Why It’s Over For Litecoin

In early 2013, when I bought my first Bitcoin, the altcoin scene was very different than it is today. At the time, the euphoria of Bitcoin was rubbing off onto the secondary and tertiary cryptocurrencies and there were people who genuinely thought that there could be “a silver to Bitcoin’s gold” or that altcoins could provide a useful testbed for features not yet incorporated into the Bitcoin protocol.i There weren’t even that many altcoins to choose from then, maybe a few dozen and certainly less than 100.ii

At that time, the leader of the pack was Litecoin, Charlie Lee’s “democratic”iii coin experiment. Even as recently as 7 months ago, the last time Bitcoin’s price went nutty,iv Litecoin was all the rage. It was The Next Big Thing and peaked around $50 per coin right when BTC hit $1,100, making it the Next Best Thing too.

Then this happened.v

LTC:BTC all-time price chart via BTC-e

But how? How did Litecoin become just another altcoin/scamcoin?

After Googling “litecoin advantages over bitcoin” I came up with this ZDNet article from December 2013, back in Litecoin’s halcyon days. Let’s allow the article’s author, Jason O’Grady, to walk us through the wonder that is Litecoin to see if we can’t see where it all went so wrong.

Although Bitcoin is the media darling, Litecoin is a better option for the average user wanting to get into crypto-currency mining.

Right off the bat, we see that Litecoin is pitched at the “average user.” This, of course, is a huge red flag that Litecoin is doomed to failure. Products and services aimed at the lowest common denominator must necessarily be shit. This works in every aspect of finance and society. If you don’t believe me, take the Bitcoin Securities Exchange scene for example.

At around US$30/LTC, it’s more affordable to outright purchase too. 

This author, like many a CoinDesker, is of the mistaken belief that buying a whole shitty thing just because you can afford it is better than buying a part of something far superior. Today, you can buy a million satoshis for $6 or you can buy most of the Dogecoin for sale on the market. Incredibly, some people will actually go for the latter.vi This is nonsense. By this logic, if you’re trying to find transport to the next town, it’d be better to buy one rollerblade than a bus ticket.

So what other reasons are there to choose Litecoin?

A group of people saw this hardware race as detrimental, and sure enough we see the effects of it — namely expensive/risky hardware on an quickly rising difficulty level. Thus it’s very difficult to continue participating without large investments to stay ahead. This group of people proposed a new coin type — Litecoin (LTC) -- that relied on an algorithm that would be resistant to a rapidly escalating hardware race, one that needed fast memory and lots of it. These components are more expensive and present a serious barrier to entry for a Litecoin ASIC that would be economical.

Ah! Mining! Needless to say, many derps still think that the hashrate race, that element that secures the network, is “unfair”vii and that the confirmations aren’t fast enough to make Bitcoin a useable consumer technology. Not that anyone particularly cares about these points. Ironically, scrypt ASIC miners are now being developed by the likes of KNC Miner and are getting ready to fuck up Litecoin and the other scrypt-based coins quite badly. With even fewer players developing scrypt ASICs, the hashing power will be ever more centralized. On the consumer side, people are still perfectly content to use their Dollars, Euros, and Pesos. And why risk keeping something so valuable on your phone just so you can buy a latte?viii

Litecoin also has four times as coins scheduled to be mined (84 million versus bitcoin’s 21 million), which may make it more accessible to future participants. Perhaps not though, as both coin types can be subdivided to eight decimal places.

O’Grady gets it exactly right here and sees through Litecoin’s marketing gimmick. More coins confer precisely zero advantage, as Dogecoin also demonstrates.

It will be easy to accept Litecoin in a world that also accepts Bitcoin (since the technologies are nearly identical).

The merchant angle would hold water, if cryptocurrencies were proving to be consumer technologies, which is dubious despite the raft of new merchants accepting it.ix Very few people are working on merchant processing or POS systems for altcoins either. It’s really Bitcoin or nothing at all. When it’s the best store of value the world has ever known, why roll the dice with other junk?

Litecoin was never able to demonstrate its superiority. Nothing has.

And that’s it. Litecoin lost the marketing as well as the technical battle. It isn’t the silver to Bitcoin’s anything. It’s just another scamcoin that had its moment in the sun and will now be relegated to the history books next to Keisercoin, Auroracoin, and MaidSafeCoin.

If you have any altcoin that’s been around for >6 months sitting in a wallet somewhere, their time has come and gone. Kids with dreams of riches who play daytrader on Cryptsy have moved on to the next shiny thing. Now would be a good time to find an alternative. Salvage what you can.

And allow me to suggest Bitcoin.

___ ___ ___

  1. There have been very, very few examples of useful altcoins. I’ll leave the identity of such examples as an exercise for the alert reader. []
  2. There are literally too many altcoins/scamcoins to count today. N.B. “altcoin” and “scamcoin” are necessarily interchangeable as so very few altcoins have proven otherwise in the long run. []
  3. mircea_popescu: you know it just occurs to me, the democratic political process and open source software have a shitload in common.
    mircea_popescu: the only reason shit like the openssh was full of is even getting fixed at all is that it costs nothing to alter code.
    mircea_popescu: if you had to pay fiddy bux to edit github bleedin’ heart would still be there and a bunch of dorks all over the web would be explaining how it’s not really that bad
    mircea_popescu: policies already in place cost about that much to change and it’s how it works.
    mircea_popescu: both methods of organising labour are utterly horrible for anyone interested in quality work. they do deliver a very extensive array of crap
    mircea_popescu: unfortunately… it’s generally very crappy.
    MP via #bitcoin-assets []
  4. What with all the insider trading at Gox. See The Willy Report. []
  5. Chart via cryptocoincharts. Updated December 16, 2015 because last chart went rogue. []
  6. I knew a girl like this in University. She worked as a waitress at the casino, was making good coin, and wanted to buy a new car. For the same $35k, she could’ve bought an entry-level Lexus IS250, which she considered, but she chose to buy a decked-out Kia Optima on $5k rims instead because she wanted “the best” not something “entry-level.” She ended up with a roughly shod beige box that depreciated so fast it made her head spin rather than a modestly-appointed but rock-solid luxury car from a reputable brand. And this was before Peter Schreyer had a chance to improve Kia’s design language, making the girl’s choice that much more unbelievable. Let this be a lesson. []
  7. This, despite the fact that Satoshi Nakamoto chose SHA256 quite intentionally to minimize the network susceptibility to botnets, which are cheaper and more insidious than ASICs. []
  8. Even Blockchain.info, apparently the safest of the webwallets, is the yacht with the fewest holes in its hull. From Twitter:
    @bitcoinpete: The security fail @blockchain won’t tell you about: http://fr.anco.is/2014/06/16/the-security-fail-blockchain-wont-tell-you-about/
    @aantonop: @Blockchain @bitcoinpete All bitcoin wallets are “potentially insecure”, blockchain’s less so than anyone else.
    @aantonop: @Blockchain @bitcoinpete 100% security doesn’t exist. There are weaknesses in any system. We manage these risks…
    @bitcoinpete: @aantonop @blockchain Dat marketing. You’re still selling the yacht with the fewest holes in the hull. Won’t stop sinking.

    Update 16/12/2015 : this was published just shortly before it was revealed that blockchain.info was revealed to have insufficiently random nonces for private key generation, be vulnerable to 2FA work-arounds, and before they were “hacked” to the tune of 267 BTC.

    Unsurprisingly, Andreas M. Antonopoulos was turfed shortly after this conversation. []

  9. Expedia just announced last week that they’re now accepting Bitcoin. No word on when they’ll start accepting scamcoins. []

29 thoughts on “Why It’s Over For Litecoin

  1. pankkake says:

    I wouldn’t call Litecoin dead this early.

    Not that I don’t wish it was – Litecoin is a fraud and is probably the biggest fraud* of all altcoins – none of its changes matter, and could even be considered worse. There is nothing to support such a valuation for something that should be an useless experiment (some other altcoins are interesting experiments but again have no merit for a high valuation). I’ll stop there, this should be on my article(s) on altcoins if I ever find the time to write them.

    But anyway, Litecoin was called dead by many (me included**) then a noob wave bought all the altcoins, despite the warnings they were given.
    Particularly those: http://www.theguardian.com/technology/2013/nov/28/bitcoin-alternatives-future-currency-investments

    The slow decline will probably continue… unless a wave of clueless newcomers comes in, hoping to be early adopters when that just can’t be done.***

    * At least Dogecoin doesn’t take itself SO SERIOUSLY.
    ** I also said that ASICs would help me take it more seriously. Well, shit! However, Litecoiners still shouldn’t be. Remember, that was supposed to be a CPU coin, but acnee-ridden teenage gamers quickly forgot about it when they were able to use their GPUs again.
    *** And before someone accuses me of being one: I knew of Bitcoin at least in 2010, yet yet first acquired bitcoins in 2013 (if you exclude 0.5 BTC from Gavin’s faucet – hilarious right?). Just accept it, risk-taking has to be rewarded.

  2. As it’s only feature, Litecoin is a high-market-cap coin that isn’t Bitcoin.

    Long-term you are correct, but I think the tire will be slow to flatten, and you’ll see one or two more bubbles of decreasing intensity before Litecoin loses it’s position as “Bitcoin’s silver”.

    Someone is buying up thousands of BTC worth of Litecoins on the way down. LTC is likely at the whim of this party, and they are ready to pump and dump it all over again along with the next wave new blood Bitcoin brings when it bubbles again.

  3. FreeJack2k2 says:

    Pretty ridiculous. The price dive since mid-may can be DIRECTLY correlated to the deployment of large-scale ASIC miners into relatively few miners’ hands. This has led to a small group of miners controlling a disproportionately large portion of the block rewards, which they are dumping into Bitcoin in a rush to make ROI before the next salvo of hardware launches. By the end of 2014, the distribution of hashing power will have reached a similar equilibrium to what it enjoyed during the time it was dominated by GPUs and by having transitioned to dedicated hardware with hundreds of millions of investment in hardware infrastructure to support it, Litecoin will be a magnitude more interesting as both an investment and as a platform for development than it was, before.

    The point was never to be ASIC-proof. The point was not to compete with Bitcoin for miners (from Charles Lee’s own words) and this required a separate proof of work. He made it MORE ASIC-resistant than Bitcoin using Scrypt, but ANY coin that reaches sufficient market capitalization is going to be attractive to ASIC manufacturers. The thing is, Litecoin’s the only alt-coin to have reached that level and considering the “pump and dump” status of the majority of other alt-coins, it seems pretty unlikely that any others will benefit from ASIC development.

    • Bitcoin Pete says:

      By the end of 2014, the distribution of hashing power will have reached a similar equilibrium to what it enjoyed during the time it was dominated by GPUs

      Let’s touch base again on New Years Eve. My 2 bitcents is on the distribution of Litecoin hashing power being much more concentrated than it was, say, a year ago.

      Litecoin will be a magnitude more interesting as both an investment and as a platform for development than it was, before.

      Investment, maybe. “Platform for development,” almost certainly not. The last year was as good a time as any for Litecoin development as we’ve seen… none.

      The point was not to compete with Bitcoin for miners (from Charles Lee’s own words) and this required a separate proof of work.

      If Litecoin isn’t competing with Bitcoin for miners, the ultimate measure of a coin’s value, what’s it competing for? Merchant adoption? Tipbots? Reddit posts?

      Litecoin won’t be dead tomorrow, but its silver glow has tarnished into something closer to copper.

    • FreeJack2k2 says:

      Considering that the “concentration of hashing power” you refer to has absolutely nothing to do with the hardware being used to hash the proof of work and everything to do with pooled mining, it’s a problem that NO coin – not even Bitcoin (as evidenced by the recent Ghash.io scare) has truly solved. What ASIC DOES do is remove the mining from the reach of people using their gaming PC to earn some spare change. That isn’t “centralization” though…that’s just people whining about being priced out of the game.

      As a platform for third party development, a network with hundreds of millions of dollars in dedicated hardware distributed globally demonstrates stability to developers and investors. It’s a network that cannot be infected with botnets and the larger the network hashrate, the more difficult it becomes to compromise (outside of a 51% attack). Litecoin is at the same junction that Bitcoin was at in early 2013 and to declare it dead when it’s at the same point where Bitcoin started to truly take hold and attract significant investor attention is premature.

    • pankkake says:

      “Pretty ridiculous.” bagholding much?

      “He made it MORE ASIC-resistant than Bitcoin using Scrypt” had he understood scrypt properly, maybe. But he didn’t. https://twitter.com/shamoons/status/311256158658760704 for the lulz

    • FreeJack2k2 says:

      So kindly point me to the 3Th/s Scrypt ASICs that only pull 2,000 watts. Oh, that’s right…they don’t exist. Hence, ASIC-resistant. Scrypt as a proof of work is used because it’s secure, independently developed (read: not by the NSA) and who cares if he didn’t make it as memory-hard as he could have? That wasn’t the point. The point was to differentiate enough that he wouldn’t be trying to compete with Bitcoin for miners, which was a fool’s errand (see all the merge-mined coins in SHA-256 today).

      Not competing for miners does not equal not competing for market share in other areas, including merchant adoption and third party software development.

      This article is nothing but a hit piece by someone who believes nobody needs a choice and everyone should accept only one crypto-currency, because to do otherwise is to pull capital out of Bitcoin.

      Honestly…Litecoin has been declared “dead” so many times (as has Bitcoin) – it’s getting a little tired.

  4. cazalla says:

    Charles Lee is disingenuous at best and a scammer at worst. The silver to gold analogy doesn’t make sense, he’s smart enough to understand why yet he continues to pitch such fraud wherever he goes.

    If you read the entirety of the Litecoin thread on bitcointalk, it’s clear that it’s been a constant game of shifting the goal posts. First, it was designed to be GPU resistant, then ASIC resistant yet now ASICs were the end goal because it will secure the network.

    The initial price rise was based purely on someone posting the mtgox litecoin links in the trollbox on btce. I’d know, given I spent much of my time on there late 2012 buying this shit for 5c-6c per litecoin because I was an idiot and not in BA. That’s something most litecoiners don’t grasp – just because you made money doesn’t mean it’s legitimate, just because it went up in price doesn’t mean it’s not a scam. The best thing I ever did was pivot *chuckle* to BA instead of continuing along with redditors and other trollbox scammers. Most, just like I, have no idea of what they are actually involved in (scams).

    Since then, it’s become a game of litecoin on gox, litecoin on btcchina and now.. litecoin on coinbase!

    Litecoin vol as a % on china exchanges is awfully small.

    Lastly, the volume has always come from BTC-e and I’ve suspected for some time that the USD on that site operates as just another altcoin and they don’t hold anywhere near the amount that is claimed. It’s only a matter of time until the plug is pulled on btc-e and with that will come the end of litecoin as the fake volume and pumping is revealed.

    • Bitcoin Pete says:

      The best thing I ever did was pivot *chuckle* to BA instead of continuing along with redditors and other trollbox scammers. Most, just like I, have no idea of what they are actually involved in (scams).

      This.

  5. Bitcoin Pete says:

    I think the guy raises valid points, actually.
    The problem is his approach. He could have took an approach of reason. “This is how the situation looks to me. This is what certain data sets are presenting, and this is what I believe will ultimately happen. Maybe I’ll be right, maybe I’ll be wrong.”
    Instead he took the approach “blah blah scamcoin, blah blah its over, blah blah”.
    Classic example of cheapening your own opinion by virtue of being an asshole.

    This response on the reddits sorta says it all. Those whose feelings are easily hurt will have a tough time in this world, and doubly so on the internet, where positions are so regularly overstated for impact.

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