At A Glance
- Litecoin is one of the oldest, popular, and most used digital currencies in the crypto stratosphere.
- Litecoin (LTC) as the silver to Bitcoin (BTCs) gold continues to strive for some form of independence. It uses its strong user base and attributes of a successful digital currency to stay relevant in a saturated cryptocurrency market.
Litecoin (LTC) is ten years old. A lot has happened in the cryptocurrency space since founder Charlie Lee released Litecoin via an open-source client on GitHub on 7th October 2011 before the network went live on 13th October 2011.
Litecoin has established itself as one of the most used blockchain protocols, while its native token, LTC, is now a top 25 digital asset by market capitalization that continues to see huge investor interest daily.
To mark its tenth birthday, Trading Education is examining six reasons why Litecoin has intrinsic value.
Intrinsic Value measures what an asset is worth. In the case of Litecoin, we are going to base our measurement of its worth on an objective calculation or complex financial model, rather than just adhering to the current trading price of the cryptocurrency.
The attributes we are going to use as a thesis to arrive at Litecoin's value are scarcity, divisibility, durability, counterfeitability, transferability, and utility.
When Litecoin launched in 2011, founder Charlie Lee mined 150 coins and released the protocol to the general public. He capped the total supply of LTC at 84,000,000 (84 million).
Currently, the circulating supply of LTC stands at 69,354,632.02 (68.702 million). This means that 83% of the maximum supply of LTC has been mined leaving 17% of coins up for grabs.
Charlie Lee, unlike Vitalik Buterin of Ethereum (ETH) and Jackson Palmer/Billy Markus of Dogecoin that has an inflationary approach towards the distribution of their coins, will not increase the number of LTC tokens in the future.
This means that scarcity lay ahead of the silver coin.
As a trader or investor, you should know that when assets become scarce, it becomes extremely valuable. This is why precious metals such as gold are considered an asset with an intrinsic value. Millions of people buy gold because of the value it could hold in the long term.
Unsurprisingly, several investors have placed small-time and large-time deposits into Litecoin. Examples of small-time deposits can be attributed to individual investors purchasing $1,000 to $499,000 worth of Litecoin on cryptocurrency exchanges such as Binance, eToro, Kraken, Coinbase, Huobi Global, and on platforms such as Skrill and PayPal.
Large-time deposits are investments above $500,000. A real case scenario of a large-time deposit is the creation of a Litecoin Trust by Grayscale. The Grayscale Litecoin Trust was created on 1st March 2018 and has $284,743,905 ($284 million) assets under management.
So, can Litecoin be a store of value? In advanced financial management studies, small-time deposits and large-time deposits are categorized under store of value. This is because money is locked into LTC with the anticipation that the price of the digital token is going to appreciate in the future.
If scarcity should take hold of LTC someday, there will surely be an increment in the price of the digital asset. Inasmuch as it would take a long time for the last LTC to be mined, the long-term outlook of the cryptocurrency market continues to remain bullish.
An extremely bullish cycle could take the real valuation of LTC towards the current market valuation of Bitcoin or even more.
Litecoin was the second blockchain project after Bitcoin. As a result, it mirrored Satoshi Nakamoto’s innovation in many areas. One area that founder Charlie Lee decided to find an answer to was the scalability problem associated with the use of Bitcoin and blockchain technology in general.
Many people complained about the slow processing speed of the Bitcoin protocol which is linked to relatively higher transaction fees.
As a result, the SHA-256 proof-of-work (POW) algorithm which was held strongly by the proponents of Bitcoin because of the security it brings the blockchain protocol was discarded for a consensus algorithm called SCRYPT.
The primary benefit of SCRYPT is that miners do not have to use application-specific integrated circuits (ASICs) devices to confirm transactions. Instead, the graphical processing units (GPUs) and the Central Processing Units (CPUs) of personal computers could be used to mine LTCs.
The resultant effect has been the relatively faster average transaction times. How long do Litecoin transactions take?
At the time of writing, the average block time for LTC was 2 minutes 35 seconds. This has seen Litecoin’s (LTC) function as a utility token soar significantly in the last 10 years.
Are Litecoin transactions fast and are Litecoin payments instant? Yes, LTC transactions are fast because they are processed within seconds. At the time of writing, LTC was involved in 113,629 transactions worth $221,314,235 ($221 million) in the space of 24 hours.
In advanced financial management studies, checking accounts and currency in circulation are categorized under medium of exchange. There are millions of people who have invested in Litecoin for its use in settling daily transactions. This accounts for the thousands of LTCs used (1,639,151) in the last 24 hours up to the time of writing which is part of the circulating supply.
Utility forms a strong basis in adding value to a particular currency. LTCs extensive usage across millions of merchants and as well be accepted as the official currency of the Miami Dolphins of the National Football League (NFL), means its usage will only explode due to the relatively lower fees that come with the use of the cryptocurrency. The average transaction fee of LTC stands at $0.0185.
The real value of Litecoin (LTC) can also be measured by the faith users have in the currency as a medium of exchange that can be used to settle thousands and millions of transactions daily. Are Litecoin transactions faster than Bitcoin? LTCs process 56 transactions per second (TPS) compared with 4.6 transactions per second for Bitcoin.
Like all cryptocurrencies, you do not have to buy a whole Litecoin. LTC can be divided into 8 decimal points. At the time of writing, LTC was trading for a coin at $134.
If you don’t have enough cash to splash, you can buy a piece of the whole coin. Buying $11 worth of LTC will see you have 0,08208955 on your portfolio.
For extensive understanding, let us consider the prices of gold.
You can buy gold per ounce at $1,809.66, gold per gram at $58.18, and gold per kilo at $58,181.92.
This means that even if you do not have money to buy a kilo of gold, you can settle for a gram or an ounce and that could bring you huge returns in the long term.
You can purchase 0.50000000 LTC today and another 0.50000000 LTC later. This will result in the full value of a whole Litecoin.
What’s more LTCs divisibility helps its efficiency as a medium of exchange. If LTC wasn’t divisible, it would have been extremely hard for people to use it to buy small and large items.
Read Also: Pros and Cons of Investing in Litecoin
Unlike fiat money (USD, EUR, or GBP) that continues to be printed and circulated periodically, Litecoin has a fixed supply that cannot be altered. As a result, no single individual can create new LTCs to be added to the maximum supply.
To put it simply, LTCs cannot be duplicated. They have unique features that are different from other digital currencies.
One of the areas certain people have targeted to duplicate cryptocurrencies is through an act called double-spending.
Double Spending is where a single unit of currency like LTC is spent simultaneously more than once. As a result, disparities are then created between the amount of currency available and the spending record. In what is normally referred to as race attacks, 51% attacks, and Finney attacks, the person trying to hack the system and cause disparities must gain substantial control of computational power. Since LTC can be mined with personal computers, this becomes impossible since millions of people are online confirming transactions. This makes it difficult for a sole hacker to have such control over the whole LTC blockchain.
The inability of hackers to duplicate LTC is one of its strong attributes that has contributed to its impressive valuation over the last 10 years.
Because Litecoin and other cryptocurrencies are digital currencies, they are not vulnerable to physical damages such as being burned, torn, or deteriorated beyond repair.
You do not have to store your LTCs in a physical wallet, safe at home, or leave it on a table where they could be lost.
Instead, you can store your LTCs on cryptocurrency exchanges, online payment wallets such as PayPal and Skrill, as well as digital wallets that provide paper, hot, and cold storage.
You must note that all currencies could be lost. In the case of LTC, your coins cannot go missing but your account can become difficult to access. Once you register for an online wallet that provides you with the storage you want, you will be provided with passcodes. These codes form part of two-factor authentication (2FA). These codes normally come in the form of at least 12 words.
Hold onto the passcodes with your life because it is the only way you can restore your account.
The impossible duplication of LTC coupled with its extensive storage capacities makes LTC a durable asset that can serve as a medium of exchange as well as a store of value for traders and investors.
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The primary reason why the world moved away from barter trade was because of the difficulty of transporting goods from one place to the other. This is why fiat currencies replaced the old system because of the ease with which money could be exchanged between friends internally or through cross-border payments.
This is the same with LTC. Having been listed on millions of merchants because of low transaction costs, LTC can move from a wallet and be used as a payment method within seconds. This contributes to the thousands of transactions the digital token continues to be involved in daily worth millions of dollars.
Other Notable Reasons Why Litecoin Has Intrinsic Value
Correlation to Bitcoin
All cryptocurrencies are affected by the price patterns of Bitcoin. Litecoin has always reacted to the price patterns of Bitcoin during crypto bubbles and bearish seasons. This is the primary reason why experts believe extensive crypto adoption and positive crypto market sentiment can lead to a consistent bullish cycle in the future.
Once BTC heads towards $100,000, there is a high probability that LTC will follow its path and also head for $1,000 and other milestones. At the moment, LTC looks to have some form of independence of its own so that it can increase or decrease based on the performance and innovative products on its technology and not mere speculation for LTC tokens.
Open to Upgrades
In a space where smart contracts have become a mainstay, Litecoin’s value can be backed with the possibilities of its blockchain through decentralized applications. As an open-source platform, numerous upgrades could happen such as the TAPROOT update that will be happening on BTCs platform in November. This will extend the use of LTC as a transactional and DeFi token which will improve the popularity of the whole project.
Now you know the six reasons why Litecoin has intrinsic value. If you decide to invest in Litecoin, you must be knowledgeable about the entirety of the project so that you can avoid irrecoverable losses in the short and long term. Investing in Litecoin and other cryptocurrencies come with risk, invest what you can write off as bad debt.
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Can Litecoin Be A Store of Value?
Litecoin is a store of value. LTC possesses all the attributes of a successful currency. You can buy a small or big stake in Litecoin and hold it for the long term. Based on the price forecasts by analysts and experts, LTC has great potential in the market. It’s a coin that can bring you huge returns in the long term.
What is the Max Litecoin Reach?
The max Litecoin can reach is undeterminable. This is because of the unpredictable nature of the cryptocurrency market. With that said, the overall valuation of LTC can be calculated in the long term. If all 84 million LTCs are mined and the trading price of the cryptocurrency tests $10,000, the total valuation (market capitalization) of the digital token would be (84,000,000 × 10,000) which will equal $840,000,000,000 ($840 billion).