On September 14, 2018, Tushar Jain, a managing partner at Multicoin Capital, wrote a report calling Litecoin (LTC) an overvalued relic. The report paints a bleak picture of the present state of Litecoin citing the absence of development, fading interest, and market changes as some of the causes. While the points made are extremely basic and easily defendable, there is no clear explanation for the scrutiny at this particular time. Also, the report almost deliberately ignores major developments and partnerships accomplished by Litecoin throughout the year. Not to mention, Litecoin remains highly utilized and it continues to garner interest. It is worth exploring the reasons given in the report, the responses to these allegations, and the overall conditions of Litecoin as a viable investment.
Litecoin is a peer-to-peer, decentralized, open-source, cryptocurrency created by Charlie Lee, and launched in October 7, 2011. LTC is a codebase fork of the Bitcoin’s blockchain (bitcore) with specific changes designed to make it faster and more efficient. For example, whereas Bitcoin has a maximum of 21 million mineable coins, Litecoin has 80. Litecoin has a reduced block production time of 2.5 minutes, as opposed to Bitcoin’s ten minutes. Also, unlike Bitcoin’s hashing algortith SHA-256, Litecoin using its own called Scrypt. In most respects Litecoin is very similar to Bitcoin. This makes it compatible with Bitcoin’s SegWit and Lightning Network upgrades. Litecoin is the number seven cryptocurrency by marketcap.
Debunking Market Narratives
The Multicoin’s report lays many claims against the current valuation of Litecoin and its position as a market leader. The authors’ intent is to in fact ‘debunk’ Litecoin from being a solid investment. He starts by saying that the status of Litecoin as a top ten coin is overrated and made possible by hype and ignorance. He believes the price boom of late 2017 raised the value of Litecoin in part due to its close association with Bitcoin. Retail investors, eager to capitalize on the rapidly expanding price bought Litecoin out of greed without truly understanding its use. The report mentions this point numerous times citing that Litecoin was one of only three coins offered by Coinbase at the time. Therefore, it gave it an unjustified, perceived, elite status; one that will fade as Coinbase adds other coins with comparable market audience.
Another major point made is the lack of a clear Roadmap and the abandonment of the project by its creator and partnerships earlier in 2018. Last year, the Litecoin Foundation offered a number of projects (Mast, Lightning Network, Atomic Swaps, Colored Coins, Privacy, etc.) as a guideline for their future course. However, the majority of these projects are largely incomplete. Also, soon after its highest price point, Charlie Lee announced that he was selling its entire holdings due to conflict of interests. And to make things less promising, Litepay, the planned payment processor abruptly shut down operations a few months later. With Litepay went away the potential of Litecoin-based credit cards, and prompt implementation.
The report also cites the ownership of one million Litecoins by mining giant company Bitmain. And, that the company could sell them at any time in favor of their Bitcoin Cash investment instead. This uncertainty takes away from Litecoin’s stability. The report other points question Litecoin’s future network security due to its decreased mining profitability which causes miners to drop out or to be replaced by ASIC rigs. And that Bitcoin’s upgrades will destroy Litecoin’s advantage making it less and less relevant. All of these factors combined make Litecoin a questionable investment; however, there is a lot more to Litecoin that counters this report.
The Other Side of the Coin
First of all, Litecoin delivered a product that is superior to Bitcoin in most respects. Not the least, faster confirmations and lower transaction fees. All investors know this, and understand that in a speculative market, Litecoin is the better choice. Second, Litecoin serves as a test bed for all Bitcoin upgrades (SegWit and Lighting Network) and most likely become part of Litecoin. Third, Litecoin sells in 74 exchanges with 400 markets; the fact that Coinbase adds other coins will not diminish its status or its price.
Fourth, it is not unusual for creators to sell the stakes in their companies and walk away rich. This does not mean the company is a failure. On the contrary, it is an opportunity. Litecoin is an open source project; there is nothing preventing anyone from re-purposing its code at any time to develop it or introduce an entirely new product. Fifth, Litepay’s partnership was replaced by TokenPay. Another payment processor which is planning to provide financial support to LTC via its WEG bank, including Litecoin credit cards.
Also, the Bitmain and ASIC connection is a problem shared by all major coins trying to contain mining monopoly and decentralization. Thus, this is not an isolated cause that will bring Litecoin down. The only clear problem mentioned in the report is the lack of a clear path or Roadmap. Even though UBER, Starbucks, and now HTC announced interest in Litecoin, implementation is not yet a reality. Finally, the lack of development and low number of GitHub’s commits for Litecoin is due to the intense competition for contributors among the many opportunities available.
All legacy coins are coming to terms with old age. AI will dominate future scaling, consensus, and smart contract applications. But this is not to say that the first crypto projects are no longer useful. Litecoin remains a solid project, with sound and proven technology. It offers daily capability that most coins only talk about in their whitepaper. Also, this probe into Litecoin’s overall integrity comes amid similar speculations made against Ethereum this month. And it lends credibility to Charlie Lee’s response that this report is an effort to suppress the price of Litecoin. It is all part of a larger agenda between competing interests to gain an advantage on ownership and custody of cryptocurrencies. Litecoin is not impervious to the test of time, but it is far from being a relic. Instead, we might learn that its best days are yet to come.