A token project called “Litecoin Cash” (LCC) performed a hard fork on the Litecoin blockchain late yesterday, creating a token that trades on four minor exchanges. Is it a legitimate experiment with blockchain technology, or an attention-grabbing pump? We examine some of the details you should look at in this and any other hard-fork token offering.
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Litecoin Cash hard-forked from the Litecoin blockchain at block 1,371,111 late on Sunday February 18th EST. It took a snapshot of all Litecoin outputs and wallets at that point, and awarded 10 LCC tokens for every one LTC.
Another key difference is implementing Bitcoin’s SHA-256 hashing algorithm in place of Litecoin’s Scrypt. This is likely to recruit a ready mining network from owners of obsolete Bitcoin mining hardware looking for a new coin to mine.
LCC will recalculate mining difficulty at every block using the DarkGravity V3 algorithm from Dash, to prevent miners changing pools too rapidly. Its block rewards will also start off lower, at 1.25 LCC, and grow to 250 LCC over the first 400 blocks.
The first 24 blocks also mined at minimum difficulty, in measures designed to avoid giving a disproportionate advantage to early miners. However, there is a “small premine” that devs claim is “less than 1 percent of circulating money supply” which will go to a “development fund”.
Like litecoin, LCC will target block confirmation times of 2.5 minutes, but promises “90 percent cheaper” transactions than LTC. Like Litecoin, transaction blocks will have segregated witness (SegWit).
Unlike Bitcoin, it’s unclear why Litecoin actually needed a hard fork. There was no years-long schism over its soul and purpose, and no pressing need to make litecoin transactions faster or cheaper.
The rather obvious attempt to grab attention from Litecoin and Bitcoin Cash (LCC’s logo and branding borrows heavily from both) has led many cryptocurrency followers to question whether LCC is legitimate — or even a scam.
Litecoin inventor Charlie Lee himself has warned LCC could be a scam, and cautioned potential investors not to hand over private wallet details to “claim” new coins.
PSA: The Litecoin team and I are not forking Litecoin. Any forks that you hear about is a scam trying to confuse you to think it's related to Litecoin. Don't fall for it and definitely don't enter your private keys or seed into their website or client. Be careful out there! https://t.co/qXbiIxp5Al
— Charlie Lee [LTC] (@SatoshiLite) February 4, 2018
Now, having key members of an original open source project claim a hard fork is illegitimate is nothing new — and not limited to blockchains or cryptocurrency.
However it’s also a common tactic for cryptocurrency scams to invite users to enter their private wallet keys or seed phrases into a website to claim forked tokens. You’ve probably seen such invitations on Twitter posted in response to nearly all cryptocurrency tweets.
In fact, the Litecoin Cash team itself is warning of such scams, which it has posted on Twitter:
— Litecoin Cash [ LCC ] ⚡️ (@LitecoinFork) February 18, 2018
Litecoin Cash is developing its own QT wallets and its website promises the source code for all will be available on GitHub. Additionally, at least one third-party wallet — Coinomi — appears to be supporting the new token:
Announcing support for $LCC Litecoin Cash, $LTC's upcoming fork. To receive your free $LCC make sure you keep your $LTC inside you #Coinomi wallet at block 1,371,111. You will receive 10 #LitecoinCash for every $LTC you hold inside Coinomi during the fork! #litecoin #fork pic.twitter.com/TVojAmZhI9
— coinomi (@CoinomiWallet) February 18, 2018
LCC’s website also says the new coin will trade on Yobit, MercatoX, TradeSatoshi, MeanXTrade and CryptoBridge. All but the last of those will automatically credit existing LTC balance holders. A quick check of each exchange’s homepage/twitter account (except CryptoBridge) confirmed this.
LiteCoin Cash [LCC] trade is open: https://t.co/6RCqR2ee6O
— Yobit.Net (@YobitExchange) February 18, 2018
So regardless of whether anyone feels a cryptocurrency hard fork is legitimate or even necessary, if the code is sound then it’s up to the market to decide if it has value or not.
Litecoin Cash has also posted profiles for four members of its development team. Three of those members have provided only first names, making it difficult to perform research on their backgrounds. Its “public relations lead” is a single name and unicorn avatar, and the only member to provide a full name is LCC’s social media liaison.
Again, that itself isn’t a firm sign of legitimacy or illegitimacy, but researching the technological credentials of any new coin’s development team is key to gaining trust.
Litecoin Cash is part of a trend that began in late 2017 called the IFO, or “initial fork offering”. IFOs, like ICOs, create a new blockchain token mainly in the hope of trading on popular platforms and boosting its value for early holders.
IFOs differ mainly in that they create tokens by “hard-forking” an existing blockchain, usually one that’s already well-known, and doing so without any substantial support from that project’s developer or user community.
As well as the PR and marketing benefits that come from the claim that “XXXXcoin is forking”, IFOs create an instant user-base of holders from those who already own the original token. Many of them will take an interest in the token even if they have little interest in the new project, simply because there’s potential for a free profit if the new coin has a price pump.
The IFO phenomenon is inspired by the success of Bitcoin Cash in August 2017 (BCH; current market cap $25.7 billion USD) and then Bitcoin Gold (BTG; current market cap $2.26 billion) a few months later. BCH was a hard fork undertaken in pursuit of ideological goals by several long-term members of the Bitcoin community. BTG also claimed ideological motives, though without the same level of grassroots backing.
Later IFOs, like Bitcoin Diamond (fork of BTC), Bitcoin Candy (fork of BCH), Litecoins Plus and Gold, and now Litecoin Cash seem more promotional than ideological. Litecoin Cash is perhaps unique in drawing attention from the names of two popular coins: Litecoin, and Bitcoin Cash.
Litecoin Cash (at press time) has not yet released its official wallet software, or revealed its code. As such, it would be prudent to wait for the community to examine that code before diving in.
On the other hand, the official project is not asking for anyone to provide private keys or other revealing information. So there’s no risk of losing anything, unless you fall for a third-party scam beyond the official team’s control.
If you held LTC at block 1,371,111 in your own wallet or a supporting exchange, then you automatically have LCC anyway — so there’s no rush. If you have a LTC/LCC balance on one of those exchanges, there’s no reason not to trade LCC for whatever value you deem adequate.
What’s your take on Litecoin Cash and brand-name hard fork offerings in general? Let us know in the comments.
Images via Litecoin Cash, Pixabay