Litecoin: Is It a Testing Ground for Bitcoin?

Recently, I wrote about big changes coming for bitcoin. A “fork” is coming at some point which will change a piece of the code that runs the bitcoin network. This fork, like a fork in the road, requires that a choice be made between going in one direction or another.

In the world of bitcoin, consensus is required for any such changes. Specifically, 51% of all miners – the bitcoin network computers – must align with a change for it to take hold. The challenge is, there are about a third of miners backing Bitcoin Core’s Segwit (Segregated Witness) proposal and another third backing Bitcoin Unlimited.

Litecoin to the Rescue?

What is interesting here is the timing. Bitcoin started operating in January 2009 and has been running continuously ever since. One of the first “altcoins”, so-called as they are “alternatives to bitcoin”, was called litecoin which started operating in late 2011. For many years, bitcoin was considered the gold of cryptocurrencies and litecoin the silver. Yet, litecoin had lost some favor in the past few years due to some new young upstarts like ethereum, dash, and monero.

Today, litecoin is back in the news. First, the price of litecoin has more than doubled in the last month. (You won’t find that kind of return in the stock market!) Secondly, the popularity of litecoin will likely push it to take its own “hard fork” to accommodate the growing number of litecoin transactions. This will require some adjustments to the program that runs the network to accommodation a greater number of transactions.

Based on the blockchain model of bitcoin, litecoin offers more coins, shorter block times, and a simpler mining algorithm that are seen positively in the digital currency community. The litecoin community is also about to consider implementing Segwit, one of the scaling solutions that the bitcoin community is also considering.

The trigger point was to fill its blocks to 75% for a certain duration before “flipping the switch” and turning on the Segregated Witness algorithm, which would allow up to three times as many transactions to fit into existing blocks. This leadership from litecoin would provide a lot of visibility to the bitcoin community, possibly even before bitcoin decides it needs a fork of it own.

When Will the Fork Happen?

The litecoin fork could happen shortly, perhaps in a matter of weeks. If that occurs, all eyes will be on litecoin to see how the scaling change occurs, what happens to the stability of the litecoin network, and what impact it has to the price of litecoin – at least in the short term.

It is a unique opportunity for bitcoin miners, users and supporters to have this “trial run” on an altcoin like litecoin. Since litecoin’s code is 95% from bitcoin, what works for litecoin will likely work for bitcoin as well.

The Price of Bitcoin

Perhaps this is why the price of bitcoin has been flirting with $1,200 again in recent days. I believe there is a growing confidence in the resiliency of bitcoin, its blockchain, and whatever choice the community makes about the next steps in bitcoin’s – and litecoin’s – future.

In full disclosure, I own some of both coins, and I plan to hold on to them. If you are looking to diversify from bitcoin and acquire some altcoins, litecoin could be a good choice for you. And, at just about $10 per litecoin, you can stock up on a lot more of those for the same investment in bitcoin. In part, that’s why people consider bitcoin to be like gold and litecoin like silver.

As for me, why choose? I like both silver and gold!

Marc Carignan is founder of The Bitcoin Tutor, a company dedicated to helping people learn about and profit from the future of money. To learn more, visit http://thebitcointutor.com.

2 comments on “Litecoin: Is It a Testing Ground for Bitcoin?

  1. I read your article on litecoin with interest. I also read your bitcoin tutor. My question is how to purchase litecoins ?

    • Paul, Glad you found my litecoin article interesting. Like traditional fiat currencies (i.e., nothing backing them up), cryptos trade in currency pairs. For example, fiats trade USD/EUR, USD/GBP, and GBP/EUR. Cryptos are similar, such as BTC/USD (bitcoin/USDollar), BTC/EUR, or LTC/USD (litecoin/USDollar). Most cryptos, however, do not trade directly for fiat. Expect to find PPC/BTC, ZET/LTC, and other crypto/crypto currency pairs. To answer your litecoin question, LTC is traded in over 200 pairs worldwide and on dozens of exchanges. LTC also trades directly for fiat on some exchanges, and through bitcoin on others. A great resources is http://coinmarketcap.com. Click on the crypto price to find all the places where that crypto is traded. To learn more, subscribe to my free weekly email at The Bitcoin Tutor site. Good luck! / Marc

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