As Litecoin Rises, Creator Talks ASIC, SegWit, and Why Mining Should Be Anonymous
While discussing some of the issues pertinent to the success of Litecoin at a presentation for Coinbase last week, its creator hints that it is unfortunate that ASIC mining is a bit centralized with a lot in China and notes a major reason why he thinks this is bad for the industry.
Charlie Lee, who hints that Silicon Valley is working on ASIC miners for Litecoin, says in the presentation:
“Centralized mining is very bad for Bitcoin and Litecoin because mining is supposed to be anonymous where you don’t know who the miners are and they are all individually acting selfishly to make them money which indirectly makes the coin secure.
“With centralized mining, there are few parties where governments or malicious entities can push those parties and coerce them into doing something bad for the coin or even those parties can have different views that are not good for the coin but just selfish for them to actually be able to control the network which is bad.”
He adds that the centralized state of the mining sector is also responsible for the difficulty in convincing the three individuals behind the Chinese pools that needs to signal SegWit for the protocol to be activated on the Litecoin network.
“I’m in talk with them (the three individuals) all the time. Unfortunately, Bitcoin politics have come into Litecoin a bit,” Lee says. “They support Litecoin and they know that SegWit and Lightning are good for Litecoin but they are kind of hesitant to support it because it undermines their position on Bitcoin.”
Lee hopes that ASIC miners, which are mainly produced by Bitmain – the hardware manufacturing supports Bitcoin Unlimited protocols for Bitcoin scalability over Bitcoin Core’s SegWit – will become a commodity eventually as the market approaches smaller nanometer chips that would bring enable more players to create ASIC. While this is likely to enhance less centralization in the market, he is not sure if it would actually happen.
As attention has shifted to Litecoin recently going by news that some investors have shown interest in the digital currency dubbed the silver to Bitcoin as gold. This comes after a bug reportedly increased the chances (by 50%) of Litecoin activating SegWit sooner than expected. The market price of the currency has since doubled to about $9 from the $4 range it had maintained consistently for more than a year. Lee attributes the recent rise to his presentation at Coinbase on March 31.
On some of the factors that made Litecoin a success, Lee mentions the fact that it became an arbitrage coin for Bitcoin in years past because it is available on most exchanges and made a very good trading pair with Bitcoin. Litecoin was also handy when Bitcoin mining transitioned from GPU to ASIC making users of old Bitcoin mining GPU to shift to Litecoin which has just switched from CPU mining to GPU.
The Litecoin creator maintains the view to make the currency complement and not compete with Bitcoin hence the design to make it “find a different kind of sweet spot for security decentralization and transactions throughput and fees” that will still make Bitcoin be the most secured and most decentralized coin.
“Bitcoin can be used for moving billions of dollars between banks, buying houses, buying cars. It is really secure. It’s uncensorable for that. Litecoin could be used for cheaper things. Litecoin and other coins can fulfill other needs. I think something like Lightning Network can be able to interconnect the two coins so that you can go from Litecoin to Bitcoin very easily via Lightning … That’s why I am pushing very hard for SegWit on Litecoin and Bitcoin so that they both get Lightning to enable payment on both networks. Litecoin can also be used to make cheaper transactions.”