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Coinbase just added full support for Litecoin (now its third digital currency). Users can now store, send, purchase and sell Litecoin from Coinbase mobile apps or official website, using simple payment methods such as PayPal or debit/credit card. Coinbase was originally founded to transact with Bitcoin only. However, it announced its intention to incorporate other digital currencies with the aim of becoming “a digital currency company.”
A while ago, Coinbase included support for Ethereum, which is currently the second most popular cryptocurrency with a market cap of almost a third of Bitcoin’s market cap. At that time, the logic was that Coinbase noticed Ethereum focus on smart contracts was a significant improvement over Bitcoin, and it is not just any other altcoin that serves no real function.
Why Litecoin? Interesting fact: Charlie Lee, Litecoin creator, was the engineering director at Coinbase for almost four years. All the while, there were discussions on the possibility of adding Litecoin to Coinbase, and they did not materialize until recently.
Lee said that Litecoin had slow years. The cryptocurrency had a period of success in late 2013, and its price shot to more than $50 per coin, with above $1 billion in total market cap. However, it sunk to earth very fast and remained down for about three years.
Why the sudden change? If you are knowledgeable about Bitcoin, you know that it's community had internal issues with deciding on how to scale the cryptocurrency for the future. Bitcoin's original code was not designed to handle multiple transactions on a daily basis; the network is now charging a lot per transaction, which takes longer to confirm.
Fortunately, two solutions have been proposed;
• Bitcoin unlimited, which seeks to remove the block size limit altogether and
• Segregated Witness (SegWit) which aims at increasing the block size slightly and in the process, eliminate some of the non-essential data from the transaction and the blockchain.
Lee and the Litecoin community agreed to work on incorporating SegWit into Litecoin. After heated debates with the sharks in the Litecoin mining community, they agreed on a common ground they should implement into SegWit.
For now, Litecoin is too small to encounter the scaling issues that Bitcoin is encountering—yet the team wanted to make Litecoin more exciting. Besides, other than increasing network capacity, SegWit has other benefits like preventing malleability and allowing Litecoin to experiment with Lightning Networks.
According to Lee, Litecoin long-term goal is to help Bitcoin alleviate its transactional volume by taking over the smaller and less significant transactions. For example, you can use Litecoin to purchase coffee with no transaction fees and zero confirmation times, but use Bitcoin to wire $50,000 to your bank (because of the tight security offered by a bigger network of decentralized miners.
Again, Lee considers Litecoin a “testing ground for future Bitcoin features.” If Litecoin successfully implements Lightning Networks and Segwit, Bitcoin will have these features as permanent solutions for capacity issues.