The founder of litecoin, a cryptocurrency that has gained 650% in 7 months, told us he's worried about all the scams in the nascent market
- Litecoin founder Charlie Lee shared his thoughts on the cryptocurrency space in an interview with Business Insider.
- He said he has faith in the future of bitcoin, but believes its success depends on the help of technologies like Lightning Network, or alternative coins like litecoin, to make payment processing faster and less expensive.
- He said bank speculation and mainstream investors aren't a bad thing - it's a sign that cryptocurrencies are being taken seriously.
- Lee also shared his concerns that scam artists could take advantage of investors by talking up new coins.
When Charlie Lee first founded litecoin in 2011, cryptocurrencies were a whole different ball game. Bitcoin, the first cryptocurrency ever, was just two years old and saw its price jump from $1 a bitcoin to around $30, before falling back to the single digits by the close of the year.
There were few, if any, competing coins - though with a tight knit community of technically savvy engineers leading the charge, there were plenty of people with ideas for how to make bitcoin better.
One of those people was Lee, a Google software engineer at the time, who developed litecoin to address the widespread scalability flaws which prevent bitcoin from processing much more than four transactions per second on average.
In June, Lee left a four-year stint on the engineering team at Coinbase to focus on developing his brainchild. Since then, litecoin has grown it's market cap from $1.4 billion to $10.5 billion, and its price has soared 650% to $190.70 per coin.
Business Insider sat down with Lee to find out more about litecoin, and how the space has changed in the past seven years.
Becky Peterson: What makes litecoin different than bitcoin and ethereum?
Charlie Lee: I've always known that it would be hard for bitcoin to scale and be the one coin that does everything for everyone. So my vision for litecoin has always been to complement bitcoin - to be the payments currency. Where bitcoin would be digital gold, litecoin would be silver. It's more useful for payments. And bitcoin would be better for store of value.
Peterson: Is litecoin on it's own blockchain?
Lee: Yes. The difference between litecoin and bitcoin is that litecoin is four times faster. Transactions happen on average every 2.5 minutes versus every 10 minutes on bitcoin.
It uses a different proof of work algorithm, so the miners that are mining bitcoin cannot mine litecoin, and vice versa. So it doesn't compete with bitcoin for miners.
Peterson: It seems like bitcoin is already not very practical for payments. Do you agree?
Lee: Technology like Lightning Network will help, but it won't be able to handle everything. Fees will be higher on bitcoin, even with Lightning Network. So litecoin I think can find its own niche to help address payment fees.
Peterson: You spent four years at Coinbase, part of which was as director of engineering. Before that you were a software engineer at Google. In terms of the companies being built around cryptocurrencies, do you think the industry is moving in the right direction?
Lee: Right now, most companies in the space are making money from investment and speculation of the currencies - exchanges are likely making a lot of money today. We do see some payment companies, but they've struggled in that aspect quite a bit because bitcoin currently is struggling to figure out how it will be used as payment.
I think it will take some more time for tech like Lightning Network to be massively adopted before we'll see more usage of bitcoin and other cryptocurrencies as payment.
Peterson: So do you think bitcoin will eventually adapt, or do you think another cryptocurrency will take the lead?
Lee: I think bitcoin will be able to adapt. Think of bitcoin as digital gold. Gold is very valuable but people don't use it to buy stuff on a day to day basis. But with bitcoin you can easily convert it, for example, from bitcoin to litecoin and then use litecoin for payment. And there might be some other technology that comes out that makes it even easier.
Peterson: Vitalik Buterin, the cofounder of the ethereum blockchain, has publicly criticized the cryptocurrency community for focusing on making money, rather than "achieving something meaningful for society." Do you agree with his criticism?
Lee: Initially most of the bitcoin supporters were crypto anarchists. They were against big governments and banks. But these days people are into crypto because of investment and speculation purposes, and banks are getting involved.
I wouldn't say that's bad. It's just going mainstream. It won't be successful if it's only one group of people supporting the movement. I think this is just a natural progression. I don't see anything wrong with that.
Peterson: There was some criticism of you at the end of last year in terms of influencing litecoin prices. It seemed to be part of a larger issue with other coins, in terms of how volatile and responsive to media coverage their prices can be.
Lee: I think there's a bit too much scam in the space, in terms of people getting in just to get rich quick.
It's quite easy for a founder to pump a coin and make it seem like it's the latest and greatest and it will cure world hunger, and the price can go up to $10 billion. And it's easy for whoever did that to cash out.
And it will leave a lot of people hanging. A lot of people can lose a lot of money because of this.
I'm sad to see this happening all over the place. There's a lot of initial coin offerings (ICOs) that have nothing but a white paper that's full of technical jargon, and they're able to raise $100's of millions of dollars; these coins will likely just go to zero.
A lot of people will get hurt. So I am kind of sad to see that. Hopefully things will get sorted out and there will be less of this and more focus on technology and moving the space forward.