Charlie Lee is lauded in cryptocurrency circles because the creator of Litecoin, a substitute for Bitcoin he conceived in 2011 as a Google software program engineer. Immediately, Litecoin is the sixth-largest crypto with a market cap of $5 billion. It bears many similarities to Bitcoin, but in addition has necessary variations: Transactions are confirmed 75% sooner, it has better liquidity with 4 occasions extra cash in circulation, and it’s extra immune to manipulation by miners holding 51% management of the community.
In 2017, Lee sold his entire stake in Litecoin and now serves as managing director of the Litecoin Basis, which seeks to advance Litecoin and develop blockchain applied sciences for the social good. On the just lately held second annual Penn Blockchain Conference, Lee sat down with Data@Wharton to speak in regards to the philosophy behind Litecoin’s creation, whether or not cryptos will exchange arduous foreign money and what’s subsequent for him.
An edited transcript of the dialog follows.
Data@Wharton: I need to set up an origin story for Litecoin. May you inform us what made you create this cryptocurrency within the first place?
Charlie Lee: Positive. In October of 2011, I used to be taking part in round with the Bitcoin code base, and I suppose the wanting it was that I used to be simply making an attempt to create … a fork of Bitcoin. It was primarily a enjoyable facet mission.
Earlier than Litecoin, there have been a few dozen different altcoins (different cryptocurrency) and most of them don’t exist in the present day anymore. Most of them had been created by founders who wished to strike it wealthy. So they might do one thing referred to as a pre-mine — they might mine quite a lot of cash for themselves earlier than they launched it, proper to start with. Then hopefully if it turns into profitable, it could make them some huge cash.
Lots of people didn’t like how unfair these cash had been in comparison with Bitcoin, which was launched very pretty. One push was to create a fairer model of a coin referred to as Tenebrix. [There were improvements but still] Tenebrix was launched with 7 million cash for the founder. Then I helped create this coin referred to as Fairbrix, which is principally Tenebrix with out the pre-mine.
Fairbrix was attacked to start with. There have been some bugs within the code as a result of the Tenebrix code was not very properly written, so it form of failed. After that I made a decision to do it proper, to truly fork from Bitcoin and to create Litecoin. So I did that and made it truthful.
“It is likely one of the tales that folks don’t hear about Litecoin, which is how truthful it was.”
It is likely one of the tales that folks don’t hear about Litecoin, which is how truthful it was. I made certain to launch it as pretty as doable. The week earlier than [the launch, I released] the supply code and binary so folks can really run Litecoin earlier than the precise launch to check the mining, to see if it really works on their laptop, to ensure every thing is OK.
Then on the time of the launch, which was a time that was voted in by the group, I launched two constants that folks can simply put into their config file, restart their consumer and would simply begin mining cash. After I launched it, 1000’s of individuals had been mining from the beginning. It was just about as truthful as I might presumably make it.
Data@Wharton: Your entire level was to create a extra egalitarian cryptocurrency. Do you are feeling that you’ve got succeeded?
Lee: Sure. I feel one of many the reason why Litecoin really survived and have become common is due to the truthful launch. Everybody, together with myself, had equal entry to mining the cash and in addition shopping for it from the change. I didn’t pre-mine. I didn’t have quite a lot of Litecoins. I didn’t simply create Litecoins and provides loads to myself.
Even a coin like Ethereum has an enormous pre-mine. They bought nevertheless tens of millions of {dollars} value to start with and gave quite a lot of Ethereum or ETH to themselves. Given how truthful Litecoin was, it is likely one of the the reason why it survived the place different cash didn’t, I feel.
Data@Wharton: One of many issues that will give a carry to cryptocurrencies is mass adoption, and it has been mentioned that service provider adoption particularly is the Holy Grail of altcoins. Do you agree with that, and the way can we get there?
Lee: I don’t essentially agree with that. I feel the objective for Litecoin and in addition, for me, for Bitcoin is to create sound cash. After I first came upon about Bitcoin, I noticed it as a greater type of cash than … human civilization has ever seen. If Bitcoin is a greater type of gold, for instance, it doesn’t have for use every day. Folks [store but] don’t spend gold, proper? And you’ll really construct on prime of that.
With Bitcoin and Litecoin there are Layer 2 options. Lightning Community [that sits on top of the blockchain to enable faster executions] might be a greater type of a fee community than simply on-chain Bitcoin or Litecoin. I see that taking place the place folks will construct on prime of it. Whereas I wouldn’t say [mass adoption] is the Holy Grail, I feel finally it is possible for you to to spend your Bitcoins or Litecoins [more widely] and it will occur finally, however it isn’t one thing that’s wanted in the present day.
“After I first came upon about Bitcoin, I noticed it as a greater type of cash than … human civilization has ever seen.”
Data@Wharton: Do you assume there’ll ever be a time after we will cast off central authorities of financial programs on this planet?
Lee: I don’t know if that may ever occur. I feel for certain cryptocurrency can be one of many currencies that folks will use; it would obtain mass adoption someday and other people would deal with it as actual cash. The volatility will come down and issues can be priced in cryptocurrencies. I actually consider in that. Whether or not or not the present system of currencies will nonetheless be round, I don’t know.
Data@Wharton: Do you see that possibly one iteration of that future is that central banks would difficulty some form of cryptocurrency?
Lee: I don’t see the advantage of that, to be sincere. As a result of for me the advantage of cryptocurrency is decentralization — the censorship-resistant half, the place nobody can forestall you from spending your personal cash. If the central banks or the governments really create a cryptocurrency, they nonetheless have full management, so what’s the level? It’s successfully no totally different than a digital model of a U.S. greenback.
Data@Wharton: Do you see a world the place cryptocurrencies in blockchain functions can be ubiquitous, similar to cell phones are actually extensively used to pay for issues as a substitute of simply making telephone calls? Do you see blockchain and cryptos altering the every day lives of individuals, and in what manner?
Lee: Sure. I feel sooner or later you can be utilizing cryptocurrencies in your every day lives, and it’s possible you’ll not even notice it. If Bitcoin actually does develop into as ubiquitous as cash, it should be straightforward to make use of. Will probably be very totally different from what we’re doing in the present day. Who is aware of what gadgets we can be utilizing, however you could possibly be spending Bitcoin, shopping for stuff, and also you wouldn’t even realize it. It’s possible you’ll not even name it Bitcoin. It’d simply be cash.
Data@Wharton: There are numerous cryptocurrencies on the market, and by some counts greater than 2,000. Do you assume we are going to get to the purpose the place possibly a number of will emerge as dominant, or possibly only one? What number of do you assume the world can deal with?
Lee: Undoubtedly not 1000’s. I feel there’s going to be a couple of — Bitcoin, Litecoin, possibly a number of others. Perhaps a handful that will really symbolize actual worth. The fantastic thing about it’s finally they’ll be very interchangeable, so you may ship Litecoin and the recipient can ship Bitcoin, and it is going to be transformed robotically, immediately. And also you wouldn’t even have to fret about it, you wouldn’t even must know. I feel that’s going to occur.
The necessary factor is that the consumer expertise will enhance, and quite a lot of sophisticated issues should be abstracted away from the top consumer. Similar to what occurs with what you utilize in the present day. You don’t actually care what occurs once you make a telephone name or once you swipe a Visa card. Nevertheless many establishments that get contacted to approve this transaction, how the cash strikes — you don’t actually care. All you care about is that you simply [can] purchase this product. The identical factor will occur with Bitcoin and cryptocurrencies: Issues will get easier, and that’s when issues will take off.
“If the central banks or the governments really create a cryptocurrency, they nonetheless have full management, so what’s the level?”
Data@Wharton: In a Utopian universe for cryptos, know-how is every thing. However since we don’t stay in that world, social behaviors are additionally crucial. What do you assume will drive mass human adoption to make folks belief them? As a result of belief is admittedly crucial for cryptos to take off.
Lee: Belief is certainly crucial. Plenty of the issues which can be hindering adoption in the present day is the dearth of belief by way of securing your Bitcoins. Lots of people aren’t tech savvy sufficient to guard and retailer their very own cash, they usually depend on third events like exchanges. After which the exchanges get hacked. Just about each month there’s a story of an change getting hacked and dropping tens of millions of {dollars} of shoppers’ funds. And that basically hurts. It hurts the belief on this trade and in addition the individuals who really misplaced cash.
So it is extremely necessary for us to construct out easy but safe methods of serving to folks retailer their very own funds. Whether or not that’s cell wallets which can be safe or {hardware} wallets, just like the Ledgers or Trezors, and enhancements to these which might make them easy to make use of but nonetheless safe.
It has all the time been a trade-off, proper? Simplicity versus safety. Placing cash on an change like Coinbase is very simple, however you’re counting on another person to safe the cash for you. After which there’s placing issues [away yourself], like I [did. I] beforehand had cash on paper wallets, the place you print out a chunk of paper along with your personal key and then you definitely put that piece of paper within the financial institution protected, otherwise you cut up it up someway.
You retailer it, safe it your self. [But it makes cryptos] actually arduous to make use of. It’s like for long-term storage; you may’t actually spend it. The compromise [is something] in between. We simply have to seek out a great way … that’s each safe and easy. I feel that could be a crucial factor to attain.
Data@Wharton: The place do you see cryptos by way of being an funding asset? Is that a good suggestion? How do you even do a valuation of that?
Lee: Because the trade grows, folks, not less than initially, will worth it as extra of an funding asset or a speculative asset. However finally when it turns into extra steady, and costs develop into much less risky, it would develop into much less of an funding asset and extra of simply cash that folks would maintain on to. I feel it’s positive proper now [for people to consider it as an investment asset], however I don’t see that being the long run.
“Sooner or later you can be utilizing cryptocurrencies in your every day lives, and it’s possible you’ll not even notice it.”
Data@Wharton: The place do you see cryptocurrencies going? What do you assume is its subsequent iteration or use case? Do you see any new tendencies coming?
Lee: My focus is on the financial side of cryptocurrencies. With Litecoin, I would like it for use as cash. My focus for that’s service provider adoption, the place increasingly more retailers or persons are really supporting Litecoin or utilizing it or accepting it. One of many key issues I’m engaged on is to enhance the fungibility of Litecoin.
What meaning is correct now once you spend Litecoin and even Bitcoin, transactions you make have a historical past hooked up to them. Folks can observe again and see the place you bought these cash and the way that individual bought his cash to ship to you. You may observe all of it the best way again to the start, so you may nearly see if I used the cash to purchase illicit items or gambled with it.
You’ve heard tales of Coinbase banning folks from utilizing their service in the event that they came upon that the cash you obtained had been despatched from, say, a playing web site or from a darkish market. That makes the cash not very fungible, as a result of it’s important to decide and select which cash to ship to somebody if you happen to don’t need them to see how a lot you bought paid or what you used with it.
In distinction, if you happen to stroll to a retailer and you’ve got two $20 payments in your pockets, for instance, you don’t care which one you spend except you care about how fairly considered one of them is. Just like the U.S. greenback, fiat foreign money may be very fungible. Bitcoin, Litecoin in the present day will not be. That’s one thing that we have to enhance.
One of many necessities of fungibility is privateness. If the coin is just not personal, then it isn’t fungible. Fungibility and privateness go hand in hand, and it’s one thing that I’m actually wanting into proper now.
Data@Wharton: What else is subsequent for you? Are you working for president, like so many are doing?
Lee: No, however it could be cool if an Asian-American turns into president. I’m nonetheless targeted on Litecoin. I’m working full time with the Litecoin Basis on simply every thing round Litecoin, together with improvement. Additionally on points like, for instance, what I used to be speaking about with privateness and fungibility. And adoption of Litecoin, partnering with numerous corporations supporting Litecoin, retailers, service provider processors and simply getting extra publicity for Litecoin.
