The crypto-fund Multicoin Capital has released an in-depth analysis on why they believe the arguments in favor of bull market movements for Litecoin are weak and do not stand up to scrutiny.
The paper started off by disclosing that the firm is short Litecoin and went into saying “Litecoin is a relic of the pre-smart contract platform crypto ecosystem” and is on the decline. The paper listed many reasons that included market maturation, negative catalysts such as Segwit and Lightning Network reducing the need for Litecoin, lack of funding to the Litecoin Foundation, and Charlie Lee’s divestment from Litecoin. The paper then goes on to discuss these and other attributes in more detail and debunks common arguments that are used to support Litecoin due to inaccuracies or insufficient evidence.
The article also drew attention to Litecoin’s original founding as “an altcoin optimized for CPU mining” since “advancements in GPU mining had rendered mining BTC with CPUs unprofitable”. Charlie Lee saw this as a “shift away from fairness and decentralization” and motivated the changes to create Litecoin. However, the paper added that today, Charlie’s “initial vision of fairness and decentralization through low barriers to entry mining has ultimately become obsolete” because of GPU mining improvements for Litecoin as well as Bitmain releasing Litecoin ASICs.
Concerns with Litecoin
A theme throughout the paper was the lack of consumer demand behind Litecoin and how Litecoin’s structural developments are not doing much to bolster that consumer demand. The paper touched on The Litecoin Foundation and their ability to remain funded since they only have $322,003.51 USD in funds, of which 81.65% is in Litecoin and only 1.2% is in cash. The author discussed how this hinders their long-term development growth strategy and thus also weakens consumer confidence. The paper also discussed selling pressure from Litecoin miners since they are mining 14,400 new LTC every day and miners often need fiat to cover maintenance and electricity costs.
The article also debunked the common argument that Litecoin is “the silver to Bitcoin’s gold” since Bitcoin is now claimed to be a store of value, while Litecoin is geared more towards a medium of exchange. The author pointed out the precious metals analogy discusses the “value of the ratio of silver-to-gold is based on the idea of price-to-weight ratio” and the fact that “lower price-to-weight ratio makes payments for smaller purchases more convenient”. However, the author clarified that, “digital assets are weightless, and thus the same analysis cannot be made”. In addition, increasing Bitcoin Segwit adoption and the Lightning Network are intended to make transactions more affordable, which makes the argument of Litecoin being “silver” as a medium of exchange obsolete.
The paper then went on to discuss “a founder selling their entire holdings is a massive red flag” and that “despite his intentions, a misalignment of incentives now exists that decreases his motivation to continue development and add value to the protocol”. The author would have preferred Charlie to “time-lock his holdings or use them to fund further LTC development”.
These concerns, among others, is what the paper used as evidence to suggest that Litecoin has an ominous future since it does not differentiate itself from other coins like Bitcoin that now does most of what Litecoin does, but better. Then other cryptocurrencies, such as Dash, provide even more solutions to the problems that were brought up in the paper.
Dash offers solutions where others fail
In contrast, Dash is able to fund its development via the DAO Treasury, an allotment of 10% of Dash mining rewards each month, compared to The Litecoin Foundation basing funds on donations and mining rewards. Dash Core Group, responsible for most of Dash’s code and outreach development, has been able to submit proposals to the DAO Treasury and receive funding approval via the voting mechanism. Additionally, many other Dash projects have been able to receive funding from the DAO Treasury, DashBoost, or DashDonates. Then the upcoming Dash Ventures provides a potentially unlimited source of funding since it will act as a VC fund investing in projects and granting the returns to the Dash network. Due to this funding success, Dash has been able to achieve real world adoption, over 3,000 merchants globally and countless use cases, which creates demand and buying pressure on Dash to counteract the selling pressure from miners. Dash also has a system of Masternodes, whom receive returns on the 1000 Dash they stake to secure the network and to decide on which proposals to fund via the Treasury. This system further incentivizes holding of Dash, as opposed to the selling incentives seen with Litecoin.
Further expanding on Dash’s real world usage, Dash has achieved actual, everyday, real world usability, which makes the whole ‘Bitcoin is digital gold’ and ‘Litecoin is digital silver’ argument a mute point. Dash is Digital Cash that enables consumers to conduct cheap remittances or make a plethora of purchases from online gift card providers, street vendors, restaurants, gas stations, travel bookings, fantasy sports games, and much more. Dash’s usability stands in stark contrast to Litecoin, which the analysis highlighted lacks significant merchant adoption other than through POS systems that integrate vast swaths of cryptocurrencies at a time. Dash also differentiates its usability from Bitcoin Lightning Network since the LN is intended to solve Bitcoin’s transaction fee and confirmation time spikes, but currently lacks on-chain liquidity, whereas Dash already offers record low fees and extremely fast confirmations to all Dash users.
Furthermore, Dash sends a stronger confidence signal to consumers than Litecoin and Charlie Lee do since Evan Duffield, founder of Dash, has shut down his masternodes and stepped away from Dash Core Group, but dedicated his funds and time to Dash Labs in the pursuit of making Dash “future-proof”. All of these features above allows Dash to provide consumers with increasingly better services to have inexpensive, fast, and reliable decentralized, digital, peer-to-peer currency, which makes Dash stand out in the crowded cryptocurrency space.