Confessions of a Former Bitcoin Maximalist Pt. 2
Has the Lightning Network Killed Litecoin?
This is the common thought that most people in the crypto community have. The majority believe the Lightning Network has killed Litecoin. This is widely accepted, as a fact by most.
I believe this is a primary reason for Litecoin’s underperformance over the last few years, against the Bitcoin pair. However, this represents an enormous opportunity.
With just a bit of research, you will find that the Lightning Network certainly has not killed Litecoin. The mispricing of this information is enormous, as it couldn’t be further from the truth.
As an example, using a very popular Lightning Wallet: Wallet of Satoshi. I sent $96. The fee was 523 Sats, which at today’s prices cost about 16 cents. Then you have the on-chain fee to get your Bitcoin into WOS, which most people seem to forget about. And we all know that transacting on Bitcoin’s main chain is not cheap. Anywhere from 0.20¢ to $10 depending on how long you want to wait for confirmation.
I routinely send money on the Litecoin network and hardly ever pay more than 0.001¢. Yes, that is right a tenth of a cent. Litecoin is cheaper than the lightning network and that is not even taking into account the Bitcoin on-chain fee.
I will use a second example. The Muun Wallet. This is my personal favorite Bitcoin only wallet. It’s very easy to use, you can choose the transaction fee that you wish to pay. It supports Taproot, which hardly any wallets support, at present. And it has a very good Lightning wallet.
Even in this example it still costs 7 cents to send $28. Again, this is not considering the on-chain Bitcoin fee which I incurred to get my Btc into the Muun Wallet.
Furthermore, in addition to the savings, which Litecoin provides over the Lightning Network. It is a simple fact that transacting on a 2nd or 3rd layer increases the security risk. If everyone only transacts on the Lightning Network, the miners do not collect the transaction fees. If only the rich can transact on the main chain, this poses a security risk.
When Satoshi created Bitcoin his main objective was to create a payment system that was Peer to Peer and required no 3rd party. Bitcoin with the use of the Lightning Network does not meet this objective. When Litecoin is clearly better for payments, the free market should pick the best option.
Finally, I would just like to clarify that, I remain bullish on Bitcoin and I do think the Lightning Network has tremendous value. However, if the Bitcoin network gets the demand that we all expect. I don’t want them stuck on a layer 2 solution like the LN. I want ordinary people to be able to take cold storage of their Bitcoin.
People could get stuck on a 2nd or 3rd layer as there is a limit to how many transactions the Bitcoin network can process. As the limit gets closer, the on-chain transaction fee will rise higher and higher. It could rise so high that it will be uneconomical, for most, to take cold storage of their BTC. At that point, the people will start looking for perfect substitutes like Litecoin.
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