Litecoin (LTC) Transaction Fees To Fall 10x In Anticipation of Bear Market End, Full Blocks

Colin Muller

Litecoin fees will fall by up to ten times, as part of changes in the upcoming version 0.17 of Litecoin, according to a post on the official Litecoin Medium. In the future, the average network fee will be Ł0.0001 per KB, as opposed to the current average of Ł0.001 per KB - $0.005 versus $0.05 at current prices, respectively.

The post detailed a current mismatch in the Litecoin ecosystem which has drawn attention to the issue of transaction fees, namely that fees remain relatively high even as demand for blockspace for transactions is low.

Fees are calculated per KB of memory usage in the blocks, and the post explained:

[c]urrently because the blocks aren’t full there is no need to pay higher fees, which is one reason why the move is being taken

Transaction sizes are based on the amount of transaction data they contain, rather than the amount of value being transferred. Some transaction sizes are less than one KB.

Adrian Gallagher, current lead Litecoin developer and the first hire of the Litecoin Foundation, said  that the future intentions of Litecoin were to “lay down the foundation for a fee rate which we can grow into proactively rather [than] re-actively [sic]”. His remarks come in anticipation of the end of the current cryptoasset bear market, which he predicts will end in three to six months.

The post also touched on the idea of a fee market, which applies to many other cryptocurrencies as well as Litecoin. In the future, when block rewards begin to diminish, it will become necessary to incentivize mining in a different way, namely with transaction fees to transfer already-existing cryptocurrency, rather than creating or “minting” new currency.

Déjà Vu

The strange thing is, this issue is not new, nor in fact is this announcement.

The exact same “news” was announced by Litecoin creator Charlie Lee way back on January 17 - when litecoin’s daily price closed at $187. Lee, also back in January, discussed the incorporation of a fee market into the Litecoin code.

On January 6, Lee outlined intentions of hard-coding in a fee market, proposing that fee rates be stored in Litecoin block headers. If this were the case,, "[m]iners [would be able to] choose to not mine low fee transactions to signal to the market to increase the fees. This should help create a fee market" Adding "I'm convinced this will work". This sounds a lot like Gallagher’s proactive-not-reactive aims.

Whatever the case, it would seem that this Litecoin upgrade has been in the works for some time.

Charlie Lee famously sold all of his Litecoin and later regretted it - although he added that “[he] didn’t actually have that many Litecoins” to begin with.

Mike Novogratz Thinks Litecoin Is Overvalued: ‘Sell $LTC Buy $BTC’

On Wednesday (April 3), Michael Novogratz, a former Goldman Sachs partner, as well as Founder and CEO of crypto-focused merchant bank Galaxy Digital, said that he could not understand Litecoin's price rally since he feels that Litecoin (LTC) is significantly overvalued.

Novogratz's comments on Litecoin came on the day that Litecoin reached its highest price ($96.39) since 14 June 2018. They were delivered via the following tweet:

As most of you probably know already, Litecoin creator Charlie Lee has often said that if Bitcoin is digital gold, then Litecoin should be considered as digital silver. For example, this is a tweet sent out by Lee in May 2017:

What Lee says makes sense since the two cryptocurrencies share the same basic philosophy, but Bitcoin is much harder (i.e. more expensive) to mine.

So, what Novogratz is saying is that since silver's market cap is 0.17% of gold's market cap, it does not make much sense that Litecoin's market cap ($5.5 billion at the time) is 6.4% of Bitcoin's market cap ($90 billion at the time). Novogratz feels that since Litecoin is just a "glorified test net" for Bitcoin, such a high valuation is not deserved, and that's why he is confounded by Litecoin's strong price rally (over the past several weeks), which started on February 8. That's why he is recommending selling Litecoin and buying Bitcoin.

Novogratz's use of the words "glorified test net" seems to suggest that he has been influenced by Tushar Jain, a managing partner at crypto hedge fund MultiCoin Capital Management. As CryptoGlobe reported, back on 14 September 2018, Jain published a blog post titled "Debunking Market Narratives: Litecoin ($LTC) Edition" that claimed that the most popular narratives used for defending Litecoin all seem inaccurate, and called LTC (even at around $50) "significantly overvalued."

In that blog post, Jain said that he believed that Litecoin is "a relic of the pre-smart contract platform crypto ecosystem," that its fundamental value is a lot less than its current price (around $50 when the report was written), and that the only things propping up its price are "outdated narratives."

With regard to Litecoin's use case as a testnet for Bitcoin, Jain wrote that this was not an "investment thesis", but simply "a false narrative that has emerged most likely due of the lack of any other viable alternative" He went on to say:

"To make the argument that Litecoin should be valuable as Bitcoin’s testnet, that means that Bitcoin holders must voluntarily choose to sell some Bitcoin in exchange for Litecoin in order to support the testnet to the tune of $3B. This is a ridiculous assertion."

It looks like Jain's feelings about Litecoin have not changed since the day after Novogratz's tweet, Jain sent out the following tweet:

However, not everyone agrees with Novogratz's assessment of Litecoin. One notable example is Mati Greenspan, Sensior Market Analyst at social trading platform eToro, who sent out the following tweet to defend Litecoin:

Another dissenting voice was that of Peter McCormack, the host/producer of the very popular "What Bitcoin Did" podcast:

Despite the negative views of Jain and Novogratz toward Litecoin, in fact, it's year-to-date performance (USD) versus Bitcoin is very impressive: (at the time of writing) Litecoin is up 189.49% and Bitcoin is up 34.2%. 

At press time, according to CryptoCompare, LTC is trading at $87.54, down 0.79% in the past 24-hour period:

LTC 24-Hour CC Chart - 5 Apr 2019.png

Featured Image Credit: Photo by "EivindPedersen" via Pixabay.com