Category Archive: litecoin

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Bitcoin vs. Litecoin: What makes them different?

Bitcoin vs Litecoin, Holytransaction

When it comes to cryptocurrencies, one name stands out from the rest: Bitcoin. Bitcoin is the gold standard upon which all the other cryptocurrencies, cumulatively known as altcoins, are evaluated. And that’s rightly so because Bitcoin is the most popular, the biggest in terms of market capitalization and so far, the one most likely to break into mainstream use. But among the contenders for the throne, one cryptocurrency that closely resembles Bitcoin and the earliest altcoin is Litecoin. It was created primarily to be a “lighter” version of Bitcoin. In fact, many people refer to it as ‘silver’ to Bitcoin’s ‘gold’. 

Why is that the case? An attempt to answer brings us to the issue of Bitcoin vs. Litecoin, exactly what we are trying to explore here. Let’s point out the similarities as well as explain the differences between these two cryptocurrencies.

A brief history

Bitcoin was created by Satoshi Nakamoto who released the Bitcoin whitepaper in 2008, before Bitcoin Core was launched on 3rd January 2009. On the other hand, Litecoin was created by Charles Lee and released on October 7th, 2011.

Price and Market capitalization

Whereas Bitcoin and Litecoin share a lot in terms of their blockchain protocols, the same cannot be said about their prices and market valuation. We could say both are dependent on the market trends and user flexibilities, but the variation isn’t even close. Today, bitcoin commands the largest market share, dominating by 42% of the total market capitalization to stand at $163 billion. BTC trades at $9636 against the USD and was at its all-time high of $19,535 on Dec 17, 2017. Bitcoin has a current circulating supply of 16,914,275 BTC against a maximum supply of 21 million coins.

Litecoin, on the other hand, is ranked 5th on with a market cap of $10.4 billion. Its price today is $187, though it climbed to an all-time high of $366 on 19 December 2017 when its market cap was also just shy of $20 billion. Incidentally, Litecoin on that day had a daily volume of an incredible $2.3 billion. The circulating supply of LTC is currently 55, 592,093 LTC with a maximum supply of 84 million LTC. 

When compared in terms of Market capitalization and price valuation, Bitcoin is 10x bigger or more than Litecoin. The same applies to popularity and use. While they both function as a store of value and can be used to make payments for goods and services, Bitcoin is accepted by far more companies and individuals than Litecoin.

Coin supply and transaction speed

Bitcoin and Litecoin differ in terms of the maximum coin supply. While Bitcoin’s total supply is capped at 21 million coins, Litecoin will have a total of 84 million coins. Though they differ in this aspect, both coins are deflationary, and their coin trajectory may appear similar. Another similarity is that both coins are divisible into smaller parts that enable micro-payments for goods and services. The smallest Bitcoin part is called a “Satoshi”.

But the two coins do differ in relation to the amount of time it takes to generate a new block. Litecoin block generation is halved after every 840,000 blocks, which is four times more than bitcoin at 210,000 blocks. For Bitcoin, a new block is generated after approximately 10 minutes. However, Litecoin miners use about two and half minutes to generate a new block. This results in the variation of transaction speeds between the two coins.

Due to having a faster block time, Litecoin’s network is normally able to confirm transactions much faster than Bitcoin. For instance, it would take 10 minutes to confirm four transactions on the Litecoin network, whereas the same amount of time would be just enough to verify one block of transactions on the Bitcoin network. Bitcoin has been implementing changes to its protocol to scale better and increase transaction speed.

It is expected that Lightning Network will make Bitcoin faster. However, Litecoin will look to implement the same protocol as it often times, does with every Bitcoin update.

Mining algorithms

Mining is a very vital component of cryptocurrency, precisely those that use the proof of work mining consensus mechanism. What we said earlier about block generation essentially amounts to the concept of mining. Basically, mining refers to the addition of new blocks to the main chain on the network to form a “blockchain”.  Cryptocurrencies utilize different cryptographic algorithms to secure transactions on the blockchain. Bitcoin uses the SHA-256 algorithm that allows for the use of ASICs (Application Specific Integrated Circuits) for mining.

This hardware equipment came to replace the GPU and FPGA miners. Bitcoin mining is a complex activity but can be summarized as the solving of computational math problems to verify and secure a new block to the blockchain. Bitcoin miners (nodes) get rewarded 12.5 Bitcoins for every new block. One criticism leveled at bitcoin mining is that the process consumes a lot of energy resulting in massive electricity bills.

Mining is also an important aspect of Litecoin. Scrypt is the mining algorithm used on the Litecoin network. The Scrypt algorithm is designed to be resistant to customized ASIC miners due to its memory-hard nature. This makes mining Litecoin a lot easier as you can do it using a CPU or GPU. however, there are concerns that Litecoin’s CPU/GPU mining days may be soon over as ASIC miners targeting the Scrypt algorithm have been developed by companies like Zeus and Flower Technology. While miners on the Bitcoin platform get rewarded 12.5 BTC for every new block, Litecoin miners get 25 LTC for every new block validly added to the blockchain. It should be noted that mining Litecoin is relatively cheaper than bitcoin, but Bitcoin could be more profitable for those with the right equipment.

Bitcoin Vs Litecoin, Holytransaction


Bitcoin and Litecoin share a lot in common when it comes to the functional aspect of being stores of value. However, Bitcoin beats Litecoin on numerous fronts, specifically on price valuation and market adoption. Naturally, bitcoin would be an attractive coin for investment, but if you are looking for an affordable crypto with the potential to grow then Litecoin could be it.

This Article was provided by our friend Ronni Martelli

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rocket batch

Batching Bitcoin and Litecoin transactions

HolyTransaction implemented SegWit on Bitcoin and Litecoin back in November 2017; and now we are glad to announce another upgrade to help the BTC network, as well the LTC network, reduce its transaction fee costs.

We implemented batching of transactions to help reduce fees for the entire network in order to strengthen the ecosystem.

Batches now allow grouping similar transactions and processing them together, as one transaction in one single moment. Thanks to this process, HolyTransaction is able to help conserve precious blockspace on the Bitcoin network.

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SegWit transactions are here

When checking your Bitcoin address from your balance page, you may have noticed that the address currently displayed differs from one you have seen listed in the past.

Thanks to the latest improvements in Bitcoin Core, we are happy to announce that HolyTransaction implemented the SegWit technology to improve the Bitcoin network capacity and reduce the network fees.

All new addresses generated for Bitcoin and Litecoin by the HolyTransaction wallet will be SegWit addresses.

We believe this change will be welcome by the community and will also help HolyTransaction reach new users. Check your wallet and try it out.


What’s SegWit?

SegWit makes it possible to rearrange the information in a block. Consequently, the block can contain more information and it makes transaction processing more cost-effective. Receiving payments on these SegWit addresses does not differ from typical addresses in any way. As of now, around 10% of all Bitcoin transactions pass in SegWit.

HolyTransaction SegWit Bitcoin Litecoin

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Welcome to Blockchain Club

HolyTransaction add-on for cryptocurrencies exchange rates

Recently we at HolyTransaction created a new add-on for the Firefox browser only to see the exchange rates for cryptocurrency pairs.

This add-on allows you to see the exchange rates between the most popular currencies using only a couple of clicks.
Exchange rates are available between dollar, euro, bitcoin, litecoin, peercoin, dogecoin, dash, blackcoin and gridcoin.
The add-on’s simplicity provides you an easy way to have all the information you need before selling or buying your favorite cryptocurrencies.
The price is shown on your browser, according to your specific preferences. You can change the displayed number of decimal places in the user settings.

How to dowload the add-on

To download this HolyTransaction add-on, you just have to follow this step-by step guide:
  • Click on the Firefox Menu at the top right of the toolbar;
  • Click on “Add-on”;
  • Write “HolyTransaction” in the search at the top right of the page;
  • Click on “Add-on” on the left menu;
  • Click the “Download” button next to the HolyTransaction add-on.
  • You will find the exchage rates window at the top right of your toolbar.
You just need to click on the HT logo of HolyTransaction.

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Amelia Tomasicchio
Altcoins Infographic HolyTransaction

Infographic: Comparing Altcoins

Comparing Altcoins: what features make each altcoin different Infographic HolyTransaction


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HolyTransaction releases Telegram Bot with Instant Cryptocurrency Conversion


We are excited to announce several new developments that have recently launched at HolyTransaction, in our continued effort to make digital currency easy and accessible for all.
Firstly, full conversion between Tether and our other supported cryptocurrencies is now available. Tether is blockchain-based smart property built on top of Omni Layer that is backed backed 1-to-1, by traditional currency held in Tether reserves. One TetherUST, for instance, equals one dollar. The value of each Tether never changes, meaning that there is no fear of volatility. Tethers can also be withdrawn and held in any Bitcoin wallet where you control the private key.
Secondly, we are pleased to introduce our new HolyTransaction Bot, available to users on both the Telegram and GetGems messaging platforms. The HolyTransaction Bot allows users to complete trades, view up-to-date exchange rates, and get the most recent cryptocurrency news, without ever leaving their chat client. In many countries, a strong and reliable internet connection is not always available. Our bot will allow users to conduct transactions and inquire about their favorite currencies quickly and without difficulty, all from a single chat. The HolyTransaction bot is available to users on both desktop and mobile platforms. Simply send a message to @HolyTransactionBot via either Telegram or GetGems to begin.

Bot Commands: 

  • ●  Conduct a trade between any of our supported currencies on the HolyTransaction platform.
  • ●  View the most recent cryptocurrency news.
  • ●  Receive details on the current price of any of our supported currencies.
  • ●  List currencies available on the platform.        

            ●  List of BOT commands
Lastly, as part of the technology behind the HolyTransaction Bot, we have released a custom HolyTransaction API. Developers around the world are invited to use this new API to integrate the functionality of the HolyTransaction platform into their own projects. You will find more info to start developing here.
HolyTransaction is a multi cryptocurrency wallet that allows you to use Bitcoin, Litecoin, Dogecoin, Dash, Blackcoin, Tether, Omni Layer and RibbitRewards. We are committed to our users both near and far. Cryptocurrency is international, and so are we. Stay tuned for more news from HolyTransaction!

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HolyTransaction partners with Netki for human-readable address

Wallet addresses are one of the most aggressive barriers to the mass adoption of digital currency. Trying to explain these lengthy, case sensitive, intimidating strings of numbers and letters to the uninitiated is a daunting task. Much of the general population values simplicity over function, and in this regard wallet addresses seem scary and overly complex.

It is with this in mind that we are very excited to announce our partnership with Netki!
Netki makes digital money approachable and intuitive for new and veteran users alike, by transforming long and unwieldy Bitcoin addresses into human-readable wallet names. Additionally, your Netki name separates your identity from public blockchain data, providing you multiple layers of privacy, as well as multiple validations to keep you secure.
When paired with your existing HolyTransaction account, Netki will allow you to use one single Name for all of your wallet addresses. This means that you will be able to send multiple currencies, all to one domain name-like address! As of this writing Changetip is integrated with Netki. Storing your funds, tipping online, building/implementing blockchain applications, and buying, selling, and accepting your desired currency, have all just become as simple as remembering a single name, when used with supported vendors!
Your account will be automatically updated as soon as it’s ready, and the integration will be seamless from your perspective. Once implemented, your wallet name will correspond to your HT username.
Bitcoin, Litecoin, and Dogecoin will be the first coins supported, with more of your favorites coming soon after.
Netki’s solution utilizes both the decentralized Namecoin blockchain at its core and distributed DNSSEC at its edges. This combination allows users to have both control and ownership of the blockchain, while still maintaining their financial privacy. This architecture allows users to easily share their Wallet Name with anyone without having to publish it to the world via a public ledger.
Together, HolyTransaction and Netki aim to transform cumbersome wallet addresses into one shareable, easy to remember name, that will be usable by all your digital currencies. We look forward to working together to continue making the bitcoin experience both friendly and intuitive for all.

Open your free digital wallet here to store your cryptocurrencies in a safe place.


Dogecoin to allow Litecoin merge mining in network security bid

(CoinDesk) The dogecoin development team has announced that it will soon enable auxiliary proof-of-work (AuxPoW), allowing merge-mining with litecoin that will address concerns over the altcoin’s future.
AuxPoW enables the dogecoin block chain to receive work from other scrypt-based networks. Dogecoin miners will still be able to generate blocks and receive DOGE, but now, litecoin miners will contribute hashing power to the dogecoin network.
The move, announced on the dogecoin subreddit, follows a months-long period of community debate focusing on the question of long-term viability in the dogecoin network. Litecoin creator Charlie Lee suggested the idea of merge mining in April, eliciting mixed reactions from both sides of the conversation.
According to the dogecoin development team, the AuxPoW integration will require a hard fork of the dogecoin wallet block chain. No specific integration date has been given, but the development team said that testing will begin soon.
As explained in the original announcement:
“Our topmost priority has always been to provide a stable platform for the currency and its services and of course its users. We hope that with AuxPoW we can achieve that in a better way than what it currently is like. Our hashrate has been on a decline and we hope that we can gain more of it with the acceptance of proof of work from other chains.”
As expected, community members voiced both enthusiasm and concern for the AuxPoW plan. Yet, advocates for the strategy, including Lee, say that the move will ensure the stability and security of the dogecoin network.

Plan to save dogecoin

AuxPoW is not new – several coins already enable work from other mining networks, with namecoin being the most prominent example. This long-standing reputation as a workable proofing system – and the strength of the litecoin network – has gained the idea support in recent weeks.
In a recent community post on /r/dogecoin, Dogetipbot creator Josh Mohland shared his perspective on the concept, saying that AuxPoW would help solve a key problem with dogecoin: the fact that it was never intended to function as a full-fledged transaction network.
Mohland explained:
“Dogecoin was built to die quickly – none of us expected it to grow into the absurd entity it is today. With that said, there’s absolutely an easy way to save the coin from its certain death (and by death I mean 51% attacked for the lulz), and that’s AuxPoW.”
He went on to call AuxPoW “a simple change” worth the trouble, owing to the fact that the risk of a 51% attack far outweighs perceived costs.
Other community members expressed concern over the idea, saying that the move enables large litecoin pools to crowd out smaller dogecoin miners. Questions were also raised as to whether or not AuxPoW would actually help prevent a 51% attack.

Dogecoin in ‘dire situation’, says Lee

Litecoin creator Lee hailed the announcement, telling CoinDesk that the development team made the right decision during a “dire situation”.
Lee argued that the move comes at the right time given the long-term threat to the dogecoin network – and, as some have pointed out, its falling price. He added that the move provides increased security for dogecoin without any repercussions, removing a source of concern for the network and enabling broader development in the community.
Lee told CoinDesk:
“[The community] can focus on what dogecoin does best (tipping, donations, wow) instead of worrying about defensive mining and network security.”

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Litecoin network hashrate tripled in two months

At the end of April, mining hardware manufacturing company started shipping a whole stack of their products. It was the same time when the Litecoin hashrate was somewhere around 173,225 MH/s. The increasing exposure of Scrypt ASICs mining machines further influences other manufactures as well. In just two months since April, the Litecoin hashrate went up to 200$, while its mining difficulty also tripled.

The next Scrypt ASICs to hit the market will have the hashing power between 200 and 400 MH/s; indicating the possible surge in Litecoin mining difficulty and network hashrate as well. Some companies are also building hardware that can sustain hashing power up to 650 MH/s. As many believes, these events will somewhat impact the Litecoin standings in the market. The question however is, in which way?

The Litecoin community seems to have divided on this question. There is a section which believes that the increasing hashrate will have a fruitful impact on Litecoin prices, citing Bitcoin as a key instance; while another section does not acknowledge any relation between the Litecoin prices and its hashrate.

Explanations are coming from both sides, each with a unique perspective. The ones that support the prediction of Litecoin’s escalation believe it to be the network’s strength that will multiply by over 1,000 times in future. It is the economics of scale in mining that will play a major role in boosting the Litecoin’s stand in the market.

On the other hand, there are those who do not support this theory even in thoughts. They outright rubbish the history that certifies increasing hashrate proportional to the coin’s market cap. Their logic dictates a scenario in which miners are faced with increased selling pressures in order to cover their investments on such expensive mining hardware. This aims at a lower demand and higher supply rate that will eventually cause a huge drop in Litecoin prices. They event say that the current imbalance of Litecoin market is caused by such selling pressures.

Considering both the sections, we believe that market conditions have changed a lot since the launch of new cryptocurrencies in the market. The reason why BTC did so well after the increased hashrate was it being used only for trading. Litecoin too cashed only because of the bubble fuelled by China. The moment these coins were introduced to the real merchant world, its basics changed completely. Seeing today’s scenario, Bitcoin is backed by multiple major organizations while Litecoin is still far away from reaching this point. In short, the continual acceptance of BTC over LTC thickens the latter chances to repeat history. Hashrate increased or decreased, it won’t hold any meaning until Litecoin grabs some major investments from big players.

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A touchup astrodoge

What Dogecoin must do to survive

Tim Swanson is an educator, researcher and the author of ‘Great Wall of Numbers: Business Opportunities and Challenges in China’. Here, he explores the mining systems of dogecoin and litecoin to show how the dogecoin economy can thrive.

(CoinDesk) The key ingredient to the success of any decentralized public ledger, such as bitcoin, is incentivizing its transactional network to simultaneously secure the network from attackers and process transactions.

In the case of bitcoin, and in the case of virtually all other cryptocurrencies, this incentivization process is handled through seigniorage.  Every 10 minutes (or 2.5 minutes for litecoin, or one minute for dogecoin) a fixed amount of bitcoins is paid to the labor force called “miners.”  These miners are computational systems that perform never-ending mathematical calculations dubbed hashing.  This hashing in turn creates security for the network; so as long as more than 50% of the hashrate is maintained by “good” systems, bad actors are prevented from manipulating the ledger.

The other key role these miners also fill is processing and including transactions into packages called blocks. Every 10 minutes, one miner is rewarded for processing these blocks with fixed income. Last month David Evans published a good overview of how this process looks from a labor input and supply output perspective.

For some advocates, one of the purported advantages of cryptocurrencies is that their money supply creation rate is actually deflationary (or contractionary) in the long run – in the short run, bitcoin’s expansionary rate is quite high, with inflation at 11.1% this year alone. That is to say, it is a hardcoded asymptote, tapering off over a known time period. In the case of bitcoin, the wage for the labor force (miners) is split in half roughly every four years (every 210,000 blocks), for approximately the next 100 years – until its money supply is exhausted at a final 21 million bitcoins.

Roughly 12.7 million bitcoins have already been paid to miners.  With dogecoin’s 100 billion dogecoins, this process is accelerated, with the mining income dividing in half every two months.  While it took about five and a half years for about 60% of bitcoin’s total monetary base to be distributed, as of today 78% of dogecoin’s reward (income) has already been divvied out to its workforce in less than six months.

What now for the workforce?

While this frenetically fast money supply has provided a psychological motivation for early adopters to partake in the dogecoin ecosystem, economic law suggests that this network will probably cease to exist in its current form within the next six months probably through a 51% attack.

The reason is simple: with every block reward halving, also called “halvingday”, the labor force is faced with a 50% pay cut.  The contractors (laborers) incapable of profitably providing hashrate at this level can and will leave the work force for greener pastures.  This same issue has impacted other altcoins in the past, such as MemoryCoin, which died after nine months due to a combination of factors including diminished block rewards (it attempted to divvy out its entire monetary supply in two years).

Early advocates of dogecoin like to point to outlier events such as the Doge bobsled team or sponsored NASCAR driver at Talladega or even a vaunted tipping economy (which is actually just faucet redistribution) as goal posts for growth and popularity, yet after two halvingdays the actual dogecoin block chain has lost transactional volume each month over the past four months and the labor force has also left for new employment elsewhere.

This is visualized in the following two graphs.

The first chart shows dogecoin’s collective hashrate.  The black lines indicate when the “halvingday” or rather “income halvingday” occurred. Because the price level of a dogecoin remained relatively constant during this time frame, there was less incentive for miners to stay and provide labor for the network.  If token values increased once again, then there may be incentives in the short-term for laborers to rejoin the network.  Yet based on this diagram, roughly 20-30% of the labor force left after each pay cut.

The second chart shows on-chain transactional activity.  The first three months are erratic because of how mining pools (similar to lottery pools) paid their workforce (miners).  Following the first halving day in February, the network transaction rate fell to roughly 40,000 transactions per day and then leveled off to around 20,000 until 28th April 2014, when another halvingday occurred and the subsequent transactional volume remained relatively flat to negative. It is currently at 12,850 transaction per day, or roughly the same level it was during the first week of its launch five months ago.

Dogecoin’s falling hashrate

Now, some readers may claim that a lot of the transactional volume such as tip services and tip bots are being conducted off-chain and thus the total number of transactions is likely higher.  And they would be correct.  But that would completely defeat the purpose of having a block chain in the first place – a trustless mechanism for bilateral exchange that negates the need for “trust-me” silos (as Austin Hill calls them).

Also, while this topic deserves its own series of articles, there is little literature that suggests that tipping can grow
an economy; it is not a particularly good signaling mechanism or way to grow a developing economy (i.e., “China, you need more tipping activity to grow and prosper”).

However the key issue is this: if the trend continues and the network hashrate continues to fall 20-30% after each halvingday, then within the next two to four months it will be increasingly inexpensive for competing mining pools on other ledgers to conduct a 51% attack on dogecoin’s network, destroying its credibility and utility.

For instance, the chart below is the litecoin hashrate over the past six months. Litecoin is dogecoin’s largest competitor based on its proof of work (PoW) mechanism called scrypt:

One of the reasons the litecoin hashrate is not rising or falling at a constant rate but is instead jumping up and down erratically is that miners as a whole are economically rational actors.  When the cost of producing security is more than the reward (block reward income), the labor force turns towards a more profitable process such as another alternative scrypt-based “coin” (note: bitcoin’s hashing method uses SHA256d whereas litecoin and dogecoin use scrypt). The same phenomenon of hashrate jumping up and down occurs with the bitcoin network.

For the sake of simplicity, the litecoin network can be viewed as roughly 200 GH/s versus the dogecoin кошелек network which is roughly 50 GH/s.  To conduct a 51% attack on dogecoin today, an entity would need to control roughly 25-26 GH/s which is roughly one eighth the processing power of the litecoin network.  The current ‘market cap’ for dogecoin is $35 million, assuming marginal value equals marginal cost, ceteris parebus on paper it could cost $17.5 million in capital and operating expenses to successfully attack the dogecoin network.

The chart above shows both the hashrate of litecoin (in red) and dogecoin with the vertical black lines representing the dogecoin “halvingday.” What this shows is that while dogecoin, for roughly one month in early 2014 was more profitable to mine than litecoin, the halvingday led to an exodus of labor.

If current prices and trends continue, which they may not, in two months the litecoin collective hashrate may hit 240 GH/s and dogecoins hashrate could shrink due to halvingday by another 20% to 40 GH/s.  At this rate a successful 51% attack on dogecoin would require just one twelfth of the hashing power of litecoin which at the same prices levels would entail less than $10 million in capital and operating expenses to do.

Will dogecoin survive?

While the development team could theoretically switch its proof of work algorithm (to X11 as used in Dash), the doge community is really faced with six options:

  1. Merge mine. Namecoin was (and is) an independent block chain, but since block 19,200 about 80-85% of its network hashrate (and block rewards) are tied to bitcoin mining pools through a process called “merged mining.”  The new sidechains project from Blockstream is attempting the same process.  Charlie Lee, creator of litecoin explained how dogecoin could be “merged mined” with litecoin in a series of posts last month.
  2. Transaction fees. Both the development team and mining community could agree to float or raise transaction fees on the doge network, similar to what Mike Hearn has been discussing for bitcoin.  In practice however, even if approved, very little actual commerce, and therefore transactions, is conducted on the dogecoin network. Thus it is unlikely that this will compensate the large drop in mining income.  Similarly, as Gavin Andresen pointed out in Amsterdam this past Friday, increased transaction fees reduces the participation rate. It is important to note the actual transaction costs are much higher than stated – block rewards (token dilution) are usually not factored in.
  3. Proof of stake. There are several variations of proof of stake.  Whereas bitcoin, litecoin, dogecoin and most other cryptocurrency experiments use a “proof of work” mechanism to protect the network from malicious entities, a proof of stake system, such as that used in NXT, will randomly assign a “mining node” called a “forger” – a poor marketing term for sure – to process all the blocks for the next minute.  Because all of the other nodes in the network know which miner to trust, this lowers the amount of infrastructure needed to protect the network.  In theory this sounds amazing.  In practice however, most proof of stake systems end up almost immediately centralized in one manner or the other. Andrew Miller, Andrew Poelstra and Nicolas Houy call it “proof of nothing”.  Perhaps Stephen Reed’s version can work in the future.
  4. Increase in market price. This would incentivize the labor force to continue providing security of the network with the expectation that the tokens they are given in return for their labor will continually appreciate in value.  This is betting on hope.  Charlie Lee pointed out the uphill task this would require beginning next year when rewards fall to less than one tenth what they are today, stating last month, “At dogecoin block 600,000, only 10,000 coins will be created per block. So in order for dogecoin to keep the same amount of security as today, dogecoin price would need to go up by 25 times. And dogecoin price would need to gain on litecoin by 50 times in order to catch up on litecoin’s security. And assuming everything stays the same, the market cap of dogecoin needs to reach $1.5 billion by January of next year.”  For comparison, the ‘market cap’ of dogecoin today is roughly $35 million (note: it is probably not accurate to call it a ‘market cap,’ see Jonathan Levin’s explanation).
  5. Migration. Dogecoin could also migrate to a platform like Counterparty and become a fully secured altcoin with a dash of proof of transaction thrown in to inflate the coin with ongoing usage that this particular community likes to embrace. It could be fully protected by the bitcoin hashrate with no further need to try to acquire miners to protect it.
  6. Further experimentation.  While it is unlikely the dogecoin has the resources to create secure production code in the shortened time frame, Robert Sams “growthcoin” and Ferdinando Ametrano’s “stablecoin” could provide a mechanism that enables the network to live on in a different manner.

While any or all of these may be tried out, it may be too little, too late. With that said, stranger things have happened.  A rising tide lifts all boats and thus in the event that “bitlicense” approved exchanges on Wall Street come online this summer and new capital actually flows into bitcoin and other alternative ledgers, perhaps similar speculative funding will flow into dogecoin as well.  However, this is not something that can be known a priori.

I contacted Jackson Palmer, creator of dogecoin for his thoughts on the situation.  In his view:

“It is definitely a challenge that dogecoin (and all current-gen crypto currencies) will face in the future. As we discussed recently, it’s kind of a sad reality that people are purely profit driven and these decentralized networks we’ve built are reliant on profit-mongers to power and secure their viability. I’m very concerned about the impact of centralized mining and reliance on transaction fees could hold for bitcoin as it becomes less enticing to mine – really, the network can be held at ransom to attach hefty transaction fees if the mining pools are cherry picking as they create blocks. At the end of the day, I think the viability of cryptocurrency really hinges on a move away from PoW-based mining to something new and innovative that doesn’t just stimulate an arms race and put all the power back into the hands of the fiat-wealthy. I don’t have a solution unfortunately, but hopefully someone will find one and bring about a new generation of digital currencies in the coming five to ten years. That being said, cryptocurrency as a space is very unpredictable so it wouldn’t surprise me at all if dogecoin beats the odds and overcomes these challenges in some weird, wacky way. It’s in the community’s hands, and they’re certainly passionate about seeing it reach the moon, as am I.”

Can this happen to bitcoin?

To be balanced, below is the network hashrate for the Bitcoin network following its first halvingday on November 28, 2012:

The following two months, from December 2012 through January 2013, the hashrate stayed flat and in some weeks even declined. There were three reasons why the network did not decline precipitously like dogecoin:

  • Despite the fact that very little real commerce actually takes place on the bitcoin network, there was some amount that did in 2012 and does today (primarily gambling and illicit trading of wares).  Thus there was external demand for the tokens beyond miners and tippers.
  • The token prices rose creating appreciation expectations.  The price rose from $12.35 on 28th November 2012 to $20.41 on 31st January 2012.  If miners believe and expect the price to increase in value, they may be willing to operate at a short-term loss.
  • The first batch of ASICs from Avalon shipped and arrived to their customers at the very end of January. These provided roughly two to four orders of magnitude per watt in performance than the top competing FPGAs and GPUs.  This is equivalent of miners being given sticks of dynamite instead of pick axes to tunnel through mountains.

While more research will be conducted and published in the following months and years before the next bitcoin halvingday (estimated to occur probably before August 2016), the bitcoin network faces a similar existential hurdle, though perhaps less stark once more ASIC processes hit similar node fabrication limitations.  That is to say, in the next couple of years there will no longer be performance gains measured in orders of magnitude. They will likely compete on energy costs. Since most participants do not like paying transaction fees, incentivizing miners to stay and provide security will likely be problematic for the same income reduction issues.  This scenario will likely be revisited by many others in the coming months and years.

Nothing personal

From a marketing perspective Dogecoin has done more to bring fun and excitement to this sub-segment of digital currencies than most other efforts – remember, USD can also be digitized and encrypted.  In turn it brought in a new diverse demographic base to block chain technology, namely women.  While some of the more outlandish gimmicks will likely not be enough to on-ramp the necessary token demand which in turn leads to token appreciation, this project has not gone unnoticed.

For instance, two weeks ago I had coffee with a bank manager in the San Francisco financial district.  As we were wrapping up he asked me to explain dogecoin.  I mentioned that what sets doge apart from the rest was its community was much more open towards self-ridicule, self-parody, less elitist and most importantly, women actually attended meetups.

He quickly surmised, “Oh, so it’s the wingman currency. It’s the friend you bring to the bar who is willing to look goofy to help you out.

That is probably a fair enough assessment and it will likely need a wingman to survive.

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