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It is said that gold and silver were first officially coined as money by the Lydians 600 BCE in the form of an alloy called electrum. Gold and silver have been considered money ever since; although, their place in daily transactions has been replaced by paper in the form of base-metal coinage; checks and bank notes; electronic transfers; credit and debit cards; and now with cryptocurrencies such as Bitcoin (BTC) and Litecoin (LTC).
Charlie ‘Chikun’ Lee, an MIT-educated computer scientist, and Silicon Valley software engineer said he found bitcoin after reading an article about it in 'Wired' magazine and perhaps because he already had an interest in gold, was one of the first humans who immediately ‘got’ the genius of bitcoin and soon created a cryptocurrency of his own by forking the bitcoin blockchain in October, 2011, which we call Litecoin. He did this as a personal project and stated he really did intend his coin to play a role similar to that of silver to gold, although one wonders if this trope developed later as a well-calculated response to the common complaint about cryptocurrency that “anyone can create one”? Indeed we’ve even assigned a name to this kind of intentional crypto: Meme Coin. A narrative or plausible explanation for a coin is one way to dodge the ‘meme coin’ tag unless, that is, one’s intention is to actually create a meme coin.
Arguably, Bitcoin is increasingly viewed more as 'electronic gold' than a circulating currency, and a plethora of money-like tokens exist that are value-pegged to the US Dollar are used far more like the Dollar than BTC is. Silver, while still issued ceremonially as a monetary metal in the form of non-circulating coins, finds its primary utility through industrial applications with hundreds of millions of ounces annually consumed by industry. Nevertheless, in times of extreme economic change, often accompanied by war or social unrest, silver increases in value in relation to paper currencies every bit as well as gold and often dramatically outperforms the yellow metal both higher and to the downside when the precious metal cycle unwinds.
Bitcoin, as electronic gold has been increasing inexorably in price and popularity because the widespread implementation of blockchain technology is truly a moment in history whose time has come. Even for China which has reacted aggressively against many of its forms while simultaneously developing its own blockchain-based Central Bank Digital Currency (CBDC). As such, while singular, Bitcoin’s popularity isn’t a singularity, as a raft of token issues has flooded the internet some which have attained multibillion dollar valuations. Nevertheless, Bitcoin dominates the entire universe of cryptocurrencies and has become metaphorical gold. How has Litecoin lived up to Charlie Lee’s vision of silver to Bitcoin’s gold?
Let’s examine the analogy. If we apply the physical analogue to LTC, it would need to be more numerous than BTC. Silver is about 8x more prevalent than gold in the earth’s crust and has historically been valued at a set ratio to gold. The United States has used different ratios but the most well-known, and one over which national political battles were fought, is 16 to 1. After gold and silver were demonetized by the United States government’s final rejection of the Bretton Woods agreement the prices of the metals have been allowed to float and be set by market demand. At present the price of silver and gold fluctuate in relation to their dollar value with very little correlation to each other except as to direction, up or down. Present silver is valued as a ratio to gold of 75:1 and in the past five years has fluctuated between around 60:1 to 120:1. Litecoin’s supply is merely twice that of Bitcoin.
Bitcoin and Litecoin also are priced independently of each other according to market demand with only the general direction of the price in common. The LTC:BTC ratio is presently around 250:1. The ratio has fluctuated dramatically over the years but it seems that initially people had mentally pegged it at around 100:1 as a value metric. Litecoin appears to be somewhat analagous to silver in that it is more abundant and many times less valuable than Bitcoin but only in the letter of the law because Litecoin's value is diminutive when compared to silver because silver is many times more abundant than gold yet it is closer in value to gold than Litecoin is to Bitcoin. Also, silver's tendency to overperform to the upside in a precious metals bull market and to the downside in a bear market has persisted over time. In contrast, Litecoin hasn't really shown this level of zippiness to the upside while it has fallen further relative to Bitcoin during market contractions.
Gold is the nexus for a nine trillion dollar industry because it has a ready market for industrial and cosmetic reasons, to be sure, but primarily because it is hoarded by national governments around the world to back up the value of their currencies and credit worthiness; and by private entities as a universally accepted store of wealth. Its supply increases by roughly 2% per year; a rate which is theoretically uncapped except by the laws of physics and of man. Silver, OTOH, is rarely mined as a primary product, with the overwhelming portion of the world’s production resulting as a byproduct of other mined metals such as lead, tin, zinc, copper and gold. The majority of mined silver is used industrially in numerous applications. A few countries do store silver as a strategic reserve and as a currency reserve, but most silver is consumed in such a way that silver is always an industrial necessity and sometimes a store of value. Interestingly, Charlie Lee’s brilliant suggestion to link the fortunes of Litecoin to Doge coin by enabling LTC miners to simultaneously mine Doge resulted in a pseudo-industrial use for Litecoin that one couldn’t have predicted; that of protecting the blockchain from 51% attacks for the benefit of both coins. This is wonderfully analogous to silver's value in itself and applied industrial utility.
It is mindboggling how quickly humanity grasped the analogy of mining bitcoin to mining gold, and then actually adopted it as a store of tangible value. Granted cryptocurrencies are not universally welcomed and there remains a vanishingly small threat that one day BTC, LTC and others are outlawed and their collective value destroyed but for the sake of our examination we presume they have a long future ahead of them. Perhaps the most emphatic proclamation of BTC’s new found status as digital money is the adoption of it as a national currency of El Salvador, an admittedly insignificant nation in terms of its impact upon global commerce. Nevertheless, El Salvador appears to be but the tip of the spear of mass national adoption.
Simultaneously, it appears that the narrative around using BTC as pocket money is fading, even while a rapidly expanding pool of commercial enterprises adopt it formally as a form of payment, with most using some mechanism that converts BTC to USD, as indeed El Salvador has done in creating its dual use BTC-USD wallets. This, too, is analogous to the universal acceptance of gold and silver as non-circulating money, i.e. if one has gold and silver he needs not actually ‘spend’ it but can do so, and can always convert it to, or loan against it, in fiat currency.
By tying Litecoin closely to Bitcoin, and adopting the silver-gold analogy Charlie Lee was able early on to persuade the crypto community to buy into the idea and LTC and BTC appeared to trade closely in tandem with LTC duplicating silver’s accustomed role of reacting to both the upside and downside more dramatically than its more highly valued relative. Without resorting to complicated charts and intensive research, one can still make a plausible argument that LTC had indeed played the role of silver to bitcoin gold for at least the first few years of its existence but this relationship seems to be increasingly tenuous or even non-existent. For example, LTC was almost always on the podium with BTC when another company announced its acceptance of cryptocurrency as a form of payment, often along with Bitcoin Cash and Ethereum. While LTC is benefiting from increasing adoption, this adoption no longer is in lockstep with BTC as Bitcoin’s adoption, based on public announcements, is overwhelming Litecoin’s similar adoption announcements. In this way LTC is not acting as monetary silver. There hasn’t been a moment in time when silver has not been readily accepted as money. The gates appear to be closing in Litecoin’s face, without a corresponding closure to Bitcoin. In this way, Litecoin’s silver role is faltering.
It seems that the relative status of BTC to LTC has fundamentally changed. Whereas Bitcoin is continually held up as the veritable King of Crypto, Litecoin appears to have lost its role as Knave. This is not only in payment adoption, but in the news headlines, market cap and activity and, perhaps most crucially, in buzz factor. It would be cruel and inaccurate to brand LTC a zombie coin, but few can argue that a lot of Litecoin’s luster has come off the coin and it is rarely included in contemporary discussions about the future of cryptocurrencies, and never around the discussion of those with the brightest future. This is occurring in the context of the unironic adoption of the meme coins Doge and Shiba Inu as acceptable forms of payment by companies that, in the past, would be expected to adopt Litecoin; and above-all in the zeitgeist of popular culture. Meanwhile usage of the actual metal, silver, is increasing and expected to continue to grow far into the future as global infrastructure demands more for the transition to green energy. This has created a narrative of “number go up” as it pertains to the price of silver and interestingly, it appears to have been adopted as a meme in itself through small communities the likes of the Wall Street Silver crowd and others of that ilk. Popular advocates aren’t making a similar argument for usage of LTC. Perhaps crucially Charlie Lee has always advocated BTC in favor of LTC and has recently disclosed that he owns only 20 LTC. Sadly, and this is perhaps where the similarity between LTC and silver diverges most clearly BTC continues to be touted not only by alternative cultures but by mainstream culture and institutions including by governments as a potential reserve currency while LTC is more often than not written off as a candidate for the dustbin of history.
Gold is a universal store of value, with a finite but slowly increasing supply. It is bought and held by national governments and private entities as an assured store of wealth. Meanwhile silver continues to occupy its traditional position as a junior but significant store of wealth that fluctuates in price according to both prevailing market sentiment while continuing to play a dual role as a critical industrial component.
Bitcoin is rapidly being adopted by national and corporate entities and occupies an unchallenged position as the standard for digital gold. It has a finite supply that is presently slowly increasing. Litecoin, meanwhile, which once could be plausibly considered a store of value akin to electronic silver now seems to be losing that argument in favor of newer and shinier blockchain objects that have cast a perhaps irreversible shadow over the Litecoin narrative.
Nevertheless, the number of companies that accept LTC as a form of payment is growing, just not universally nor at the rate of uptake on par with BTC. One could argue that this behaviour is silver-like in that silver long ago lost its strictly monetary stature but has seen its industrial use grow to occupy a critical and presently irreplaceable position in our industrial complex. We see that LTC appears to have lost its preeminent position in the rank of monetary instruments while its importance to the cryptocurrency complex grows as the value and adoption of the Doge Coin does, arguably making Litecoin relevant and indispensable. These things mitigate in favor of considering Litecoin electronic silver but not enough to overcome the long term relative value degradation of Litecoin which silver hasn't suffered in relation to gold.
In conclusion, one believes that Litecoin has not fulfilled Charlie Lee’s vision of playing silver to bitcoin’s gold, but perhaps has taken a place within the blockchain table of elements as silver-lite because of its industrial applications, specifically as a fast, cheap and easy form of electronic payment, and in the mining and defense of the Doge coin block chain. Useful and valuable yes, but one should perhaps hesitate before building a stack of Litecoin silver as a companion to Bitcoin's gold.
