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Why Does Litecoin Observe Bitcoin Intently?

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Litecoin founder Charlie Lee typically refers back to the altcoin because the “silver to Bitcoin’s gold.” Other than sharing the identical codebase, each cryptocurrencies additionally exhibit largely related value actions in cryptocurrency markets, rising and falling in tandem. 

Additionally they complement one another. Bitcoin’s unique mandate was to turn into a medium for day by day transactions. However scaling issues have prevented it from fulfilling that position. In the meantime, Litecoin has picked up the mantle and included scaling applied sciences into its ecosystem to allow digital funds on its platform. In 2017, Litecoin had, what some analysts referred to as, a phenomenal year. As of 2021, there are 3,178 retailers globally that accepted Litecoin as cost.

The resemblance between the 2 cryptocurrencies might sound baffling to observers, particularly for the reason that cryptocurrency ecosystem is premised on range in purposes. However it happened largely as a consequence of a aware determination by Lee to have Litecoin comply with bitcoin. In a 2018 interview, he defined the rationale for his name.

Key Takeaways

  • Litecoin was one of many first “altcoins” to attract from Bitcoin’s unique open-source code to create a brand new cryptocurrency—one that’s nonetheless energetic right now.
  • As a result of Bitcoin stays the principal cryptocurrency, different main altcoins equivalent to Litecoin do are inclined to comply with its value traits.
  • Litecoin’s creator, in addition to different adherents, have referred to Litecoin because the silver to Bitcoin’s gold.

Why Does Litecoin Observe Bitcoin? 

Lee began bitcoin as a result of he knew that equal transaction charges on bitcoin would show to be problematic for transferring small in addition to giant quantities. “If bitcoin is targeted on shifting giant quantities of cash, then the charges shall be excessive and safety shall be excessive. Litecoin can act as a praise. It may be used for smaller quantities of cash and have decrease charges,” he defined. In 2018, the Litecoin Basis, the nonprofit related to Litecoin, acquired 9.9% of Germany’s WEG bank, opening the door for this cryptocurrency to turn into part of mainstream banking.

Bitcoin is the mom ship for a majority of cryptocurrencies right now, which means that they’ve repurposed its code to go well with their ends. However Lee adopted a hands-off method to bitcoin’s unique code whereas creating Litecoin. As an alternative, he enhanced bitcoin’s unique code with new options and functionalities.

For instance, Litecoin has a bigger block measurement and processes transactions way more rapidly as in comparison with bitcoin. Lee mentioned he trusts bitcoin and its code is structured in such a fashion for a motive. “We’re seeing a variety of cash change some stuff round after which get hacked or have one thing blew up of their face, just because they didn’t notice that the factor they modified was there for a motive,” he mentioned.

What Are the Drawbacks of Lee’s Strategy? 

There are two foremost drawbacks to Lee’s techniques. 

The primary one is that, barring a few exceptions, Litecoin’s value has largely mimicked that of bitcoin’s value trajectory. It additionally signifies that Litecoin is just not as enticing to traders as bitcoin as a result of it’s not sufficiently distinguishable from the unique cryptocurrency. Not surprisingly, litecoin’s valuation is minuscule ($10.2 billion market cap) as in comparison with bitcoin ($891 billion), as of Dec. 30, 2021.

The second is a transference of bitcoin’s vulnerabilities to its progeny. Within the interview, Lee mentioned he was frightened a few bitcoin bug that has the potential to crash nodes in its community and destroy their worth. Litecoin shall be immediately affected by such a crash as a result of it shares code and copies bitcoin’s value actions. 

“One thing like that would like destroy 90% of its worth in a single day. So stuff like that undoubtedly retains me up at night time. In Litecoin’s case, we’re working a community that’s value three billion {dollars}. That’s nonetheless some huge cash,” mentioned Lee.

Investing in cryptocurrencies and different Preliminary Coin Choices (“ICOs”) is extremely dangerous and speculative, and this text is just not a advice by Investopedia or the author to spend money on cryptocurrencies or different ICOs. Since every particular person’s state of affairs is exclusive, a certified skilled ought to at all times be consulted earlier than making any monetary selections. Investopedia makes no representations or warranties as to the accuracy or timeliness of the data contained herein. As of the date this text was written, the writer owns 0.21 bitcoin and 1 Litecoin.


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