The Death of Litecoin: Boom, Bust and Self-Destruction

Litecoin, the world’s third largest cryptocurrency ($ 137,703,781 in marketcap) created in October 2011 by Former Google Engineer and current Coinbase Director of Engineering Charles Lee was popular among digital currency miners due to its implementation of a unique ASIC resistant proof of work algorithm called s-crypt (scrypt).

ASIC stands for Application Specific Integrated Circuit and is used by miners to verify hashed transactions on litecoin and bitcoin networks. Due to the network’s resistance to ASIC products, the number of miners rapidly increased and litecoin thrived for the past 4 years.

However, since early 2014, mining hardware companies including Alpha Technology have begun to develop and distribute litecoin specific ASIC products, offering to both individual miners and prominent transaction processing companies.

Suddenly, the block difficulty spiked. Litecoin wasn’t “ASIC resistant” anymore. The one difference which differentiated Litecoin from other major digital currencies like bitcoin became redundant.

On August 25, 2015, the block reward for Litecoin halved, from 50 to 25 LTC, amidst the growing concerns about the block difficulty and profitability of mining litecoins.

The significant decline in block reward which was already fairly low as is, led to the downfall of the several Litecoin mining operations and individual miners processing transactions on the network using ASIC miners.

The majority of individual miners won’t able to afford the costs of electricity and ASIC miners needed to maintain its computing power to continue their operations.

In response, the Litecoin association explained that the decreased supply growth may raise the price of the currency which could potentially stabilize the income of miners. However, the decline in the block reward may dwindle the number of miners in the network which ultimately could lead to a more centralized network due to the failure in the distribution of network hash rate.

The market-cap of litecoin has declined by over 30% in the past few weeks, and is predicted to hit its yearly low in upcoming weeks.

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  • MINAX

    Someone has a massive short open… 😉

  • Erik

    I have to disagree because of the following bitcoin is (deliberately ? ) setup to fail due to decision paralysis of the bitcoin core programmers. Just look at the graph of the average block-size which hit 0,75MB during the spike to $500,- BTC price, I am assuming that most people will not understand the problem in the beginning and that when the limit hits, where can people go ? Allot of people still think that litecoin is the answer, because it is faster.

    From what I could tell its about 4xtimes faster due to 1mb blocks per 2,5minutes. Given that that the case people will in such an event allot will move into litecoin, price will rocket at that time.

    Side-note truth of the matter as far as crypto currency’s go they both lack suffient functionality in their current forms, the coin named Dash seems to have all the answers with many of them already functional, but the coin it’s still in heavy development.

  • Paul Schmitzer

    “…was popular among digital currency miners due to its implementation of a unique ASIC resistant proof of work algorithm called s-crypt (scrypt).”

    It was actually popular among us miners because it was GPU resistant. Then SolidCoin figured out how to GPU mine scrypt coins and shared it with the community. Rumour had it that user Artforz (who first figured out GPU mining bitcoin) figured out GPU mining scrypt and kept it a secret. SolidCon crew was happy to share it and fan the flames of the rumours.

    GPU mining Litecoin was way more fun than ASIC mining. By the time they came out mostly noob miners were jumping in and had already missed the boat.

    • earonesty

      Then ASIC mining came out… and all the hobbyists abandoned litecoin (i used to mine in my basement). GPUs have a good resale value, so you can get in… mine and sell. You can install a massive dual-GPU system at home… and use it to play games… mine in the spare time. A friend of mine spend $1200 on a very powerful set of GPUs which he uses for gaming… and he’s already mined $500 worth of ethereum back in the system spare time. That works. ASIC mining causes centralization, lack of adoption and enthusiasm, and loss of focus in development… since hobbyists are the ones working on open source code.

  • Bieber before hos

    All this is saying is that cheap coins can no longer be produced and sold at current market value. One could infer that Litecoin must increase in price or risk an automated difficulty decrease. Either way it’s a win for those that continue to hoard coins. I personally see a day in the next decade where litecoin will cost $300 per coin and bitcoin will be 3000-5000 dollars.

    • John Hanekamp

      So you think LTC will appreciate 100x and BTC 10x? Why do you think the also ran alt-coin will outperform by 10 fold?

    • Andy Moe

      Looks like you were right!

    • Charles Saini

      so you’re all like, “right, again!”

  • earonesty

    Block reward halving had nothing to do with litecoin’s decline in price. The decline in price is entirely do to the failure to integrate litecoin into verticals and exchanges. litecoin had little perceived utility. its block speed isn’t fast enough to use in PoS, unlike fast chains like ethereum or validating nodes like vcash. and no serious new features were added to generate the hype needed for partners to integrate.

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