The fifth most popular cryptocurrency, Litecoin went through a hard fork earlier this week, on Sunday February 18. As a result, Litecoin Cash (LCC) was born at block 1371111.
This pushed the price of Litecoin up as high as $254, though it has since fallen lower.
Hard forks, which involve splitting the path of an existing blockchain in two directions, generally occur when there's no longer full consensus regarding the efficiency of the technology and code of the existing token. With a hard fork, a significant portion of nodes and miners continue to mine the old chain, while another group begins mining the new cryptocurrency.
Litecoin Founder Not On Board
It's not unheard of for hard fork events to generate controversy. Bitcoin has seen a number of hard forks in its history, some the community of developers were in favor of, some that weren't as widely accepted. Previous forks have created a number of offshoots including Bitcoin Cash (BCH) and Bitcoin Gold (BTG). In addition there have been proposed forks that didn't eventually occur, whether because the community couldn't agree on its necessity, or because many believed the proposed technological 'fix' was somehow flawed or even completely unnecessary.
This particular hard fork however, could be something more than merely controversial move. Though Litecoin Cash has been touted as having speedier transaction times than Litecoin, thereby justifying the fork, there's some very strong negative sentiment about it.
Indeed, Litecoin's creator Charlie Lee tweeted a strongly worded caveat in response to the launch, cautioning that it has nothing to do with him or the Litecoin team:
According to Trevor Gerszt, the CEO of crypto investment service, CoinIRA, "what we’re seeing with Litecoin Cash looks like an attempt by some unknown actors to solve a 'problem' that nobody thought was a real issue with Litecoin." He views the situation as a way of creating a new currency these unknown actors can control in order to profit by piggybacking onto the Litecoin name. Gerszt adds:
“Since Litecoin Cash doesn’t really bring any significant improvements, and Litecoin’s creator warned that Litecoin Cash may be a scam, we don’t see Litecoin Cash picking up any significant share of the cryptocurreny marketplace.”
James Song, founder and CEO of ExsulCoin, a NYC-based blockchain technology startup focused on the refugee crisis, believes Litecoin Cash could be a marketing ploy used by a development team to generate hype around an unnecessary fork:
“Likely driven by the adoption of Bitcoin Cash, they want to make a Litecoin version for a quick buck. Litecoin Cash is also asking users to input their private keys into its website, presumably to use its services. This is a huge red flag and should be avoided. Charlie Lee, founder of Litecoin, has publicly called Litecoin Cash a scam.”
Increase in Pointless Forking?
This most recent event does give the impression that hard forks are becoming increasingly popular, allowing anybody to modify code. But true blockchain afficionados find this development troubling. Xiahong Lin, Founder of Bodhi, a China-based decentralized prediction market platform is highly critical:
”I don’t find value in forking if you don't make meaningful advances in the technology, such as just changing a few variables and nothing else. Trying out new configurations might lead to technological advances, so it's interesting to see what people value as a significant change. But, in the end, a successful fork will be the one that the community supports.”
Aleks Nowak, CIO of BlockEx, and a founding member of the United Kingdom Digital Currency Association (UKDCA) has been involved in the crypto-currency space since 2011. He explains:
”Because these are open source protocols, anybody can fork and modify the code. If there is a difference of opinion in a community, then hard forks are inevitable. If a group can convince enough people to run their updated version of the code, then you have a fork."
Brand Hijacking; Quick Money Grab
The reason for a split should be driven by a significant protocol upgrade, notes Marcin Rudolf, CTO and Co-Founder of Neufund. He cites Ethereum's Byzantium fork as the right event for the appropriate reasons. But it often happens that a fork is simply a money grab—a kind of hijacking of the global brand such as Bitcoin or Litecoin, in order to make a quick profit.
ZClassic's scheduled hard for on February 28 is generating a lot more positive sentiment. Rudolf underscores the vast difference between the two events:
“Here we have both cases. ZClassic looks like a fundamental, justified upgrade that introduces transaction privacy via novelty cryptography. Litecoin Cash, let's be frank, it's just brand hijacking.”