Litecoin banking on SegWit activation to realize vision as Bitcoin’s alternative
While there are disintegrating views on its upgrade for Bitcoin miners, the proposal to use SegWit – or Segregated Witnesses – on Litecoin first and then make an evaluation of its feasibility on Bitcoin has been welcomed by major industry insiders. Aside that, it is also being seen as beneficial to the Litecoin market as an alternative to Bitcoin in major markets.
The Litecoin SegWit soft fork will start signalling on block number 1145088 in a couple of hours. The idea is that since Bitcoin miners remain deadlocked, Litecoin’s deployment of SegWit could make its value rise due to utility and this may probably make miners reconsider their positions.
Bitcoin and SegWit
If SegWit activates on Litecoin and it value rises considerably, Bitcoin miners are likely to be tempted to enable SegWit so as not to see a part of their market share go to Litecoin as it was the case with Ethereum and Ethereum Classic.
Though it looks dicey, there have been some level of support for SegWit among Bitcoin miners thus far. Some miners, including Japan’s largest Bitcoin exchange, Coincheck, welcome SegWit’s activation. Coincheck’s Business Development Lead, Kagayaki (Kaga) Kawabata, states to 8btc News in an email:
“We agree on both proposal but are neutral on the position for SegWit and Bitcoin scalability issue. As an exchange and bitcoin payment provider, we welcome activation of Segwit. It brings more transaction throughputs, fixes malleability, makes wallets more secure and it enables Lightning, which will enable quick and low-cost Bitcoin transaction. However, until an off-chain transaction such as Lightning is established it is inconvenient for a Bitcoin user when a remittance transaction is crowded. In the short-term, when we think about Bitcoin’s usability, the increase in Bitcoin size is important. We are monitoring activation preparing our exchange and payment service ready for both.”
Litecoin and SegWit
Litecoin is expected to be a great test for SegWit particularly to bring more miners on board.
F2Pool, which currently controls around 43% of the Litecoin network hashrate, is planning to upgrade to SegWit. This will add to Batpool and Litecoinpool.org – which control 11.6% and 5.8% respectively and are already signaling for SegWit – to have over 60% of the network’s hashrate share.
Yet, unlike Bitcoin which aims for 95%, Litecoin requires 75% of the network’s hashrate to upgrade for SegWit to be activated. However, it is not clear whether that threshold would be reached as some miners already appear to be against it.
If it does happen, one of the suggested possible outcomes going forward is that Litecoin might become the payment chain and Bitcoin the digital gold chain. How will this benefit the market especially in China?
China, Litecoin and SegWit
In a post which outlines his vision for SegWit and Lightning Networks on Litecoin and Bitcoin, the creator of Litecoin, Charles Lee, who has been pushing for SegWit activation recently despite Litecoin does not have a block size problem, highlights how the second most-traded digital currency in Chinese yuan would benefit from an upgrade to SegWit.
Lee believes Litecoin and Bitcoin will work together to solve the world’s transaction needs in the future. This will be possible as the implementation of Lightning will improve but still not able to make Bitcoin service every person in the world. Rather, LN nodes will charge a fee for transactions going through it which will be relative to the Bitcoin network fee thus making Bitcoin transactions be more expensive than Litecoin’s.
The double fees will create the needed opportunity for transactions to be channeled through Litecoin and back to Bitcoin to get the cheapest rate as Lightning will make it possible for the two networks to be interoperable.
With Litecoin not being considered an altcoin in China but rather classified just as Bitcoin, Lee’s view makes sense for the currency which is popular among exchanges dealing with CNY as they have been seeing more trading volume in Litecoin than Ethereum – though in USD, Bitcoin and Ethereum remain the leaders with Litecoin cling onto the third spot.
Lee illustrates that the Lightning Network will build bridges between a highway full of cars (Bitcoin) and an empty highway (Litecoin). He also cites another benefit with the conduct of atomic cross-chain transactions through Lightning which enable two users to trade Bitcoin and Litecoin instantaneously without risk. This is really good for users who only have Litecoin but would like to transact with merchants that only accept Bitcoin.
Whether this cheaper and easier Litecoin option will win the market will be known once the two networks are connected.