What Is Litecoin, and Why Is It Beating Bitcoin This Year
With digital currency Bitcoin taking the spotlight in 2017, it’s hard to remember the other cryptocurrencies that have been growing in its shadow.
An increasingly-prominent example: Litecoin. The fourth largest digital currency by market capitalization has gone positively vertical this year, with Litecoin prices breaching $320 for the first time Tuesday. Since the start of 2017, Litecoin has risen 7,291% against bitcoin’s 1,731%.
So why the rise? There doesn’t seem to be a single event—though the recent surge in interest surrounding cryptocurrencies may have pushed some investors into becoming more adventurous. Some investors may also think the price of bitcoin is overdone—and are seeking other investment opportunities. Meanwhile, Litecoin only became somewhat easier to purchase earlier this year, with Coinbase adding the cryptocurrency to its listing.
What is Litecoin?
One of the several clone cryptocurrencies that stemmed from Bitcoin, Litecoin “forked” off the Bitcoin ledger in late 2011. It was intended to be the silver to Bitcoin’s gold: a faster, more lightweight version of the Satoshi Nakamoto-created cryptocurrency. Instead of the approximately 10 minutes it takes for a Bitcoin transaction, a Litecoin transaction only takes 2.5 minutes.
While making transactions four times faster, Litecoin’s creator also Charlie Lee quadrupled the maximum number of coins that can be mined. While bitcoin has a total of 21 million, Litecoin totals 84 million. And the total market value of Litecoin is currently lower: $18 billion to Bitcoin’s $291 billion. It is the fourth largest cryptocurrency market behind Bitcoin, Ethereum, and Bitcoin cash.
The higher number of Litecoins, meanwhile, could make it psychologically more attractive to buy small-ticket items using the cryptocurrency.
“The vision is always I wanted Litecoin to complement bitcoin—not compete,” Lee said at a March Coinbase talk. “Bitcoin can be used for like moving millions of dollars between banks, buying houses, buying cars. It’s really secure… Litecoin can be used for cheaper things.”
Still, Lee has kept Litecoin simple and similar in technical ways to Bitcoin so that the cryptocurrency could “merge in” Bitcoin bug fixes with minimal effort.
Bitcoin has Satoshi Nakamoto. Litecoin on the other hand…
Has a former Google engineer.
Lee, a less shadowy figure than the pseudonymous Nakamoto, first got involved in Bitcoin in 2011. Not long after, he launched Litecoin, though not with the intention of actually creating an alternative cryptocurrency at first.
“It was an excuse to kind of learn the Bitcoin code,” he said during a March Coinbase talk. “I decided that I can actually create an altcoin that’s better than what’s out there. and lastly it was fun to play around with what’s out there.”
He got serious about Litecoin earlier this year, when he announced via Twitter plans to leave cryptocurrency exchange Coinbase during the summer.
While Nakamoto is no longer vocal about Bitcoin, leading current supporters to interpret his seminal white paper, those with questions about Litecoin need only ask Lee about his vision of cryptocurrency.
So why wasn’t it a failure like so many other early altcoins?
Unlike many other altcoins, when it first started, Litecoin was not too far behind Bitcoin. It first surpassed $1 billion in November 2013—about 8 months after Bitcoin.
One reason why Litecoin supporters didn’t ditch the nascent coin for Bitcoin is the different mining process, requiring hardware that is more widely available. While Bitcoin mining uses the SHA-256 hashing algorithm, which requires ASIC microchip technology, Litecoin uses the Scrypt algorithm. Because Scrypt requires a larger working memory, most ASICs makers have been barred from developing a suitable technology. Instead, Litecoin is often mined on graphics cards or GPUs.
But companies such as Zeus and Flower Technology are beginning to bring ASICs aimed at Scrypt to the market.
In light of this, Lee is offering Litecoin buyers a warning via Twitter Volatility, after all, is a daily thing in cryptocurrency.
Written by Fortune
Victory Lap? 2017 Was Bitcoin’s Backwards Year
2017 was another gloriously miserable year for bitcoin.
As in 2016, gains in the price of bitcoin belie deep deficits in the cryptocurrency world. Bitcoin’s stock of social capital, the human institutions around this most important technology, remains woefully deficient, and the capacity of bitcoin to deliver anything other than wealth to “HODLers” has fallen precipitously.
Don’t get me wrong: wealth is great! But some of bitcoin’s greatest potential benefits — global financial inclusion, broad gains for financial privacy, a stable money supply for those without, and increased liberty — appear further away now than they did a year ago, or at any time in bitcoin’s history.
Big gains, bigger pond
Yes, bitcoin went up in price against fiat currencies this year. By a lot.
Increasingly recognized as an asset class uncorrelated to most others, bitcoin and crypto should be part of any smart investor’s portfolio. That bodes well both for bitcoin and for investors. But, bitcoin’s “market cap” is worth keeping in perspective.
Among the arguments for conservatism in bitcoin scaling this year was that there was $30 billion in value (then $60 billion, then $100 billion) at stake. Those are big numbers, until you consider that the “market cap” of the four largest currencies in circulation is about $22.5 trillion.
Bitcoin’s “size” is less than 1 percent of the mega-currencies, perhaps half that if you count all the rest. If it were possible to measure effects on humanity, bitcoin would probably rank even smaller than low tenths of a percent.
The pocket calculator has had a bigger influence on human progress than bitcoin. Velcro has improved human welfare more than cryptocurrency has.
Given its potential, that’s a damning indictment of bitcoin’s influence so far.
Bitcoin’s social capital
Every invention has the potential to change the world to some degree. Most of them don’t. That’s because they lack social capital.
Social capital is “everything else” around a business, technology or product: knowledge of it, adoption of it, supportive customs and laws, integration into existing human institutions, and so on. It was necessary at one time to construct social capital around bananas.
Bitcoin still has strikingly little social capital. Few people know about it. Fewer still think it’s beneficial or viable. Even fewer hold it, much less use it. The legal environment may be a tamed menace right now, but the broader lack of orientation toward bitcoin keeps that menace alive.
Perhaps those assertions sting, but don’t blame the messenger: Bitcoin has simply not reached the level of ingratiation into society that it could and should have by now. That means that when bitcoin’s price in fiat falls from whatever heights it reaches, it will plunge all the deeper and stay low all the longer.
There is a shallow reservoir of real institutions supporting our crypto future.
Scaling to low heights
The scaling debate is responsible for a good part of bitcoin’s present failure relative to potential, and it illustrates the lack of social capital in spades.
Again this year, disputes over how to grow bitcoin consumed a tremendous amount of energy that would otherwise have gone toward building bitcoin along other dimensions. The slow pace of scaling assuredly drags adoption down.
Now, adoption isn’t the only goal. But the scaling debate has been so acrimonious because neither Bitcoin Core, the project’s leading developer team, nor the backers of the major alternatives have been able to string together and communicate a clear philosophy that animates their goals for bitcoin.
They haven’t depicted in an accessible way how their technical decisions strike the proper balances among bitcoin community priorities. (Those things aren’t easy to do, of course.)
Instead, SegWit2x was a slugfest that has now been “suspended” in bitterness.
Politicking, then progress
But along the way, a path to progress emerged in bitcoin-land.
The weeks leading up to the highly anticipated 2x fork had all the feel of a political campaign. With every argument exhausted, there was nothing left but barnstorming.
The debate shifted inexorably to the personal. There was even an “October surprise” of a sort, with the news that SegWit2x lead developer Jeff Garzik was involved with a new cryptocurrency called Metronome. (As in political campaigns, that development was shocking or not shocking, depending on one’s pre-existing views of Garzik and SegWit2x.)
But while those political storms crashed, bitcoin cash was introduced to the world, almost as a side-note. That forked version of the bitcoin blockchain includes an 8 MB block size limit, and the SegWit modifications are stripped out. After a brief surge of interest, bitcoin cash began its long, slow surprise by continuing to exist.
Then, as part and parcel of the SegWit2x effort’s collapse, bitcoin cash became the major contender against Core for bitcoin leadership. Thus, a political campaign ended in a competition.
Bitcoin cash does not seek to change the software that miners and nodes run all at once, as SegWit2x did. It must work to gain market share: miners, nodes, and users that adopt this version of bitcoin.
That is a commercial challenge, with the vectors of competition including transaction fee, coin price, transaction speed, mining rewards and ubiquity, and network size, as well as censorship resistance and other essential dimensions of security.
Brand recognition is part of that. That is why “bcash” is a grave insult to bitcoin cash supporters.
In money, network effects are a dominant dimension of quality, if not the dominant dimension, and Core has got it. So, bitcoin cash has a very long and difficult challenge before it.
But the bet laid down by bitcoin cash supporters is that the value proposition of a rarely traded and expensive digital gold is lower than a widely-used money that maintains enough of the properties of a blockchain-based currency. Bitcoin Core is a bet on security above all else.
As we conclude this gloriously miserable year in bitcoin, we should give thanks and say good luck to all the competitors.
Their efforts to retain or seek the lead will strengthen bitcoin, and if they build up bitcoin’s social capital, they will strengthen bitcoin all the more.
Flock of sheep image via Shutterstock
Written by CoinDesk
South Korea to tax Bitcoin profits, ban foreigners from trading
South Korea will ban minors and foreigners from trading in virtual currency or creating bank accounts for them in the country, the government announced.
It will also tax profits from income from virtual currency and impose stricter authentication for traders, the Office of Government Policy Coordination, which reports to the prime minister, said.
The announcement follows an emergency meeting by deputy ministers of financial regulators due to overheated security trading in virtual currency. Last week, the price of Bitcoin, the most popular of the currencies, fluctuated between 14 million won ($13,000) to 25 million won ($23,000). There are concerns over it being a bubble due among rampant speculation.
The office said that it will actively work to prevent losses for normal investors and block exchanges from becoming a place for speculation. It won’t impose a complete ban as to not stifle innovation in fintech, it said.
Financial institutes such as banks will be banned from owning virtual currency, buying them, mortgaging them, or owning shares in them.
Those who use virtual currency will go through a stricter guideline for authentication. The government already previously announced that it will prevent ICOs.
Transactions in virtual currency will only be allowed in exchanges.
Written by Zdnet.com
One of the World’s Biggest Bitcoin Markets Is Holding an Emergency Meeting on Cryptocurrency
SEOUL, Dec 13 (Reuters) – South Korea’s government has called an emergency meeting to discuss the trading of cryptocurrencies, and measures on the market will be announced on Friday, a central bank official said on Wednesday.
The official declined to give further details, but the announcement underscores how global regulators are grappling with the frenzy over cryptocurrencies, just days after the launch of the world’s first bitcoin futures.
Bitcoin-related shares slumped in early trade. Vidente Co Ltd and Omnitel Inc, which hold stakes of South Korea’s biggest bitcoin exchange Bithumb, fell 8.4 percent and 4.9 percent, respectively. Bitcoin mining-related company JCH Systems Inc shares dropped 4.2 percent.
South Korean policymakers are facing a growing chorus of calls to regulate the market as sharp volatilities in virtual currency trading such as bitcoin has created a new tribe of traders called “bitcoin zombies.”
Earlier on Wednesday, Australia’s central bank governor said the fascination with virtual currencies feels more like a “speculative mania.”
The comments come days after his New Zealand counterpart said bitcoin appeared to be a “classic case” of a bubble and that its future was in doubt.
As bitcoin notched more than 15-fold increase in value this year, Prime minister Lee Nak-yeon in November said he is worried about students jumping into the frenzy, and called on the government to take action as “some serious pathological phenomenon” could arise if left unchecked.
The finance minister said on Monday that ministries are in talks to decide whether such trading should be regulated, while the chief of the financial regulator said some Justice Ministry officials are calling for an outright ban on cryptocurrency trading. No decisions have yet been made, however, on regulating the market.