Litecoin Guide

Litecoin: An Ossified Bitcoin fork

• Launch date: 13th October 2011

• Daily transactions: 3 days in November 2023 processed a million transactions per day, increasing from 800k in May.

   

Litecoin at a Glance

• Recorded 67m in 2023 alone, doubling 2022’s 39m transactions, with 14th November breaking the 1m transaction per day barrier. 

• Fees have recorded the highest consistent levels since the beginning of January 2022, denominated in LTC, which is derived from higher transaction count.

Key Figures

Protocol Mechanism 

Scrypt, pronounced 'ess crypt', is a security tool initially created for online backup. Its main purpose is to make it expensive and hard for large-scale attacks using custom hardware by needing a lot of memory. It's also used in mining digital currencies, designed to be incompatible with Bitcoin mining ASICs which uses SHA-256. This ensures Bitcoin and currencies using Scrypt, like Litecoin, don't compete over the same mining resources.

History 

Key milestones

• After launch, the early growth of Litecoin was aided by its increasing exchange availability and liquidity on early exchanges.

• Dogecoin forked from Litecoin in December 2013.

• Litecoin deployed the SegWit softfork before Bitcoin did in May 2017, which allowed signatures to be recorded and verified in their own section of a block where data could be added at a discount. SegWit did increase the blocksize, but did so in a way that didn't force users to update their software rules.

• In May 2022, MWEB (Mimblewimble Extension Blocks) upgrade was activated on the Litecoin network as a soft fork. This upgrade provides users with the option of sending confidential Litecoin transactions, in which the amount being sent is only known between the sender and receiver.

• 2nd August 2023 saw Litecoin’s third successful halving, reducing block reward from 12.5LTC to 6.25LTC.

What's next & future upgrades 

• Future upgrades are very hard to follow, a Litecoin core dev, called Losh, has previously mentioned they work in private repositories then push to the master, or a specific, branch when ready for review, or when its safe to build on. Public updates on one of the most important soft forks stopped in June 2023, although this doesn’t mean that development has stopped.

• According to Core Dev, Losh and David Burkett’s, public GitHub activity, it seems some developments are related bugfixes here and here. Many of the pull requests on popular repositories have not been active in months or years.

CoinShares’ Analysis

Litecoin is a true crypto-old-timer with one of the longest running track records of any crypto asset in the market. While most early altcoins suffered from bugs, design failures and lack of community support, Litecoin has maintained a strong, successful record of continuous operation without significant disruption in protocol function. However, like most other crypto assets, Litecoin needs to strengthen its real-world utility, security and decentralisation to increase its appeal in the long term.

Strengths

• Litecoin’s increased block frequency compared to Bitcoin lends itself better towards payments as transactions clear securely (6 confirmations) in an average of 15 minutes as opposed to an hour for Bitcoin.

   

Weaknesses 

• The market has decided that Litecoin has worse properties and characteristics than Bitcoin, hence the much lower market cap, security, decentralisation and interest. Therefore, limiting its upper bound potential for adoption.

Opportunities  

• The Ordinals trend could make miners much more profitable, therefore increasing hashrate and security of the ledger, and the attractiveness to mine, therefore having a knock on effect on decentralisation of hardware. On 2nd May, the Litecoin community introduced ordinal inscriptions with the launch of LTC-20, adapted from BRC-20. By September, the count of Litecoin Ordinals soared over 6 million. The momentum continued, and in November, a record-breaking 1.32 million inscriptions were added to the Litecoin network in just one day. As of December, the total number of ordinals inscribed on Litecoin has surpassed 14 million.

Threats 

• There is a much higher chance of protocol insecurity due to the lower hashrate and less developed amd decentralised mining market, which is also reflected in the token price, therefore limiting the attractiveness mining and using the network. Litecoin adoption has probably stagnated in meaningful terms.