TL;DR: “Litecoin’s hashrate has fallen more than 50% from its peak,” claimed anonymous developer imaginary_username, “and there is no other major Scrypt coin to put those dark ASICs to use. It is likely more vulnerable to 51% attacks than any SHA-256 coins.”
Litecoin Hashrate Falls More Than 50% Since Peak
Anonymous developer imaginary_username told CoinSpice his observations were relative, and that they do not necessarily mean Litecoin (LTC) is dommed. Among other things, the project has been dogged by recent claims of being a so-called Zombie Coin, one where near-zero development happens, while getting the tag of being solely a palatable BTC proxy for micro-transactions with a giant marketing budget to distract from more viable blockchains.
Asked by CoinSpice about the above assumption, Litecoin as an answer to BTC scaling for maxis, the anon dev mused, “I wouldn’t even call it an answer, it’s usually more viewed as a fallback when BTC gets … inconvenient. There were/are other altcoins (pardon that word) that can fulfill that role as well, but since Litecoin’s founder was so friendly to BTC, the BTC community mostly reciprocates except for a few diehards like Cobra, Lukejr, etc. In the very early days, almost everyone in the community saw Litecoin as useless at best, scam at worst – there’s no reason to use it whatsoever. It only picked up when it was clear that BTC was going to stay constrained for a while, and got critical momentum with Coinbase listing.”
This isn’t imaginary_username’s ultimate point with his thought experiment, however. “In ASIC resistant coins,” he explained further in his thread, “security is proportional to electricity spent + opportunity cost of CPU/GPU that could be doing other things. In majority ASIC chains, security is enhanced by [the] sunk cost buying rigs, which tied your future finances with [the] fate of your coin.”
Interview with imaginary_username
He contends that for so-called minority chains “sunk cost” isn’t as important. “Attackers not only have to overcome electricity cost, they also have to weigh against [the] opportunity cost of mining somewhere else, and damage to [the] resale value of their rigs. In [coins] with a large ‘dark pool’ – like LTC right now – the dark hashrate has no opportunity cost, they are just rusting. As they are dark, they failed to be resold to places they can mine as well. Whenever profit exceeds electricity cost there’s incentive to attack,” imaginary_username stressed.
Litecoin has withstood such an assault for at least two reasons: “rig owners also owning large amounts of LTC, and that they still hold hope that LTC price might rise in the future to make their rigs useful again. But the longer it goes on, the less reliable this is,” he concluded. CoinSpice spoke to the anon dev in an effort to better flesh out his thoughts on the matter.
CoinSpice: Litecoin gets a lot of juice, marketing-wise. Clearly someone wants it to succeed.
imaginary_username: Given that Litecoin only has to spend minimally on development, they follow literally all BTC developments after all, it makes sense for whales to throw money exclusively at marketing.
Also, since they have both liquidity – being an old coin helps – and non-hostility from most BTC maximalists, they do have an advantage in that some BTC hodlers will do their marketing for them. The hodlers are pretty decent in number, so that helps quite a bit.
And what are you to make of the rumored lack of development on Litecoin? Is there something to that or do you think it’s blown out of proportion?
Litecoin can continue indefinitely being a ‘4x bitcoin,’ so I don’t see why they have any urgency in developing anything new that’s not on the BTC roadmap. If I were them, I’d drop any pretense of new things, which, if realized, are actually dangerous for their situation.
The only external threat to their existence would be either BTC increases blocksize one way or another, which fortunately for them is not happening; or a surge in BCH popularity, which has been bludgeoned by the market and hence probably not high on their threat list.
‘Lack of unique features’ is very unlikely to be a worry, while ‘deviated from BTC and couldn’t keep up with maintenance, and fall apart in weird ways’ is a very real threat.
What’s a Scrypt coin? Why is that significant?
Scrypt is an algorithm for mining Litecoin, its main significance is that it’s different from bitcoin (all notable forks); so machines used to mine bitcoin cannot be used to mine Litecoin and vice versa.
What do you mean by ASICs going “dark?”
ASICs in this context are specialized machines used to mine one or more cryptocurrency chains. When they go dark, they are left idle and you no longer see their hashrate show up on the blockchain; this can be due to a number of reasons, the most usual of them being that the owners can no longer find electricity cheap enough for them to mine profitably.
Explain “sunk cost.”
Sunk cost is the large amount of money they prepaid to buy ASICs. That money is recovered by mining the coin over the coming months /years, as the rig cannot be used for anything else; so doing things that affect such recovery (lowering coin price by attacking transactions on the chain is one of them) is unlikely to be considered.
Why are they languishing away? Why aren’t they in use?
Those machines likely can no longer find anywhere in the world where electricity cost is lower than coin revenue. If it cannot find such a place, you do not mine – the electricity cost is better spent buying coins even if you want the [mined] coins very badly.
“Whenever profit exceeds electricity cost there’s [an incentive to attack,” you posted. Why is there an incentive in this case?
For example, if an exchange takes six confirmations (24 confirmations in the case of Litecoin) before trades and withdrawals are allowed, and putting those rigs to work for one hour takes $10,000 … that means if someone deposits $11,000, he has an incentive to gather all that hashrate and take it back – he gets $11,000 (traded some-other-coins) plus free coins back (note that this is pretty much the original scenario described in the satoshi whitepaper).
How is the LTC scenario different or more vulnerable than other top 10 coins? Are they all facing the same fate?
Not really: BTC is obviously not, ETH is the ‘ASIC resistant coin’ described in my thread (it still is to some extent, the delta between GPU and ASIC isn’t that huge), and BCH piggybacks on SHA256. Other coins are not PoW.
What made/caused you to think about this subject?
To be absolutely honest, it’s the ‘BCH is getting 51% omg’ FUD. I figured I should take a good look across the landscape and bring some perspective.
Right. And how much of a concern you’re bringing up here is relevant to BCH? Is this just as potentially big a problem for BCH as LTC? And if not, what’s different?
This is less of a problem for BCH, as miners who are not on the BCH chain can still move to BTC where they have some profit margin – and as far as we know there are no large collections of dark miners around to attack SHA-256 at the slightest motivation.
But I also want to make it clear that this does not mean LTC is going to be immediately attacked. As long as the expected haul is modest, we can expect electricity cost and uncertainty to still deter would-be attackers even if they unite a lot of dark hashpower.
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