by Cindy Huynh
Cryptocurrency is proving time and time again as a more effective medium for money transfers than traditional payment systems.
On Thursday, April 19, 2018, according to UK Business Insider, someone sent $99 million worth of Litecoin to another cryptocurrency wallet. While the identities of the parties involved were unknown, the large transaction attracted a lot of attention on Reddit. A thread dedicated to the transaction quickly became the third most popular post of the Litecoin subreddit on Friday, April 20.
“Worth surfacing up here that the $99 million transactions cost just $0.40 and took 2.5 mins. Holy moly,” said Reddit user b30. While many users were highly impressed with Litecoin’s speed and efficiency, Hodl4dayz user wondered how long a similar transaction would take if it were in fiat currency. Other Reddit users commented that not only would a fiat currency transaction that size be expensive, it would take days and that CPAs, attorneys and a sheer number of employees would also be involved.
Litecoin’s Low Transaction Fees and Fast Confirmation Times
According to CoinMarketCap, Litecoin is the sixth most popular cryptocurrency with a market capitalization of $8.5 billion. Litecoin was created by software engineer Charlie Lee to tackle the scalability problems faced by the Bitcoin network.
Although Bitcoin is a better store of value, Litecoin is more useful for payments. Litecoin generates a block every 2.5 minutes, whereas Bitcoin’s block generation time takes 10 minutes. Transactions on Litecoin’s network are therefore significantly faster than Bitcoin’s first generation blockchain network. Furthermore, Litecoin was also one of the first cryptocurrencies to implement SegWit to make transactions faster and cheaper. “We have all the cool scaling technology,” said Lee. “But the reason we adopted SegWit was not for the scaling features, but because it allows for instant payments off-chain.”
As seen on BitInfoCharts, as of April 22, 2018, it only costs a user on average $0.169 per transaction. The cost of sending a transaction peaked to $1.434 in December 2017.
Bitcoin is Slow Compared to Other Altcoins
Unlike Litecoin, Bitcoin is significantly slower and more expensive. Although Bitcoin’s average transaction fee as of April 23, 2018, is $1.128, at its peak during December 2017, it reached $54.901. While it takes on average of nine minutes to confirm a transaction on April 24, 2018, earlier this year in January 2018, according to blockchain.info, it took on average 2,536 minutes.
In 2017, Bitcoin experienced many spikes in fees and confirmation times which eventually led to a split in the original blockchain. In August 2017, the Bitcoin blockchain hard forked into a Bitcoin spinoff known as Bitcoin Cash.
In comparison to Litecoin, Bitcoin Cash transactions are cheaper but take longer to confirm. The average transaction fee only costs $0.0508. Bitcoin Cash has also become a very popular altcoin ranking fourth on CoinMarketCap. It’s also widely accepted at many common cryptocurrency exchanges like Coinbase, Kraken, and Binance. There’s also a community-curated list of merchants that accept Bitcoin Cash known as the Accept Bitcoin Cash Initiative.
The chart below shows that the average fee for bitcoin cash and litecoin converged around January 2018 but have since diverged, with BCH fees falling faster. Bitcoin cash’s block time will be reduced in an upcoming hard fork on May 15 that will introduce an adaptive block size.
Source: Coin Metrics
Although Bitcoin is relatively slow, other altcoins like Litecoin and Bitcoin Cash have potential to grow into a new payment system until scalability is addressed. While it’s too early to know whether these coins will become the future of payments, blockchain technology and cryptocurrencies are here to stay.