Litecoin: the little brother

Price at time of writing: $28.35

Market Cap: $503,102,328

Consistent with its name, Litecoin is essentially Bitcoin-lite and is the second most valuable altcoin. It shares nearly all the same features except it has a shorter block rate (every 2.5 minutes versus 10) and a different proof-of-work (scrypt versus SHA2). Shorter block rates mean faster transaction times, which is advantageous, but it’s not a huge change. The use of a separate proof-of-work is. Scrypt was chosen because it theoretically prevents the use of ASICs, those specialized chips that greatly increase mining power and efficiency (though there is debate over the validity of this claim). This is supposed to maintain a sense of egalitarian participation since the arrival of ASIC chips has significantly raised the barriers of entry for mining. If you aren’t already a Bitcoin miner, forget about it. That boat has sailed.

Unlike social networks, Litecoin benefits from its similarities to Bitcoin because of familiarity. All digital currencies have a learning curve, which meant Litecoin’s creators had little explaining to do. They also lucked out with timing. Litecoin popped up right around Bitcoin’s bubble earlier in the year, just as the first ASIC systems started shipping. This made it especially attractive to miners suddenly squeezed out by these powerful entrants. Rather than scrap their now unprofitable mining rigs, all they had to do was download some software to start mining litecoins, which had risen in value from about 50 cents in the fall of 2012 to a few dollars by early 2013. Because why not? They had nothing to lose.

Today, Litecoin maintains its status as a destination for Bitcoin castaways. For those who feel like they missed the boat, with Bitcoin hovering around $900, litecoins are a way to hedge their FOMO at a cost of only $20 each. Of course, you could always just buy a fraction of a bitcoin, but there’s something psychologically satisfying about owning a couple of something rather than 0.05.

All of which keeps Litecoin alive in a Google+ sort of way. It’s Bitcoin, but cheaper and not as popular, with a more accessible mining system. It’s there and people use it, but you aren’t really sure it has a purpose. It’s also not nearly as functional. If only a few vendors accept Bitcoin, nobody accepts Litecoin. That could change, and the shift could be an easy one, especially for those who already accept any digital currency. This makes its future much harder to predict, since it has no real identity of its own. But Litecoin may continue to exist simply because Bitcoin does.