CoinGrades

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Litecoin

By Victor & Grayson
March 21, 2020

Disclaimer

The following review is not financial advice. Coin Grades’ ratings and letter assignments reflect the technical and practical viability of these cryptocurrencies in the eyes of the Coin Grades team. As always, we encourage you to do your own thorough research from multiple sources before choosing to invest in any cryptocurrency. The Coin Grades team was not compensated for this review. Some members of the Coin Grades team do hold Litecoin (LTC) in their personal investment portfolios.

Overview

Litecoin (LTC) was founded in 2011 by Charlie Lee, shortly after Bitcoin. Litecoin is a nearly identical copy of Bitcoin, except it has a reduced block generation time of roughly 2 and a half minutes. This makes it roughly 4 times faster than Bitcoin. During the mania in 2017, many new cryptocurrency buyers would purchase Litecoin over Bitcoin, in order to send their funds to an exchange to buy other cryptocurrencies as quickly as possible. Litecoin also uses a different proof-of-work algorithm than Bitcoin, which makes it a bit more difficult for miners, in terms of energy consumption. This sacrifice was made in order to increase decentralization since it makes it more difficult for more powerful mining operations to gain control in a larger capacity.


Decentralization

Litecoin boasts a total supply larger than that of its parent blockchain (Bitcoin). With 84 Million coins, there are four times more LTC than BTC in existence. The number of possible coins is directly related to its block generation. Due to the fact that it uses the Scrypt algorithm, it can be said that Litecoin has improved upon its predecessor in the decentralization category. It loses a couple points here because Charlie Lee owned a substantial amount of Litecoin in 2017, before selling it on the market at the bubble peak. A fully decentralized cryptocurrency should not have any one entity owning a substantial portion of the supply.


Security

Security here depends largely on one’s preservation of their private keys, but the network itself, just like Bitcoin, is fairly resistant to attacks. While Litecoin may have improved upon decentralization by a marginal amount, it sacrificed this for a slightly less secure network. Not as many miners are incentivized to participate since the Scrypt algorithm makes it slower and more complex. There have been talks about adding a new “MimbleWimble” layer to Litecoin, which is a privacy protocol developed originally for the GRIN cryptocurrency. Litecoin transactions are all viewable on the block explorer, but this new layer would improve Litecoin’s anonymity.


Speed & Scalability

Towards the end of 2017, Litecoin was often the go-to cryptocurrency to purchase directly with fiat, for anyone wishing to buy other altcoins in the market. This was because the Bitcoin network became extremely slow and expensive at the time, making Litecoin the fastest accessible, liquid alternative. Even so, transactions could take between 30 and 60 minutes.

Litecoin suffers from scalability issues but is an improvement upon its predecessor due to its faster block generation. Additionally, if the Lightning Network becomes more usable, perhaps it will help Litecoin as well. Unfortunately, there do not seem to be any other efforts to improve Litecoin’s scalability.


Energy Consumption

While making many marginal improvements compared to Bitcoin, Litecoin actually ranks quite poorly in terms of energy consumption due to the algorithm it uses. Bitcoin is already considered to be one of the worst-performing cryptocurrencies in this category, so Litecoin doing even worse is something to be noted.


Community

Litecoin’s community has dropped significantly since Charlie Lee distanced himself from the project, and since he sold his Litecoin holdings precisely at the 2017 bubble peak, many people saw it all as a scam. As such, the community’s attitude has dwindled. Even so, Litecoin proponents can be found all throughout the crypto sphere. They have a substantial presence on Reddit and Twitter. Litecoin’s powerful price action leading up to its halvening in 2019 proved that there are still supporters of the project, and there was even a successful effort to make Litecoin the official cryptocurrency of the Miami Dolphins in 2019.


Team

The number of major developers working on Litecoin dwindled from 5 in 2018 to just 2 in 2019. There is not much development happening at all, as evidenced by GitHub activity. It cannot be said at the moment to what extent the Litecoin Foundation is ploughing ahead on development, although there have been some marketing advances over the last two years.


Adoption

Litecoin is one of the most widely accepted cryptocurrencies around. At any merchant that takes cryptocurrency payments, you’re likely to find Litecoin. It was also one of the first alternative cryptocurrencies to be added to Coinbase.


Liquidity

Being one of the most liquid cryptocurrencies on the market, Litecoin has benefitted from all of Bitcoin’s price fluctuations and has even outperformed it on longer timeframes. Where it falls short here is the fact that there aren’t too many pairings between Litecoin and other altcoins on the market.


Potential

Litecoin can be seen as a bellwether for recent Bitcoin price action since it experienced its block reward halving nearly a year prior to Bitcoin’s own halving. Due to this, LTC may be used as a testing ground for proof-of-work crypto-economics. Logically, if Litecoin’s price is stable and/or increasing, it should mean the same for Bitcoin. Likewise, if Bitcoin is doing well, Litecoin should follow, since it’s based upon the same supply and demand. It has lost some ground in this category, with the addition of faster, cheaper cryptocurrencies to larger retail-focused exchanges like Coinbase. The real question is whether Litecoin will continue to outperform Bitcoin in the future, and amount to an inflation-resistant store of value. Perhaps it’s fine the way it is and will continue to hold its position in the top 10. Litecoin may ultimately touch its all-time high above $400 again. After all, it reached as high as $50 in its first-ever bubble, only to drop all the way back to $1. This time around, it dropped to $22 and has since already recovered nicely.

Summary

Litecoin currently sees itself in an interesting predicament. As mentioned above, LTC has long been seen as the silver to Bitcoin’s gold. This is primarily due to its longstanding bond with BTC being one of the original Bitcoin “clones” that sought to improve upon what BTC had created. The problem that Litecoin now faces is that it’s almost in a lose-lose predicament. What it didn’t improve upon, Bitcoin already does, but what it did improve upon, other cryptocurrencies have since improved upon even further. Litecoin hit its stride when it was a cheaper and faster alternative to Bitcoin. However, Litecoin is no longer the cheapest or fastest alternative. If people are looking for durability, security, and liquidity, then Bitcoin will stand as the better option. If people are looking for speed, low fees, and a green aspect, then there are now other cryptocurrencies that do the job better. Combine this with its dwindling community and developer base, and Litecoin’s future doesn’t look as bright as its past.

It is possible that Litecoin will be able to hang on in the coming years due to its reputation, and it is by no means a sub-par cryptocurrency, but with the future of cryptocurrency constantly evolving and improving, it is unlikely that Litecoin will be able to keep up and remain relevant in the long term.

Coin Grade


C-

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