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Important points:
Created in 2011, Litecoin has demonstrated resilience and reliability over the years, maintaining its position as a top cryptocurrency. Litecoin has recorded an impressive number of daily active users, a significant achievement for a blockchain that does not support smart contracts. However, Litecoin faces significant competition from other payment cryptocurrencies such as Bitcoin Cash, as well as the rise of stablecoins, which are preferred for payments due to their lower volatility.
In 2011, Bitcoin was only two years old. But Charlie Lee, a brilliant mind fresh out of the halls of Google, had a vision.
Lee wasn’t just an engineer jumping on the blockchain bandwagon. He envisioned a virtual currency that would complement Bitcoin, rather than compete with it. He viewed Litecoin as a digital asset designed for everyday users, not just tech-savvy early adopters.
When building and launching Litecoin, he improved upon Bitcoin to allow for faster transaction times and a mining process that didn’t require a supercomputer farm in a basement. It was a cryptocurrency for the masses, a digital coin that grandma could use (well, mostly).
The cryptocurrency community took notice. By late 2013, Litecoin was no longer just an altcoin, with a market capitalization of $1 billion and rising to number two in the crypto rankings. In a brief moment of brilliance, it went from digital silver to the digital gold of Bitcoin.
However, the world of cryptocurrencies is rapidly changing and new players are entering the game. By 2016, Ripple had pushed Litecoin off the silver medal podium. Shortly thereafter, Ethereum surged to the top, taking the second spot and tenaciously holding on to it.
Still, Litecoin has proven its staying power for over a decade. The LTC token has weathered bull and bear markets, survived the rise of DeFi and NFTs, and still holds a high place among the crypto elite. Litecoin has consistently been in the top rankings for over 10 years.
So what is the secret to Litecoin’s staying power? How has this Bitcoin alternative been able to maintain its shine in a market that is always on the hunt for the next great opportunity? Here, we will explain Litecoin in detail for the savvy crypto investor.
Important basic data
Daily Active Users (DAU): According to IntoTheBlock, Litecoin records 368,000 daily active users. This represents a significant increase in user engagement compared to the previous year.
Litecoin DAU over the past year
Fees and Revenue: Litecoin primarily makes money through transaction fees, and transaction fees are significantly lower, especially when compared to cryptocurrencies like Bitcoin. These fees are supplemented by block rewards that incentivize miners to protect the network. As block rewards decrease over time due to halving events, transaction fees will play an increasingly important role in incentivizing miners. Current low fees are sustainable as long as trading volumes remain high enough to provide sufficient compensation to miners.
Market Capitalization: LTC’s market capitalization is $4.3 billion, a notable 30% decrease compared to a year ago. This is second only to other Proof of Work (PoW) payment tokens such as Bitcoin Cash ($6.3 billion) and DOGE ($14.3 billion).
market analysis
The problem Litecoin solves: Litecoin was created to provide a faster and more scalable alternative to Bitcoin. Block time is 2.5 minutes (compared to Bitcoin’s 10 minutes), allowing for faster transaction confirmation.
Customers: Litecoin customers are individuals and businesses who want to facilitate faster and cheaper blockchain transactions. (Please note, however, that merchants must accept Litecoin and this is a long process.)
Value Creation: Litecoin’s value lies in its speed and low transaction fees. It provides a secure, low-cost, and speedy trading network, making it ideal for small and medium-sized transactions.
Market Structure: Initially, Litecoin was one of Bitcoin’s strongest competitors. However, 10 years later, the cryptocurrency landscape has evolved and new cryptocurrencies like stablecoins have emerged that offer faster and more efficient transaction methods.
Market Size: The global cryptocurrency payments market is valued at $1.29 billion and is projected to grow to $4.85 billion by 2033. While this is a huge growth opportunity, Litecoin faces increasing competition, especially from stablecoins like USDC and USDT that offer faster and lower cost services. Unstable payment solution.
Regulatory risk: Because Litecoin is decentralized, it is probably not the first cryptocurrency that regulators will target. That said, all digital assets carry some degree of regulatory risk.
Our analysts have rated LTC a 4 out of 5 for their market analysis. Download the complete scorecard here.
competitive advantage
How big is the company’s moat? Will they be able to protect themselves from competitors?
Technology/Blockchain Platform: Litecoin runs on a proprietary Proof-of-Work blockchain that has been in operation for over 10 years.
Lead time advantage: Litecoin was one of the first few altcoins to start the movement to develop an alternative to Bitcoin.
Contacts and Networks: With the backing of prominent industry figures, including founder Charlie Lee, you can safely assume that Litecoin has access to major industry players.
Our analysts rate LTC’s competitive advantage at 4 out of 5. Download the complete scorecard here.
management team
Does the team have the experience, intelligence, and integrity to make the company great?
Entrepreneurial Team: Litecoin has a very strong group of developers and a reputable board of directors, including Charlie Lee, Xinxi Wang, Alan Austin, and Zing Yang.
Industry/Technical Experience: Being one of the oldest projects in the industry, it’s safe to say that the team has the necessary industry experience.
Integrity: The Litecoin team is not completely free from controversy. In 2017, Charlie Lee faced backlash from the community after selling all of his LTC holdings during that year’s bull market.
Our analysts have rated LTC a 4 out of 5 for management. Download the complete scorecard here.
How tokens work
Is the token design advantageous for long-term investors?
Do I need a token? Like Bitcoin, Litecoin requires a token for basic transactions. Far from being a “bolt-on blockchain”, tokens are products.
Added value: LTC works like many other tokens, but has a distinct advantage due to its short confirmation time.
Decentralized: Fully decentralized. Users create value through the cryptocurrency mining process.
Token Supply: LTC has a fixed supply of 84 million tokens.
Public Exchanges: LTC is listed on major cryptocurrency exchanges such as Binance, Coinbase, and KuCoin.
MVP: Litecoin has been around for over a decade and has made a name for itself in the cryptocurrency world.
Our analysts rate LTC 4.5 out of 5 for Token Mechanics. Download the complete scorecard here.
User adoption
How easy is it for businesses to grow users?
Technical difficulties: LTC suffers from the same complexities that come with blockchain technology. Users must understand concepts such as private keys, wallet management, and transaction fees, which can be daunting for those unfamiliar with cryptocurrencies.
Halo Effect: Litecoin is closely related to Bitcoin, so the halo effect is strong. However, Litecoin does not have many strong connections with other institutions or influencers, limiting merchant acceptance.
Buzz: Litecoin has a huge buzz and a strong social media presence with over 1 million followers on Twitter and 359,000 members on the subreddit.
Our analysts rate LTC a 4 out of 5 for user adoption. Download the complete scorecard here.
potential risks
What are the risk factors that keep smart investors away?
Team: Litecoin’s team is transparent and its founder Charlie Lee is a well-known figure in the cryptocurrency space. However, past controversies, including Mr Lee’s sale of all of his LTC holdings in 2017, have raised concerns about his integrity. Although the team has strong technical experience, such disputes can lead to a perceived risk in trusting leadership completely.
Finances: The Litecoin Foundation faces financial risks as it relies heavily on donations, and since 2017, the majority of its funding has come from Charlie Lee (according to CoinDesk in 2019). The Litecoin Foundation’s latest financial statements put its total assets at approximately $400,000, further highlighting the foundation’s financial vulnerability and raising concerns about its long-term sustainability.
Regulation: Litecoin carries some degree of regulatory risk, especially since it is one of the most popular cryptocurrencies on the market. However, the project operates outside Singapore, a relatively cryptocurrency-friendly jurisdiction, minimizing the risk of US-based intervention.
Smart Contracts: Litecoin’s smart contract capabilities are limited compared to newer blockchain platforms. Regarding bug reporting, there is currently no notable bug bounty program in place, but issues can be reported through the Github forums.
Traction: Litecoin faces low traction risk as it has consistently demonstrated the ability to attract and retain users both on-chain and off-chain on social.
Behavior: We believe many users are currently investing in LTC based on its long track record and proven ability to withstand periods of high volatility. Moreover, many others seem to be hoping that this project will return to its glory days.
Our analysts have rated LTC’s risk at 2.5 out of 5 (note in this section, lower = better). Download the complete risk scorecard here.
Key points for investors
Bull Case: As one of the oldest and most valuable cryptocurrencies by market capitalization, Litecoin boasts proven longevity and reliability. This long-term stability is a testament to its resilience and the trust it has earned within the cryptocurrency community. Additionally, Litecoin has recorded an impressive number of daily active users, a remarkable achievement for a blockchain that does not support smart contracts.
The bearish case: However, Litecoin faces significant competition from other PoW payment cryptocurrencies such as Bitcoin Cash and Dogecoin, which have large market capitalizations. LTC’s market capitalization has declined significantly over the past year, indicating volatility and market challenges. Additionally, the rise of stablecoins, which are preferred for payments due to their lower volatility, poses competitive challenges to the use case for Litecoin as a payment method.
Overall, our analysts rated LTC a 3.5 out of 5 based on its longevity, which has proven to be balanced against significant competition from other payment cryptocurrencies. Download the complete scorecard here.
This analysis will help you become a better-informed investor. It’s not financial advice. The future may look different than the past. All investments involve risk. See our investment approach to learn how to manage risk through diversification. Never invest more than you can afford to lose, and treat your losses as a learning experience.
