcoin. While Bitcoin blocks become saturated and fees spike, money moves towards the Litecoin blockchain to take advantage of the cheaper toll’s. This is also why Litecoin’s trading volume tends to be high relative to its market cap and against other coins.
There are other coins that offer cheaper fees than Litecoin, but most tend to lack the attributes that made Litecoin and Bitcoin succeed in the first place, such as dominating their respective mining algorithms, network security, high liquidity, reliable and well-tested code, etc. Most of these tend to operate in highly centralized manners with very few nodes to keep the network in check. In the end, it’s a matter of accepting trade-offs, and Litecoin has offered an excellent combination of network security, reliability, decentralization and cheaper fee’s.
At the moment, with Bitcoin’s ongoing network congestion and growth of its second layer scaling solution, the Lightning Network (LN), Litecoin will transition into several different roles. Since Litecoin and Bitcoin’s code are compatible, Litecoin is the only cryptocurrency aside from Bitcoin that also has a Lightning Network.
At the moment, since Litecoin doesn’t have a congestion issue (yet) due to more frequent block space (there are more train cars in a 10 minute interval, meaning more seat availability), transacting on the main chain will likely continue being the popular route to take in the near future. Litecoin’s Lightning Network is already up and running, but demand for it will increase as Litecoin’s blocks begin to fill.
With Bitcoin and Litecoin’s Lightning Networks running simultaneously, Litecoin will continue offering lower channel opening costs. By taking technology like atomic swaps into consideration, one could potentially take advantage of these and then switch over to Bitcoin’s LN if for example, one wanted to pay for a service where Bitcoin is accepted but Litecoin is currently not.
Litecoin’s code compatibility with Bitcoin is another major advantage. Due to both being open monetary networks, anything that’s built on Bitcoin can be built and transitioned into Litecoin. Litecoin receives the full strength of all active Bitcoin developers around the world. Vice-versa, technology that’s built out for Litecoin can be added onto Bitcoin.
In the coming months, Litecoin will be undergoing its community signalling for MWEB (Mimblewimble Extension Blocks), the biggest upgrade to the Litecoin network yet. This is an upgrade that will improve one of the key features missing from Bitcoin and Litecoin, fungibility and transaction data privacy. In this case, Litecoin will be the first major mover and will provide a pathway for users to transact without having to publicly disclose how much money they’re sending to 3rd parties. It’s not really “sound money” if someone across the globe you’ve never met can see how much money you’re sending to another individual. Litecoin’s MWEB will fix this. Not to mention, MWEB will also increase Litecoin’s transaction throughput and improve scalability. MWEB’s code has already been completed and is undergoing the final multi-month review and auditing process by Quarkslab, a security solutions and vulnerability research company.
Litecoin’s endurance over the years can be largely attributed to remaining cautious in its approach to money. Many newcomers in the crypto-space mistakenly believe cryptocurrencies should be viewed similarly to start-ups in the tech world, constantly “breaking things” and creating new features. This is a grand mistake, as the best forms of money have historically been mundane and quite literally, rock-like (e.g. Gold/Siver). It’s also not good practice for a form of money to consistently encounter bugs and temporary (or permanent) network shutdowns. These experimental projects may find success in the short term, but will likely struggle to persevere if issues commonly arise. On the other hand, reliability has been of utmost importance for Litecoin’s growth as a network and user confidence. Thanks to this dependability, Litecoin has become one of the most trusted network’s in the cryptocurrency space.
Although innovating “on top” of the Litecoin network is greatly applauded, e.g. OmniLite smart contract platform that was recently built (enabling features such as stablecoins/NFT’s etc.), Litecoin has tried to make the base code layer as stable and fully-tested as possible to avoid experiencing any network hiccups. So far, it’s achieved this not by trying to create value on an immediate or 1 to 2 year basis, but by looking on a long-term horizon and envisioning a world where the preferred method for transacting will eventually become cryptocurrency.
There’s no doubting that Litecoin has risen above and beyond what was thought possible by being integrated on almost every cryptocurrency exchange (achieving high liquidity), being the second most integrated cryptocurrency in ATM’s worldwide and being one of the most widely accepted and transacted with cryptocurrencies. All of these factors have helped contribute to its increasing Lindy effect.
In the end, it’s a marathon and not a sprint. By officially turning a decade-old, Litecoin has become the first highly integrated alt-coin to reach this milestone. Litecoin’s resilience over the years has demonstrated the importance of maintaining sound money principles and establishing a high level of trust. Its endurance can help serve as a model for those wishing to build in this vastly growing ecosystem. Happy 10th Birthday, Litecoin!