Litecoin was the result of a failed Bitcoin update, which didn’t meet the majority’s consensus and a hard fork occurred. The update’s goal was to address the scalability issues on Bitcoin’s blockchain, by decreasing the block time to 2.5 minutes and significantly reducing the transaction fees.
Unlike other Bitcoin forks, Charlie Lee was a Bitcoin proponent and created Litecoin to be complementary to Bitcoin. Bitcoin’s popularity increase turned Bitcoin into an inconvenient medium of exchange and was mostly considered as a store of value, similar to gold. Litecoin as a fairer and cheaper cryptocurrency aimed to enable everyday micropayments, which seemed impossible with Bitcoin.
Bitcoin’s scalability issue has been under debate for a while. The Bitcoin Core team decided to implement the Segregated Witness (SegWit) protocol, that would virtually quadrable the block size to fit more transactions and fix malleability. Ultimately, SegWit would pave the way for the anticipated Lightning Network that will bring instant payments with extremely low fees, by taking the transactions off-chain.
Litecoin follows the heels of Bitcoin and acts as its testbed for upcoming implementations. Litecoin was the first cryptocurrency to adopt SegWit and will enable the Lightning Network before Bitcoin does. However, this raises the question about whether fast and low-cost transactions on Bitcoin, would mean the end for Litecoin or not.
No one can predict the future, but Charlie Lee remains optimistic on Litecoin. According to his calculations, Bitcoin Lightning Network’s capacity will be capped at serving 500 million users and the LN transaction fees will be cheaper, but always relative to Bitcoin’s network. Therefore, Litecoin Lightning Network transaction fees will remain lower than the ones on Bitcoin.
The Lightning Network will open bridges on a currently congested highway, so users will have alternative and less congested routes to choose. Therefore, Litecoin might see a transaction volume increase, as the cross-chain atomic swaps will enable a user to go from Bitcoin to Litecoin and vice versa. As the two blockchains will become interoperable users could also benefit by opening an LN transaction in Litecoin for cheaper tx fees and then take it to Bitcoin’s network. Noteworthy, Litecoin to Bitcoin was the first-ever cross-chain atomic swap to be successfully completed, with Charlie Lee expressing his excitement in a tweet.
The atomic cross-chain swaps will be beneficial for commerce as well. Transactions will become convenient, as a Litecoin user will be able to use his Litecoins to pay merchants that only accept Bitcoin. The cross-chain atomic swap will allow merchants to receive a payment in their preferred currency, by automatically exchanging Litecoin into Bitcoin off-chain.
The Lightning Network will require two users to open a payment channel and have a fixed balance of funds to keep them open. Charlie Lee is optimistic that Litecoin will contribute positively in rebalancing lopsided payment channels at an agreed rate.
Therefore, it seems like the Lightning Network will boost cryptocurrency transactions, making them more flexible, instead of eliminating them completely. The advent of the Lightning Network is still months away from its launch, in order to evaluate its actual metrics, but a positive outcome should be highly expected.