Litecoin has been around since October 7th, 2011, when Bitcoin – the first and largest cryptocurrency – experienced a hard fork and split into two. To date, it is the largest Bitcoin alternative that was created by a hard fork.
Because Litecoin is based on the same blockchain technology as Bitcoin and contains nearly identical code in its core, Litecoin can be viewed in much the same way as the Mini-Me clone of Dr. Evil in the Austin Powers movies.
Like Mini-Me, LiteCoin is much smaller and struggles for recognition in the shadow of its larger, more established originator. Unlike Mini-Me, Litecoin has incorporated code that many see as superior to Bitcoin, giving it advantages in security and scalability, the two most important issues facing cryptocurrencies in the future.
Due to a recent increase in acceptance of Litecoin combined with turmoil in the Bitcoin market, Litecoin has made large strides in adoption, pushing to a record-breaking month in July. With cryptocurrency investors hoping that a bullish market is once again on the horizon, many are seeking for Litecoin predictions.
It Can Be Any Color, As Long As It’s Black
When a new technology is adopted, the first iteration is generally functional but poorly optimized.
If the new innovation is popular and grows quickly, the innovators tend to be conservative about making changes. They realize that change is bad for the status quo, and if the status quo includes rapid growth, they don’t want to tinker with anything under the hood until after things settle down.
Henry Ford made this famous statement when pressured to add new color options to the Model T. He knew that adding options increased complexity, and the black paint dried faster than any other. This focus on maximizing the fast and cheap curves was instrumental to the birth of the mass produced automobile, but it also created opportunities for competitors to capitalize on the new market.
Similar examples can be seen when Steve Jobs and Apple refused to compromise on quality and created a niche for IBM clones to compete. While Ford went on to be the top automobile manufacturer for decades (and is still a world leader in the automotive industry), Apple was relegated to an abbreviated market share for decades.
AT&T and AOL also suffered massively from an unwillingness to adapt to market pressures and new innovation.
It is easy to criticize when one has the advantage of hindsight. Innovators and corporate executives have to make many difficult decisions every day about what changes to adopt and which to reject. Only with hindsight can we know which moves are good and which are bad.
The Perils of Competition
When you are experiencing rapid growth, you draw a lot of attention. Many innovators try to improve on your idea so they can compete. In many cases, the conservative nature of the market leader creates openings for competitors to make a play.
Bitcoin miners are demonstrating classic conservatism when it comes to making changes to the core code. Their conservatism may even be right. But Bitcoin has scalability, security, and utility issues. Most miners want a block size of 8MB. Thanks to the recent adoption of Segwit2x, the block size has been doubled from 1MB to 2MB, but this is still far too small for the Bitcoin community.
Even SegWit adoption faced considerable resistance, despite the fact that SegWit is a non-controversial response to legitimate scalability concerns. In order for Bitcoin to become a major currency, these issues must be addressed. If another cryptocurrency addresses these problems first, then Bitcoin may find itself in the same position as MySpace… A horror story about how you can go from hero to zero, almost overnight.
Litecoin Predictions: Back to the Future
Unlike Ford, Apple, and other companies, Bitcoin could easily adopt controversial or risky code upgrades – after those upgrades have been tested in the smaller derivative markets like Litecoin. The fact that Litecoin shares most of the same code with Bitcoin makes this not only possible but quite easy – assuming you can get enough Bitcoin miners on board.
If the Segwit2x roll out for Bitcoin follows the same pathway as that of Litecoin, Bitcoin miners and users could still see substantial delays in transaction times and costs. While Litecoin has adopted Segwit, the code has not been integrated into the core program yet. Essentially this means Segwit compliant transactions are optional. As a result, it is still too early to use Litecoin as a predictor of what kind of impact Segwit2x will have on Bitcoin.
If Bitcoin makes a smooth transition to Segwit2x and does so faster than Litecoin, then the fears that drove investors to Litecoin could cool, pulling some or all of them back to Bitcoin. Alternatively, the smooth adoption of Segwit2x could increase the general popularity of cryptocurrency, giving the broader market more evidence of maturity and dynamic problem-solving. This could lead to an expansion in cryptocurrency trading in general and become the rising tide that lifts all boats.
The sluggish and uncooperative nature of the Bitcoin Segwit2x drama could introduce a third option: As the marketplace settles down post implementation, more users could be motivated to experiment with the smaller cryptocurrencies instead of fighting to change Bitcoin.
Creating Value Out of Uncertainty
The future here is uncertain but has many potential upsides for Litecoin.
If new ideas are trialed in Litecoin and other, smaller cryptocurrencies, the hurdles to implementation will be lower as the people who hold the smaller currencies are more tolerant of risk. If changes are successfully implemented in the smaller and more experimental cryptocurrencies, the conservative Bitcoin miners can evaluate the strengths and weaknesses of the changes and proceed with implementation in Bitcoin.
Waiting until after successful “beta testing” to implement new ideas could be very attractive to risk-averse miners, especially if that beta testing occurs in a derivative fork. This could not only help Bitcoin, but it could also increase interest in the derivative markets spawned by the largest cryptocurrency… Assuming the beta tests do not include any catastrophic failures.
What are your Litecoin predictions? Will it ever outshine its predecessor Bitcoin?