What is Litecoin (LTC)?
The Litecoin blockchain is what is known as a “fork” of Bitcoin which is when a group of coders copies the source code of a blockchain, in this case Bitcoin, and uses it to launch an entirely separate blockchain, often with a few tweaks. In Litecoin’s case, it is designed to fulfil a similar purpose—to process payments on a decentralized, peer-to-peer network—but is quicker and better suited to small transactions.
Litecoin is the creation of Charlie Lee, a former Google employee who contributed to the Chrome OS. After Google, he headed the engineering department of Coinbase, one of the world’s largest cryptocurrency exchanges. Charlie was Coinbase’s fifth employee; the exchange went public in May 2021, and holds a market cap of $60 billion.
As of May 2021, Litecoin has a market cap of over $26 billion. Currently the 12th largest cryptocurrency by market cap, and the third-largest Bitcoin spinoff (discounting Dogecoin, a highly-volatile meme coin that is itself a spinoff of Litecoin).
Bitcoin vs Litecoin
Bitcoin and Litecoin are fairly similar. Both are based on blockchains and use cryptography to power a network of anonymous and transparent transactions.
One of the main differences between Litecoin and Bitcoin is that the Bitcoin blockchain takes 10 minutes to process a single block, while on Litecoin it takes just 2.5 minutes. Blockchains process transactions in batches, known as blocks. These blocks are “chained” together to form a wider, publicly available ledger. This means that everyone knows how much Litecoin everyone else owns.
Since Litecoin processes blocks quicker than Bitcoin, it is, theoretically, more useful for everyday purchases. For instance, buying a coffee could be processed relatively quickly via Litecoin, whereas it would take far longer for the Bitcoin blockchain to clear the transaction. Litecoin is also far cheaper. It can cost up to $70 to process a transaction on the Bitcoin blockchain; On Litecoin, transactions rarely cost more than $0.1.
Despite this advantage, Litecoin has not yet gained significant traction as a means of payment. Litecoin ran a short-lived mobile app called LitePay a few years ago, which functioned as a crypto competitor to Apple Pay. It didn’t pan out and was ultimately discontinued.
Litecoin is also significantly smaller than Bitcoin, both in market cap and coin price. Bitcoin continues to dominate the cryptocurrency market. Its domination over the market rarely falls below 50%. Litecoin, by comparison, commands under 1% of the cryptocurrency market cap.
Apart from that difference, Litecoin operates rather similarly to Bitcoin.
Just like Bitcoin, Litecoin is decentralized. No single entity maintains the Litecoin network by processing transactions or producing more Litecoin. This means that the token is divided between a potentially unlimited number of users, none of whom have ultimate control over the system.
And, just like Bitcoin, Litecoin is a peer-to-peer currency. It requires no central authority, such as a bank, to act as an intermediary between two parties. All that is needed for a transaction to take place is permission from the two users involved to transfer funds between wallets, plus miners to process said transaction. (A wallet is a hardware or software tool to store Litecoin. Intermediaries, such as cryptocurrency exchanges, do exist, but these aren’t strictly necessary).
The decentralization of the network, plus its peer-to-peer nature, makes Litecoin borderless. It’s possible to transfer Litecoin from one account to another without considering the nationality of those accounts or the identities of the account holders; Litecoin pays no heed to international sanctions or money-laundering regulations. Once transactions are processed, they are irreversible and can’t be scrubbed from the blockchain.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about Litecoin, including an opinion that Litecoin is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of Litecoin prior to making it available on Wealthsimple Crypto and has concluded that Litecoin is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated Litecoin based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of Litecoin, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Litecoin;
- The supply, demand, maturity, utility and liquidity of Litecoin;
- Material technical risks associated with Litecoin, including any code defects, security breaches and other threats concerning Litecoin and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with Litecoin, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Litecoin.
Like all other crypto assets, there are some general risks to investing in Litecoin. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure. Further, the Litecoin community is not under any legal or regulatory obligation to disclose material information to the public regarding community activities. Holders of Litecoin have no recourse to the Litecoin community or Wealthsimple if the cryptocurrency declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading Litecoin. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: June 18, 2021
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