The Bitcoin community has been in a heated debate for years over how to scale the network to handle more transactions in a block. The main debate is around security vs increased transaction capacity. Right now each bitcoin block can handle 1mb worth of transactions and some people want this capacity increased through a hard fork.
Bitcoin’s main developers think that a hard fork can cause security issues around a network split and would prefer to implement a scaling solution through a soft fork. Both types of forks would change rules to the Bitcoin protocol, except a soft fork is backwards compatible with nodes that don’t upgrade whereas a hard fork isn’t.
Bitcoin’s core developers have come up with a soft fork solution called Segregated Witness, which will increase block capacity to around 1.7mb and fix the transaction malleability issue. This has already been implemented into Bitcoin’s software but requires 95% of the miners to signal and activate it.
Due to ongoing political issues with certain factions of miners being against it, activation of Segregated Witness may not happen as quickly as people would like. As a result scaling the Bitcoin network is coming to a stalemate.
Litecoin Steps Up to Help
In an effort to help things move forward, litecoin developers have decided to implement Segregated Witness into the protocol. Their network transactions aren’t close to capacity so technically they don’t need an immediate scaling solution but the effort can increase Bitcoin’s chance of implementing it sooner than later.
Litecoin is very similar to Bitcoin because it comes from the same code with a few minor adaptations such as supply and transaction speed. This will serve as a live example for the Bitcoin network to study and can even lead to payment channels such as lightning network. If everything works smoothly without any serious issues then Bitcoin can safely make the changes without jeopardising a +$14B market.
There’s a strong chance that litecoin will make the changes sooner because the miner vote requires only 75% consensus and litecoin’s largest mining pool F2Pool (40% of the hashrate) announced support for the changes.
The LTC/BTC markets have been on a long bear trend since the rally of 2015. During that summer rally a Chinese ponzi scheme had accumulated and dumped around 20% of the entire supply.
Litecoin used to have strong correlation to bitcoin and would rally alongside it but lost its correlation after the 2015 pump. The dollar value of litecoin has remained stable but it lost grounds against bitcoin’s strong percentage gains.
If litecoin implements these changes in 2017 then the fundamentals just might be enough to wake this market up from its slumber. Looking at the LTC/BTC charts we’re seeing prices at new lows but showing the first sign of breaking out of a large descending trend line.
If this market wakes up there are several reasons why it could have a big trend.
- One of the most liquid altcoins around
- Listed on all the major exchanges including the Chinese market movers
- Has a higher network hashing rate (and rising) than any other altcoin
- Stable network, old coin and had a fair launch (no pre-mine)
- SegWit implementations could trigger some market FOMO
- The market is still alive so may be long overdue for a reversal
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