---

I. Financial Prospects of the Network

Tokenomics

Litecoin is a Layer-1 blockchain. Its native currency – LTC – is capped at 84mm tokens, but not all are in circulation. Rather, like Bitcoin, Litecoin uses proof-of-work (PoW) consensus to release new coins with each block. PoW demands that network nodes validate transactions to add new blocks to the blockchain in a process called mining. For their work, miner nodes are rewarded with newly generated LTC. In theory, miners could indefinitely mint LTC and inflate its price, so Litecoin implements halving to control supply, cutting the rewards a miner receives for adding new blocks at regular intervals. In Litecoin’s case, halving occurs every 840,000 transactions, with the next event expected in 2027. At launch, rewards were 50 LTC, but are now 6.25 LTC.

Halving mediates inflation, since miners work harder for diminishing rewards. Consider that current rewards generate US$378 per block; the next halving will reduce this to US$189 if current price ($60.45) stands. Logically, the more resource required to obtain an asset, the more value it holds, and we may expect LTC to appreciate over time. In theory, to retain a reward of US$378, LTC must appreciate to US$120 following halving.

LTC is a unit of currency, offering similar characteristics to bitcoin to support peer-to-peer payments. One LTC is divisible as far as one photon – 0.00000001 LTC. It is digital, portable and secure in a user’s digital wallet. It is fungible, transferable and exchangeable for goods on the Litecoin network.

74,841,775 LTC are in circulation, 89.1% of maximum supply. At a market price of US$60.47 per token, Litecoin has a market cap of US$4,525,393,861 – 19th highest of all cryptoassets. Typically, higher circulating totals indicate greater decentralisation of token distribution. We review ownership to determine whether this is the case.

Distribution appears relatively balanced. Retail users hold 51.7% of tokens, whales 10.31% and institutional investors hold the remainder. Retail ownership sits in the median of all tokens we have analysed: retail investors hold 88.11% of BTC, 48.56% of ETH, 71.35% of ADA and 31.66% of ALGO. However, the top 122 wallets own 45.26% of all tokens and US$1.94bn in value (whales determined as 1mm-10mm tokens). This consolidates a large proportion of LTC tokens with a few institutional investors, presenting risk to smaller investors who are exposed to unpredictable price moves if a large holder trades.

Revenue Streams

Blockchain networks that cap their total supply must find a way to sustain themselves in the long term. Once all coins are minted, unless networks incentivise miners, no one will validate transactions and the blockchain will become redundant. So, networks require users to pay fees when they perform a transaction. With Litecoin, users can expect to pay U$0.004 per transaction, whereas Bitcoin charges around U$1.1. Litecoin has lower fees because the network allocates a portion of total supply to miners, incentivising them with a separate pool to not rely fully on fees.

Fees indicate how much users will pay to use the blockchain and we can compare competitors to estimate value. Litecoin generates low fees, annualised at US$4.53mm, in-part attributable to its low charging model. Bitcoin generates US$251.85mm, implying more transactions are undertaken on Litecoin. However, Litecoin derives a price-to-fee (PF) ratio of 14,645, meaning its fair value is currently 14,645x higher than the economic value it captures. Bitcoin’s is 4,763x, suggesting its market cap is more appropriate based on its fundamentals. However, both are extraordinarily large and indicate serious overvaluation. Litecoin also generates fewer fees than Dogecoin, despite the latter being widely regarded as a meme coin. None of the three PoW blockchains book revenue.

Financial Metrics

Total Value Locked (TVL) on Litecoin stands at US$3.1mm, which is extremely low. Bitcoin, for example, has US$646mm; other Layer-1 blockchains such as TRON and Solana host US$7.71bn and US$4.98bn, respectively. TVL is crucial for blockchains, revealing the sum of capital inflow into from users, and higher sums indicate greater trust in the blockchain. It is correlated strongly with both value and utility, but Litecoin’s market cap is 1,466x greater than the value locked on its network. A ratio of 1.0 is considered healthy. TVL has failed to reach even US$10mm in the last year, spiking to just US$7.36mm in March. Users do not appear to support Litecoin’s utility.

We map price, volume and volatility of LTC over the last 90 days, observing a 36.7% price decline between 21 May and 5 August and volatility prevalent in July. The market declined too, with total crypto market capitalisation dropping 26.7% across the period, but Litecoin experienced a more severe downturn. On average, 405,060 LTC are traded each day, contributing to an average daily value of US$30.37mm traded. This is substantially lower than other tokens (see Filecoin, Ethereum and Bitcoin), indicating LTC is less popular with users and investors.

---

II. Network and Usage

Network Metrics

User Adoption

Smart Contracts and dApps

---

III. Comparison with Traditional Finance Alternatives

Cost-Benefit Analysis

Security and Trust

Accessibility and Inclusivity

---

IV. Future Utility

Roadmap and Development

Risks and Mitigations

Risk management is not about eliminating risk. Rather, it is about diligently understanding the risks one takes, minimising the unanticipated and adhering to the risk/reward balance an investor can palate.

Relevance

---

Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research and seek professional advice before making investment decisions.

---

References

Electric Capital. Developer Data. Available at: https://www.developerreport.com/.

---