Litecoin (LTC) Token Report

Litecoin Token Analysis (PDF)

Litecoin, created by Google engineer Charlie Lee in 2011, is one of the longest standing and largest, by network value, cryptocurrencies. Originally released as a fork of Bitcoin, Litecoin is referred to as “the silver to Bitcoin’s gold” by its founder and the crypto community. It was an attempt to address some of Bitcoin’s and other contemporary projects’ shortcomings, chiefly in the areas of mining and block creation.  Litecoin has a different consensus algorithm than Bitcoin that makes it more easily mined by standard computer hardware rather than specialized chips.  Litecoin also has a shorter block creation time, 25% the time of Bitcoin, that enables faster transaction confirmations and potentially four times the transaction throughput.  Litecoin was also one of the first networks to adopt SegWit and has been at the forefront of implementing a Lightning Network.

The potential technical benefits of Litecoin over Bitcoin have not translated into widespread adoption, even with its long history. Litecoin significantly lags the larger network in terms of transaction throughput, transaction volume, and USD value sent across the network, which are some of the most important metrics for measuring a cryptocurrency’s economy.  Aside from sporadic instances of more than nominal economic activity, the Litecoin network has been sparsely used until this year. Transaction volume began to ramp around the time that the token began trading on Coinbase, and has continued to grow, with the price of litecoin breaking $400 on some exchanges in early December after starting the year at less than $5.

Litecoin has several technical advantages that should allow it to capitalize on the growing network congestion issues faced by both Bitcoin and Ethereum, chiefly that its transactions are fast and inexpensive.  Average transaction fees are greater than $1 on Ethereum and $25 on Bitcoin.  Average Litecoin transaction fees just exceed $0.20, and while such transactions are significantly slower than Ethereum transactions, they are significantly faster than Bitcoin transactions.

Earlier this year creator Charlie Lee has stepped down from his fulltime job at Coinbase to focus on the future development of Litecoin, which bodes well for the project’s roadmap. Litecoin was the first Large Cap digital asset to implement SegWit and is now working on deploying a Lightning Network for high speed, off-chain transactions.  While the Litecoin network is far from congested, it is the team’s goal to let bitcoin function as a digital version of gold, while litecoin picks up the banner from bitcoin’s original use case, a peer-to-peer version of electronic cash. 

While we think the recent rapid increase in price of litecoin will build community adoption and token use, it is not apparent that the recent on-chain economic activity warranted such an increase.  We do think, however, that ongoing congestion issues with Bitcoin and Ethereum will be positive for the token.  It would be reasonable to suggest that Litecoin could continue to narrow the valuation gap with Bitcoin if on-chain economic activity continues to increase and new technology is implemented. The recent total sale of litecoin holdings by Charlie Lee is an area of concern as he has been publicly warning about the euphoric phase the current market.