Overview - TokenInsight · Figure 5: Fluctuations in Litecoin Price over the Past Year Unit: USD Source: Bitinfocharts For Litecoin, which is third in market cap for payment tokens

1 July 18th, 2018 Litecoin Rating Report

Overview

Litecoin is based on the foundation of Bitcoin, with a few modifications to the core

code. It's positioned as a medium of exchange. Compared with Bitcoin, Litecoin

shrunk the block creation time in order to speed up transaction confirmation. The

consensus mechanism is built on the Scrypt algorithm, a PoW consensus mechanism

that seeks to lower the threshold for mining.

As for its positioning, these payment tokens all have relatively high volatility,

including Litecoin. This is a factor that has hindered more widespread adoption.

Compared with other tokens of the same kind, Litecoin is in the upper echelon in

terms of market value, transaction volume and other factors, but lags behind Bitcoin

and Bitcoin Cash. Its although improvements to its mining mechanism have clearly

lowered computing power requirements and increased speed, the problem of

concentration of mining in pools hasn't been avoided at all. As for ecosystem, Litecoin

is far ahead of most other coins of its type in terms of community population,

popularity and merchant support. However, as for its fundamental position, Litecoin

has yet to meet expectations.

Outlook

Litecoin's development is essentially complete, with figure plans focusing on

increasing influence. However these completion of these plans is limited by

regulation and other influencing factors. Looking at the total picture, TokenInsight

assigns a rating of BBB to Litecoin; its outlook is stable.

LITECOIN Rating Report

Analysts

ZHAO Wei ZHAO Longwen YANG Qi

[email protected]

Contents

RISK SUMMARY............................... 3

OVERVIEW ...................................... 4

INDUSTRY ........................................ 4

PROJECT .......................................... 7

MINING ......................................... 11

ECOSYSTEM ................................... 14

TEAM ............................................ 17

OVERSIGHT ................................... 19

CONCLUSION ................................. 20

Project LITECOIN

Rating BBB

Outlook Stable

Tags Payment

Time 2018-08-16

Price (USD) 56

Market Cap 3,224,887,100

Ranking 7

mailto:[email protected]


TokenInsight Inc. hereby makes the following statement in connection with the issuance of the rating report:

1. There is no relationship between TokenInsight Inc. (including TokenInsight Rating Project Team Members, and Review

Committee Members) and the subject of this rating would affect the objectivity, independence, and impartiality of the rating.

2. The project team members of TokenInsight Inc. take their due diligence obligations seriously and have a good reason to

ensure that rating reports followed the principles of objectivity, truthfulness, and impartiality.

3. This report is an independent judgment made by TokenInsight Inc. in compliance with applicable laws, regulations and

reasonable internal credit rating processes and standards, and there are no changes in rating opinion due to improper

influence of the rating target or any other organization or individual.

4. All information contained herein is obtained by TokenInsight Inc. from sources believed by it to be accurate and reliable.

Because of the possibility of human or mechanical errors as well as other factors, however all information contained herein is

provided ‘AS IS’ without warranty of any kind. TokenInsight Inc. checks verifies, as necessary, the authenticity, accuracy,

completeness, and timeliness of the information relied upon in the rating report, without making any representations or

warranties, express or implied, as to authenticity, accuracy, completeness, timeliness and feasibility and appropriateness for

any commercial purpose.

5. The inclusion of a credit rating or secondary market price analysis in this rating report should and can only be interpreted as

an opinion and not as a statement of fact or a recommendation to buy, sell or hold any token.

6. The risk ratings indicated in this rating report are valid from the date of issuance of this report until the date of the next adjustment; at

the same time, TokenInsight Inc. will periodically or irregularly track the ratings of the rating recipient to determine whether to adjust

the credit ratings and will publish them in a timely manner.


1. Litecoin is a payment token. Its biggest risk lies in its significant volatility, which hinders its stable function as

a medium of exchange. However, the token is relatively strong when compared with other tokens of the

same category in terms of market value, transaction volume, and extent of consensus. The problems that

Litecoin faces are the problems that all tokens of its coin face -- that its volatility limits its real-world

application.

2. In terms of technology, all of the core contents of the Litecoin plan have been accomplished. Using Scrypt for

PoW has to a definite extent lowered the barrier to entry for miners, and in theory helps with

decentralisation. However, in reality Litecoin processing power is quite concentrated. By shortening the block

time, transactions processing power is raised from bitcoin by about 400%, but the possibility of orphan

blocks is also increased, and its number of transactions is nowhere near the upper limit of the network. In

another aspect, through segregated witnesses (SegWit) and the Lightning Network, Litecoin is attempting to

bring about large-scale cross-chain exchange, but this has yet to be proven by the market.

3. In terms of the ecosystem, currently Litecoin is in the upper echelon in terms of merchant acceptance. As for

the specific merchants that support it, most of them are smaller-scale, and there gaps in acceptance among

larger merchants. In terms of community activity and the extent to which people are watching the token,

Litecoin is still in the developmental stage, with the Litecoin foundation being the major driver of future

development.

4. As for the time, currently the Litecoin Foundation is responsible for Litecoin development and future

ecosystem construction. A topic of contention is that the head of the Litecoin Foundation is also the Litecoin

founder Charlie Lee, who has previously publicly stated that he plans to sell his Litecoins in order to facilitate

the development of Litecoin; this caused great controversy.

5. In terms of legal oversight, the regulation all over the world of the entire token market is at a stage of

vacancy. For a payment token like Litecoin, the lack of regulation isn't good for Litecoin's long term

positioning and development.


Litecoin is based on the foundation of Bitcoin, with some modifications to the core code to produce a payment token. It was

brought online on October 13, 2011 by its founder Charlie Lee. As Litecoin is fundamentally a derivative of Bitcoin, it's very similar

to Bitcoin in many aspects. From a macro perspective, the two are public point-to-point networks, with nodes providing

information exchange confirmations, recording and other services to receive rewards. In terms of information recording, the

latter packages transaction and then arranges them into a chain chronologically. However, Lightcoin's consensus mechanism uses

a PoW mechanism that requires RAM: Scrypt; in terms of block time, Bitcoin's 10 minutes was reduced to 2.5 for Litecoin; the

total number of tokens was increased from 21 million to 84 million. From when it came online to now it's already run for seven

years; in terms of payment tokens its second only to Bitcoin and Bitcoin Cash.

Industry Situation

Payment and settlement in the traditional market requires going through a centralised bank. Payment and settlement between

groups is a long and complicated process with high costs and low efficiency. Using blockchain technology can make things quicker,

cheaper and more efficient. As a point-to-point cash system, the first blockchain application, Bitcoin, can accomplish payment

and settlement. After Bitcoin went online, a number of problems with the system gradually occurred, such as slow transactions,

low throughput, concentration of processing power, the lack of extensibility arising from a non-Turing-complete language. A

number of forked tokens have been made from Bitcoin to address these problems, most of which are based on mining, and face

problems such as attacks or small user bases, which prevents them from being widely recognised, leading them to failing. Figure

1 describes some failed projects before Litecoin and the reasons for their failure.

Figure 1: Failed Projects before Litecoin and Reasons for Failure

Number Project Time Online Reason for Failure

1 Ixcoin 2011 Premining

2 I0coin 2011 Too few users

3 SolidCoin 2011 Unsafe operation, immature community

4 GeistGeld 2011 Premining

5 Tenebrix 2011 Premining

6 Fairbrix 2011 Paralysed due to mistake in first launch, attacked after reboot

Source: TokenInsight

Comparison with Similar Coins


Currently, the entire payment token market has a total value of about 120 billion USD,1 which is about 60% of the total token market. In this

market, the tokens that are primarily used for payment in the top 20 spots include Bitcoin Cash (BTC), Litecoin (LTC), Monero (XMR), Dash

(DASH), and ZCash (ZEC)

Parameters

Trading experience is an important aspect which influences whether or not users will use an item; for this reason the actual

performance of a token is very important. Figure 2 shows some parameters for BTC, BCH, LTC, SMR, DASH and ZEC.

Figure 2: Performance Comparison of Some Major Payment Tokens

Number Name Block Time (Minutes) Block Size (MB)

1 BTC 10 1

2 BCH 10 32

3 LTC 2.5 1

4 XMR 1 No Limit

5 DASH 2.5 2

6 ZEC 2.5 2


1 TokenInsight, CoinMarketCap, August 16 2018.


Figure 3-1: Transaction Fees of Mainstream Payment Tokens over the Past Three Months

Figure 3-2 Average Transaction fee for Bitcoin and Litecoin over the Past 20 Days

Bitcoin 0.7362

Litecoin 0.0638

Unit: USD

Source: Bitinfocharts

In terms of block size, Bitcoin maintains its original size limit. After Bitcoin Cash was forked from bitcoin, a number of hard forks

occurred, and it's block size has now arrived at the value of 32 MB. Litecoin is the same s Bitcoin, maintaining its original block

size limit; the reason for this is mainly that Litecoin transactions haven't reached the limit of the network's processing power, so

there's no need to increase the block size limit to process more transactions.

From the perspective of fees, over the past 3 months, Bitcoin has had the highest transaction fees, reaching a high of almost 7

USD at one point, with Litecoin being relatively lower. We can see in figure 3-2 that Litecoin's transaction fees are much lower

than those of Bitcoin. Litecoin has an advantage in this respect; lower transaction costs are one of the essential conditions for a

payment token.

Trading Situation

As a payment and settlement token, forming consensus is widely used as an main major indicator of the token’s value. Figure 4

shows the market value, daily turnover and active addresses for various tokens as of 18:00, August 16 2018.

Figure 4: Trading Situation for Mainstream Payment Tokens

No. Name Circulation Value

(x 100mm USD) Daily Transfers Active Addresses Volatility (30D)

1 BTC 1090 242,104 528,608 26.58％

2 BCH 88 20,925 30,088 26.58%

3 LTC 32 28,746 65,544 23.44％


No. Name Circulation Value

(x 100mm USD) Daily Transfers Active Addresses Volatility (30D)

4 XMR 14 4,086 N/A 30.22％

5 DASH 12 5,731 29,705 28.91％

6 ZEC 6 3,574 N/A 28.11％


Figure 5: Fluctuations in Litecoin Price over the Past Year

Unit: USD


For Litecoin, which is third in market cap for payment tokens currently, it's network performance is better than Bitcoin to a

relatively large extent; in theory it can meet daily payment needs. In terms of the number of transfers and active address, there's

still a large difference between it and Bitcoin, but it's still higher than other payment currencies. For this reason, there will be

relatively large fluctuation in the price; over the past year, at its highest it topped 300 USD, and at its lowest was worth less than

50 USD. This kind of great volatility is not good for its use as a payment token.

Litecoin is a payment token developed based on Bitcoin, but compared to other coins that copy bitcoin, its development is

relatively complete. Compared with Bitcoin, the specific differences are as follow:


Table 6: Differences between Bitcoin and Litecoin

Name Total Supply (x 10,000) Average Block Time (minutes) Consensus Algorithm Time of Creation

Bitcoin 21,000 10 SHA-256 2009-01-03

Litecoin 84,000 2.5 Scrypt 2011-10-132


Block Creation Time

In light settings, the time between block creations is 2.5 minutes. The shrinking of this number means faster transaction

processing. Additionally, it means that miners will be paid rewards with greater frequency. Although looking at the total value,

Litecoin rewards are worth less than Bitcoin rewards, more frequent rewards lower miners' uncertainty with respect to mining

rewards. Lower variance3 to a certain extent can mean more enthusiastic miners. Also, the number of mining nodes on the

network is a major factor in the security of the Litecoin network.

In another area, by reducing the time between blocks, there may be an increased possibility of orphaned blocks. Orphaned blocks

are those that are real and valid but are not included as block on the longest chain. In Litecoin, a block time of 2.5 minutes means

that each round of block creation is shorter. network delays and physical distance lead to a certain amount of time needed to

transmit information, making stable response times, which means that after a miner creates a successful block,4 in situation

where another miner doesn't receive this information, he may continue the work of packaging a block, and also successfully

create a block. In Bitcoin, this time is 10 minutes whereas in Litecoin it's 2.5 minutes, making for a higher possibility of orphaned

blocks. Creating an orphaned block has a negative incentive for the miner, because from the block perspective the orphaned

block and the one included in the chain are both valid. In many cases an orphaned block is created due to objective factors, with

even sometimes blocks mined earlier becoming orphaned due to network delays, which make the miner unable to attain the

reward. In Ethereum, these orphaned blocks can be "adopted" by "uncle blocks", with the adopter gaining a reward, but there is

no such system in Litecoin.

Scrypt Algorithm

Litecoin uses the Scrypt algorithm for consensus, whereas Bitcoin uses SHA-256. The difference between the two is that the

former has higher memory requirements. In the Bitcoin and Litecoin mining processes, miners conduct many hashing operations,

looking for a nonce to find a specific hash value.

For each hashing operation, compared with Bitcoin's SHA-256, Litecoin's Scrypt needs more memory5 to store information from

2 Litecoin was formally announced on October 7, and came online on October 10.

3 Measured by the number of tokens.

4 Solving the problems of PoW.

5 High speed RAM


the calculation process. For this reason, the more hashing operations that are performed per second, the more memory is

required to support them. Additional memory means a need for physical equipment to support it. For this reason, in Litecoin,

additional hashing power requires the addition of physical RAM, and as RAM is relatively expensive, it raises costs for miners,

which reduces the value of ASICs for mining.

Lightning Network and Segregated Witnesses

The Lightning Network and SegWit are expansions to the blockchain. Simply speaking, the Lightning Network processes some of

the transactions off-chain, with the record of transactions between two parties only recorded by those two parties. After an

amount of time the final result of all the transactions is broadcasted to other nodes and recorded in the blockchain. In this way

multiple transactions together only need a single record, which is very suited to frequent transactions for small amounts.

Segregated witnesses take a batch of transactions and analyse it, with only the portion of information that is important recorded

in the train, which reduces the size of each transaction and increases the number of transactions that can be processed in each

block.6

Currently on the Litecoin network, both kinds of technology are already running.7,8 In terms of expansion, Litecoin doesn't really

doesn't need any. Compared with Bitcoin, the network's processing power is four times that of Bitcoin (the blocks are the same

size, but Litecoin's blocks progress at four times the speed). Looking at the actual situation, on the bitcoin blockchain network,

the number of actual transactions it has recorded are shown in figure 7:

6 It should be reminded that segregated witnesses when they first appeared were for solving the security concerns the transion malleability

problem caused.

7 https://twitter.com/Blockstream/status/862420329888595969

8 https://blockstream.com/2017/05/11/lightning-on-litecoin.html


Figure 7: Records of Actual Transactions in Bitcoin Blocks

Source: hBlockexplorer

It can be seen that with a block size limit of 1 MB, Bitcoin can record a bit more than 2,000 transactions in each block, and

transactions currently can reach the limit. For this reason, there's congestion in the Bitcoin network, and transaction processing

power doesn't meet needs. In the Litecoin network, the number of transactions recorded in each block is far below the limit of

their capacity:


Figure 8: Records of Actual Transactions in Bitcoin Blocks

Source: Explorer.litecoin

Speaking about the current situation, Litecoin doesn't need an expansion plant to solve any problem with transaction processing

capability. Litecoin founder Charlie Lee has verified this9, and that the true goal of adding in SegWit and the Lightning Network is

to allow for interchange of value and cross-chain interaction with Bitcoin.10

The Scrypt Algorithm and Mining

9 https://segwit.org/my-vision-for-segwit-and-lightning-networks-on-litecoin-and-bitcoin-cf95a7ab656b

10 https://blog.lightning.engineering/announcement/2017/11/16/ln-swap.html


Litecoin mining and its algorithm are closely related. Due to memory requirements, Litecoin mining has definite ASIC resistance.

Looking at the actual hashrate, when compared with bitcoin, growth has been much slower.

Figure 9: Litecoin Hashrate over Time

Source:Bitinfocharts

From the graph, we can see that Litecoin's hashrate (the number of hashing operations performed per second) at its highest was

343TH/second11 Compare this with what we see in figure 10, that Bitcoin's hashrate at its highest was 55.6 EH/s:12

Figure 10: Comparison of Litecoin and Bitcoin Hashrates


The use of the Scrypt algorithm of limits rapid increases in Litecoin hashing power. A more logical way to understand reasons for

growth in hashing power is from the perspective of the miner, because miner participation the factor that directly decides total

hashing power. For miners, whether or not to participate in Litecoin mining, and contribute to the total processing power of the

Litecoin network, there is only one reason: to gain profit from mining. Considering it from this perspective, growth in Litecoin

processing power should be directly linked with benefit from mining. The price of Litecoin is much, much lower than that of

Bitcoin. In a situation where profits from mining are predictable (the block reward is known, and in the short term the price range

11 1TH/s, one terahash, is 1012 hashes per second.

12 1EH/s one exahash, 1018 hashes per second.


of Litecoin is known), miners will only mine Litecoin when the cost of mining is low, thereby adding power to the whole network.

As for the Scrypt algorithm, to a definite extent it does limit the large-scale development of hashing power, but it's necessary to

consider the relationship between mining cost and profit. By keeping the processing power of Litecoin relatively low, it lowers

security, and the cost of an attack on the network. With Bitcoin, if a 51% attack is to take place, more than half of the entire power

of the network must be controlled.13The higher the total hashrate is, the higher the cost becomes to obtain more than half of it.

With a lower total hashrate, the cost of an attack on Litecoin is relatively lower. Scrypt makes concentration of processing power

more difficult, which may make for a latent risk of an attack.14

Mining Pools

The original intent of the use of Scrypt was to make it harder to concentrate hashing power, and to lower the barrier to entry for

miners, in order to help Litecoin better accomplish decentralisation. Over the course of seven years of development, miners

joining pools has been unavoidable. As of 16:00, August 15, 2018, in the previous 21 hours, approximately 97.2% of hashing

power was provided by pools. The distribution of hashing power between various pools is shown in Figure 11:

Figure 11: Distribution of Litecoin Hashing Power between Various Pools

Source: Litecoinpool.org

We can see the extent of the concentration: the top three pools control more than half of the hashing power. Looking at the

distribution between pools, the balance between the bigger pools is fairly even, without an "oppressive" leader.

Considering the original intention of Litecoin, it should have been decentralised mining, but these pools possess massive amounts

13 In reality if such an attack were to actually occur, one wouldn't need more than half the total power in a strict sense; 40% or even 30% may

be enough. This has to do with the success rate of the attack. For details, one may consult "Mastering Bitcoin".

14 https://en.bitcoin.it/wiki/Scrypt_proof_of_work


of power, the reason for which is the choice of algorithm. What should be clarified is that miners electing to mine in pools isn't

determined by the total hashing power, but rather by what portion of it they themselves hold, because that's what directly

decides the possibility of reward for them. The total power of the Lightning network is less than that of Bitcoin, but in terms of

mining, the cost of obtaining hashing power is high, and thus the power that miners hold is lower. This means the probability of

profit is also lower. In concrete terms, Litecoin mining machines currently on the market have a hashing power of 580

MH/should15. Currently the Litecoin network has a total power of about 250 TH/s16, thus each machine has about 0.000232% of

that. There are approximately 584 blocks17 produced on the chain, which means that one machine would need about 774 days

to gain a single block reward. This means a huge amount of uncertainty of mining reward for a single miner. Thus, most miners

choose to join pools to smooth out their profit, and reduce uncertainty.

Litecoin is almost seven years old. It's ecosystem and degree of recognition are near the top of the list among crypto

tokens, almost second only to the older and more recognised Bitcoin. However, in the field of payments, although Litecoin has

functionality improvements over Bitcoin, it's still hard for it to avoid the influence of limitations of the early generation of

crypto tokens, such as large volatility, high transaction fee rates, long confirmation times, small number of users, and so on.

These limitations mean that it experiences continual bumps on the road in its usage scenario.

15 This refers to Bitmain’s Antminer L3++.

16 https://www.litecoinpool.org/pools

17 https://bitinfocharts.com/litecoin/


Search Popularity

Figure 12: Comparison of Search Popularity for Bitcoin and Litecoin

Source: TokenInsight、Google

As the graph shows, over the course of the past five years, trends Litecoin's search popularity mirrored its price closely. More

people pay attention to Litecoin when its price is high. At the same the trend in search activity is very close to that of Bitcoin, 97%

in similarity, but the difference in popularity between the two is relatively wide.

Supporting Merchants, Debit Cards and ATMs

Litecoin positions itself as a payment currency, and the realisation of its capability to function as such depends on merchants

accepting Litecoin for payment. There are usage scenarios in which Litecoin holders can spend it via a debit card loaded with it,

or withdraw cash from an ATM.

In terms of supporting merchants, the Litecoin foundation's litecoin.com lists 86 online merchants that support Litecoin for

payment, and information assembled by crypto token enthusiasts18 shows that already a few hundred online merchants and

physical stores accept Litecoin. These merchants that accept Litecoin provide many products and services, including art products,

clothing, food and beverage, precious metals, electronics, education, entertainment, and legal services. However, most of these

merchants are relatively small-scale, and exist for short periods of time -- some of the merchants listed in the table have already

ceased operation. In terms of large online merchants, Bitcoin is accepted more readily than Litecoin, including by Microsoft and

18 Such as https://www.reddit.com/r/litecoin/comments/6vygev/its_time_to_let_everyone_in_on_litecoins_biggest/


Newegg,19 whereas the only large online retailer to accept Litecoin is Overstock.20

Currently, multiple crypto token debit card services have issued Visa cards that support Litecoin, including SHIFT21 and Wirex22.

Users can top up their wallets with crypto tokens, and then spend them via what functions as a normal debit card.

The first Litecoin ATM in the world went into operation in My 201723, and of the currently approximately 3,600 cryptocurrency

ATMs, 1814 provide Litecoin withdrawal or deposit services.24

Currently more than 70% of these ATMs are located North America, and about 20% in Europe, with about 3-4 new machines

coming online each day. These ATMs allow provide services such as crypto token exchange, purchases via crypto tokens,

purchases of crypto tokens, and cash transfers.

Crypto tokens have had much development in the past few years as a method for payment, and at the same time have also

experience setbacks. In January 2018, due to compliance problems, Visa ceased cooperation with debit card issuer WaveCrest.25

This incident also led to the cessation of service for a number of other debit card providers supporting crypto tokens such as

Wirex. In terms of supporting merchants, a number of online retailers that previously accepted Bitcoin have ceased support for

the crypto token due to high volatility and high transaction fees, such as the gaming platform Steam26 and the travel site

Expedia.27 Microsoft, which still supports Bitcoin, has closed the Bitcoin payment channel a number of times. Although crypto

token ATMs are continuing to grow in numbers these years, they're concentrated in a small number of countries and regions,

which has a relatively large impact on their compliance environment and building of recognition. It's hard to underestimate the

uncertainty in future development.

19 https://promotions.newegg.com/nepro/16-6277/index.html

20 https://help.overstock.com/help/s/article/Bitcoin

21 https://www.shiftpayments.com/card

22 https://wirexapp.com

23 https://steemit.com/cryptocurrency/@digicrypt/world-first-litecoin-atm

24 Data retrieved on 16/08/2018 from https://coinatmradar.com/charts/

25 https://cointelegraph.com/news/visa-suspends-wavecrest-status-stopping-some-crypto-credit-cards

26 https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613

27 https://ethereumworldnews.com/expedia-bitcoin-payment-2018/


Figure 14: Distribution of Litecoin ATM

Source: Coinatmradar.

In an environment where there is relatively large resistance to the use of crypto tokens as a payment method and progress is

relatively difficult, Litecoin's ecosystem will have a hard time avoiding the impact of these facts in the future. Only crypto tokens

achieve development in gaining recognition, and the compliance environment is improved will the Litecoin ecosystem be able to

easily make great progress. At the same time, currently recognition of crypto tokens is concentrated upon Bitcoin, and Litecoin

in most circumstances will not be the first choice for merchants. Although Litecoin has to some extend mas made some

improvements that make it more suitable as a payment currency than Bitcoin, looking at the development of the ecosystem over

the past few years, it doesn't appear that it has the power close the gap between it and Bitcoin.

Founder

Litecoin founder Charlie Lee graduated from MIT and holds a Master's degree. From 2007-2013 he worked as a software

programmer for Google.28 He created Litecoin whilst working there. After he left Google, he joined the exchange Coinbase, which

he left in June 2017. Currently, he functions as the managing director of the Litecoin foundation.

In December 2017, due to his worries that the Litecoin held would be influenced by the items described above as well as the

possibility of a conflict of interest, he sold or gave all his coins away, and made an announcement on Reddit.29 As the creator of

28 https://www.linkedin.com/in/chocobo/

29 https://www.reddit.com/r/litecoin/comments/7kzw6q/litecoin_price_tweets_and_conflict_of_interest/


Litecoin, not holding any of the token at all caused a degree of conjecture in the market, and may bring latent risk to the future

development of the project.

Litecoin Organisation and Litecoin Foundation

Before April 2017, the Litecoin used the Litecoin Core team30 and the Litecoin Association in conjunction as an operating model.

Litecoin Core was responsible for the technological development work, and the Litecoin Association handled publicity,

crowdfunding, and community operation, among other things. On April 1, 2017, the head of the Litecoin Association Andrew

Vegetabile quit. On April 3, 2017, the Litecoin Foundation was registered as a nonprofit entity in Singapore, and took over from

the Litecoin Association the technological development and promotional activity roles. According to head of the Litecoin

Foundation Charlee Lee31, this entity was formed because the Litecoin Association was having trouble accomplishing its mission.

Tokenpay in August 2018 gave its 9.9% share in German bank WEG to the Litecoin foundation, hoping that to gain the Litecoin

Foundation's technical and market support. For Litecoin, through working with a bank, it can to a certain extent expand its

payment token's power, encouraging it to be used in more application scenarios, and at the same time by holding these shares,

it can proceed with development with better financial strength.

30 https://twitter.com/litecoincore?lang=en

31 https://www.reddit.com/r/litecoin/comments/8zm8tn/clarifications_on_litecoin_foundation_and/


Figure 14: Attitude Towards Tokens in Countries and Regions of the World

Green: Permissive Yellow: Contentions Red: Hostile Black: Unknown

Source: http://map.bitlegal.io/

As the token market continues to warm up, various countries and regions are giving it more attention, with a number of countries

and regions starting to define regulatory policies in order to have standards for the development of the industry. Figure 14 shows

the attitudes of countries and regions towards the token market.

Starting in 2018, the USA's SEC has continually strengthened its regulatory policies with respect to the token market, analogous

to strengthening of operating licenses for digital products in the securities market, registration of securities issuance, taxes, and

regulation at other levels.32,33,34

Currently, the token industry is still in a regulatory grey zone, with regulation all over the world still clearly insufficient when

compared with the traditional financial markets. In the long-term development view, relevant regulatory policies will be beneficial

in guaranteeing the healthy development of the industry, but in the short term they may prove a bit of a shock to the market,

especially in terms of price.

32 https://www.sec.gov/news/press-release/2018-5

33 https://www.sec.gov/news/press-release/2018-23

34 https://www.investor.gov/additional-resources/specialized-resources/spotlight-initial-coin-offerings-digital-assets

https://www.sec.gov/news/press-release/2018-23


Litecoin creator Charlie Lee created Litecoin via mimicking Bitcoin's core code, and managed to survive in the sea of clone coins,

gradually developing strongly. In terms of the technical layer, Litecoin made improvements concentrated in the consensus

mechanism layer, and through a new hashing mechanism, lowered the barrier to entry for miners, and raised the difficult of

concentrating hashing power, as well as providing a certain degree of resistance to ASIC mining. However, power still became

concentrated and decentralisation wasn't achieved. This was an inevitable result of the increase in popularity of the token, and a

result of the relationship between cost and benefit for miners. As a token very similar to bitcoin, to a certain extent, Litecoin can

work a test ground for Bitcoin, and in a situation where it can lower the cost of experimentation, Bitcoin may need to attain a

plan for improvement. When compared with other coins that have failed, there are many reasons why it has been able to gain

attention. Aside from analysis of the text, "Litecoin is silver to Bitcoin's gold", it as a supplement to Bitcoin, and is use in areas

that Bitcoin can't touch is one of its major aspects through which it can be promoted.

As a payment token, Litecoin faces the same problem other tokens do: high volatility. Currently, the degree of support by

merchants on the market of Litecoin is not enough to be able to make it widely accepted as a medium of payment. Litecoin in

the top echelon of payment-type tokens. Additionally, in the regulatory realm, due to different regulations throughout the world,

as well as a lack of a complete regulatory framework, the possibility of influence by external factors is relatively large. For these

reasons, TokenInsight gives Litecoin a rating of BBB. The outlook is stable.


Appendix 1: Symbols and Definition of Risk Ratings

RATING DESCRIPTION

AAA

The technical foundation is extremely solid, the status of operations is extremely stable, the extent of influence on

the project by unfavorable changes in the environment or uncertain factors is extremely small, and risk is

extremely low.

AA

The technical foundation is very solid, the status of operations is very stable, the extent of influence on the

project by unfavourable changes in the environment or uncertain factors is very small, and risk is very low.

A

The technical foundation is solid, the status of operations is stable, the extent of influence on the project by

unfavourable changes in the environment or uncertain factors is relatively small, and risk is relatively low.

BBB

Technical feasibility is very good, the status of operations is stable, influence on the project by unfavourable

changes in the environment or uncertain factors exists to a certain extent, and risk is controllable.

BB

Technical feasibility is good, the status of operations is relatively stable, the possibility of influence on the project

by unfavourable changes in the environment or uncertain factors exists to a relatively large extent, and risk is

basically controllable.

B

Technical feasibility is moderate, the status of operations is relatively stable, the possibility of influence on the

project by unfavourable changes in the environment or uncertain factors exists to a very large extent, and risk is

to a definitely limited extent controllable.

CCC

The technical foundation or idea has certain problems, the application scenarios are limited, the project is

susceptible to influence by uncertain factors, both internal and external, and has relatively large risk.

CC

The technical foundation or idea has considerable problems, and application scenarios are highly limited, which

makes for a project that has few internal or external factors to consider in the context of sound development, and

carries a very large risk.

C

The technical foundation or idea has substantial problems, and lacks deliberation upon possible application

scenarios. The token has almost no usage value, and the project suffers from extremely large risk.

D The project is riddled with problems and carries an extremely high risk of failure.


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Documents

Overview - TokenInsight · Figure 5: Fluctuations in Litecoin Price over the Past Year Unit: USD Source: Bitinfocharts For Litecoin, which is third in market cap for payment tokens