Litecoin is planning to set itself apart from its Bitcoin origins by moving toward the realm of privacy coins. Charlie Lee, the creator of Litecoin, has announced that the Litecoin development team is working to add confidential transactions to the coin, adding in later comments that the feature is due sometime this year. On Twitter, Lee revealed:

It is still unknown what privacy system Litecoin will implement. Apparently, Taproot will be involved, although it is not clear if it is the sole privacy feature under consideration. Lee has also made it clear that Litecoin will not adopt the new Mimblewimble privacy protocol, as that would require a major hard fork. Instead, Litecoin’s confidential transactions will be added seamlessly as part of a soft fork.

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Potential Issues

Scalability could be an issue. Traditionally, privacy coins have been more resource-intensive than other coins, and they have usually offered slower and more expensive transactions. In the past year, Monero, Zcash, and Mimblewimble have all confronted this problem. Although Litecoin has added other scalability features, it has not revealed any specific plans to make its confidential transactions lightweight.

The auditability of the coin supply is also a potential problem: since confidential transactions prevent transaction details from being revealed, they make measurement difficult and can introduce “undetectable inflation.” Monero lead developer Riccardo Spagni has weighed in on this issue, suggesting that Litecoin’s privacy plans should not be migrated to Bitcoin. Charlie Lee agreed that care must be taken:

Litecoin In the Lead

If confidential transactions were implemented in Litecoin today, the feature would make it the highest-ranking coin with fundamental privacy features. As the seventh-largest coin, Litecoin currently outranks privacy coins like Monero (#13), Dash (#15), and Zcash (#22). At the moment, Litecoin’s total market cap is nearly 2.5 times that of Monero, meaning that Litecoin’s dominance over its closest competitor is quite secure.

However, Monero makes private transactions mandatory, something that Litecoin may or may not do. If Litecoin chooses to make private transactions an opt-in feature, which it plans to do initially, it may end up handling far fewer private transactions than Monero does. This would make Litecoin’s confidential transactions a side feature at best and allow Monero to maintain its established position as the leading privacy coin for a while longer.

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