Litecoin began a bull run yesterday, nearly doubling in 24 hours from around $22 to now trading at $38 in anticipation of segregated witnesses (segwit) activation which is now due in a couple of hours.
Just over 100 blocks are left at the time of writing for segwit to activate, with litecoin’s blocks averaging 2.5 minutes. So after some drama between litecoin miners and developers, it’s finally happening. Segwit will now go live.
If all goes well, then it’s a non-event for litecoin. The currency is hardly used or accepted by anyone. It already has 4x bitcoin’s capacity, with segwit increasing it to around 8x, but just 4,000 transactions a day, while bitcoin currently has 250,000.
So litecoin users won’t really see any change, nor would anyone really care about litecoin or its segwit activation if small blockers were not promoting it as proxy politics for segwit’s activation in bitcoin.
Bitcoin, however, remains split, with the result seemingly being an increase in hashrate support for Bitcoin Unlimited. It has reached 45% during the longer one-week time frame and 53% during the past 24 hours.
That’s probably because segwit’s activation in bitcoin is very different from segwit’s activation in litecoin where it is largely irrelevant since litecoin has plenty of capacity, but bitcoin currently has none to spare. That means segwit’s activation in bitcoin would force users to the Lightning Network (LN).
That would be a significant transformation of bitcoin with a lot of unknown, a transformation supported by a minority of the hashrate, while the majority now prefers on-chain scaling. The problem is that majority might need to reach some high level of 80% which may not be anytime soon.
In the meantime, litecoin will probably launch LN, a ripple like second layer network with IOU hubs enforced on-chain. According to LN developers, its deployment on litecoin will allow them to:
“[E]xamine monetary incentives within the network, observe the emergent properties of the networks’ channel graph, and see the rise of production services and applications built on top of the network.”
That’s if anyone uses it. It’s not very clear why they would when they can just transact as normal as LN doesn’t really offer any added benefit while being more costly due to double fees – once for the hub and once for the miners.
Sure, it can offer more transactions, but most micropayments situations can be served by payment channels, so taking the intermediary hubs off the transactions and therefore paying lower fees.
So it all appears to be a bit of a stunt, but a pretty clever one since, ironically, bitcoin maximalists can’t stop talking about litecoin now. Well, maybe they can go there and let bitcoin scale both on-chain and off-chain. Guess that would be one way of solving the endless stalemate.
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