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Cryptocurrency litecoin is often referred to as the silver for bitcoin gold. This year, litecoin investors would have done better to stay in the analog world: while bitcoin earned twice as much gold, litecoin just kept pace with silver.
Some investors now anticipate a developing rally in litecoin prices, with a key update looming and signs of increased activity on the blockchain network.
The update will implement a “privacy protocol” known as Mimblewimble, which is expected to help protect the identities of litecoin token sender and recipient holders, while also improving the network’s ability to scale to handle more transactions. A Mimblewimble testnet, which has been in the works for almost a year, is scheduled for late September.
And based on market data, it appears that the looming addition is generating excitement among users: transactions confirmed daily on the litecoin blockchain have more than doubled this year, reaching a seven-day average of 48,948 last week, the highest since February 2018, according to data source Glassnode.
Litecoin supporters are hoping the token’s additional privacy features from the Mimblewimble update will help attract users who might otherwise gravitate towards existing privacy coins such as monero (XMR) and zcash (ZEC). These tokens carry their own risks, such as the possibility of holders being diluted by new issues.
The speculation is that the update could help Litecoin, which gained around 50% this year at $ 63, catch up with bitcoin’s 64% rise.
“Litecoin’s upcoming Mimblewimble update has resulted in a spike in active transactions and addresses,” said Matthew Dibb, co-founder of Stack, a cryptocurrency and index futures tracker provider.
Litecoin’s ability to handle large numbers of transactions at any given time is expected to increase with the upgrade, helping to address the “scalability” issues that had put off some users and investors, according to Nicholas Pelecanos, head of trading at NEM Ventures. a cryptocurrency investment firm.
“In 2017, a huge development bottleneck in the blockchain space was shrinking,” Pelecanos said. “The problem will now be solved with protocol updates due to most major protocols, leaving ratings at the highest of life.”
The processing speed of the litecoin network has doubled this year to about one transaction every two seconds. But it is still much slower than the Bitcoin blockchain, which can handle around 3.7 transactions per second. The upcoming protocol update could further increase transaction capacity.
One concern with the additional privacy features is that it is not yet clear how they will adapt to regulators. Coinbase UK canceled zcash last year, possibly due to pressure from financial watchdogs. South Korean exchange Upbit removed the monero, dash and zcash privacy coins in 2019.
“There is some stigma against privacy coins and some exchanges have removed them from the list,” Litecoin founder Charlie Lee told CoinDesk in a recent interview. “But from what I can tell, exchanges are fine with this litecoin privacy update as an extension block because it’s a bit on the side. Exchanges don’t have to support the extension block side.”
David Schwartz, project director at Litecoin Foundation, a non-profit organization that sponsors development on the blockchain, she tweeted earlier this month who thought cryptocurrency was undervalued.
“Its average usage has doubled since the start of the last bull run and is gaining ground,” he tweeted. “So much so that the transactions have exceeded the historical price, which means that the price is not showing its true value.”
There is a bit of skepticism, of course. The cryptocurrency markets are notoriously speculative.
“The recent recovery may be attributable to the next update,” says Connor Abendschein, a research analyst at Digital Assets Data, but “increased bullish sentiment across the entire cryptocurrency market has pushed the prices of most assets higher in recent months. “.
“As the update gets closer, we’ll see if litecoin is just upping bitcoin trends, or if it can find some legs and run its course,” Abendschein said.
Fix (12:50 UTC, August 17th, 2020): An earlier version incorrectly quoted Nicholas Pelecanos as saying that LTC’s network faced bottlenecks in 2017. This has been fixed.
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