Charlie Lee on How Litecoin Can Be Truly Successful

CoinDesk profile: https://www.coindesk.com/coindesk-most-influential-2017-3-charlie-lee

Charlie selling his LTC: https://www.reddit.com/r/litecoin/comments/7kzw6q/litecoin_price_tweets_and_conflict_of_interest/

WSJ article on selling his LTC: https://www.wsj.com/articles/cryptocurrency-founder-tries-a-new-play-sell-it-all-1513873355?mod=searchresults&page=1&pos=3

Multicoin Capital report on Litecoin: https://multicoin.capital/2018/09/14/debunking-market-narratives-litecoin-ltc-edition/

Magical Crypto Friends: https://www.youtube.com/channel/UCVVDsIYJBQ_C7Bh_aI3ZMxQ

Transcript

Laura Shin:

Hi, everyonel. Laura here. Before we get started, a couple quick notes. First, upon listening to this episode there were two points where I wanted to ask Charlie some follow up questions that I didn’t think of during the recording. He agreed to answer those by email. So check out the show notes for a link to those. They will also be on the unchained website under the newsletter section.

Second, I love doing this podcast, but the conversation is pretty one-way. It would be great to have more of a dialog, and there’s a fantastic opportunity coming up. Meltem Demirors of CoinShares and Jalak Jobanputra of FuturePerfect Ventures and I are all teaching a crypto workshop at Omega Institute in Rhinebeck, New York from September 20 to 22. It will be a weekend of, yes, talking crypto, but also of doing yoga, eating healthy food, and enjoying the outdoors on Omega’s 250-acre campus. From my days as a yoga instructor I remember many of the yoga and meditation teachers I revere would lead workshops here, so I’m so honored to be teaching my own, even if it’s on a very different topic. Check out the show notes for the link to sign up, and I hope to see you all there.

Hi, everyone. Welcome to Unchained, your no hype resource for all things crypto. I’m your host, Laura Shin. Unchained is now on YouTube. You can find the most recent episodes there every week on the Unchained podcast channel, and we’ll soon be getting the full archive up. Also, if you’re not yet subscribed to my weekly newsletter, go now to unchainedpodcast.com to sign up.

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Laura Shin:

My guest today is Charlie Lee, the creator of Litecoin. Welcome, Charlie.

Charlie Lee:

Hey, thanks, Laura. Thanks for having me.

Laura Shin:

You found out about Bitcoin when it was 2 dollars, how did you hear about it and what were your initial thoughts?

Charlie Lee:

Well, actually, I found out about Bitcoin when it was 30, and then it dropped to 2 over the next year.

Laura Shin:

Oh. Oh, dear. Okay. Well, you know, I guess…

Charlie Lee:

So, I got in at a high.

Laura Shin:

Well, you learned very early how this type of money operates, I guess?

Charlie Lee:

Yeah, extremely volatile.

Laura Shin:

So, yeah, how did you hear about it and did you immediately grasp it or were you skeptical at first or what?

Charlie Lee:

Yeah, I heard about it from reading an article on Silk Road. I believe it was a wired article, and it was talking about like how the Silk Road drug marketplace only accepted Bitcoin, and I pretty much immediately understood the value of Bitcoin and what it’s all about because I’ve previously been quite into gold, and I saw like the need of sound money and how fiat currency is just broken, and when I saw Bitcoin I saw that this is like gold but better, right, it’s like gold where you can instantly send it to someone on the other side of the country for very low fees.

Laura Shin:

That’s so interesting. I feel like you’re, you know, maybe like the 10 percent of people that say that they immediately grasped it because I feel like the other 90 percent are just like, oh, I at first just missed it, but it sounds like you were sort of primed.

Charlie Lee:

Yeah. I think I just had the background, and also with the background in computer science, I can actually dig into a code and see what it’s doing, right.

Laura Shin:

Oh, right. So, previously, you worked at Google, is that where you were working at that time?

Charlie Lee:

Yeah. I worked at Google for six years.

Laura Shin:

And what were you doing there?

Charlie Lee:

Let’s see, I worked on YouTube Mobile, Chrome OS, and also Google Play Games.

Laura Shin:

All right, and so you found out about Bitcoin, and it was I guess 2011?

Charlie Lee:

Yeah. April of 2011, I believe.

Laura Shin:

So, how did you buy your Bitcoins, at that time?

Charlie Lee:

The first Bitcoin I bought, I actually bought from Mike Hearn. So, at Google, Mike Hearn was one of the kinds of well-known guys who was into Bitcoin, at that time, and he was like talking about Bitcoin all the time, and I reached out to him, and I guess learned a bit about Bitcoin from him and bought my first Bitcoin at 30 dollars from him.

Laura Shin:

Oh, I see. Okay. So, you read about it, but then, through your work, you realized, oh, there are other people here who are into this?

Charlie Lee:

Yeah, there were only like a few, right, Mike Hearn was one of the bigger ones.

Laura Shin:

Okay, and for people who don’t know, he’s a former Bitcoin core developer, who famously left the project with this blogpost that was also written about in The New York Times, and he talked about how Bitcoin was broken and sold all of his Bitcoins, and then, he went to work at R3, right? Is he still working there, do you know?

Charlie Lee:

I don’t know, I haven’t kept in touch with him. It was funny because he famously rage quit from Bitcoin, right, he was so upset that he thought Bitcoin needed to scale on chain and the community didn’t think the same way, and he kind of just rage quit.

Laura Shin:

Yeah. Yeah. We’ll talk about that a little bit more in a bit because I actually don’t think he’s…he was maybe the first like big one, but there have been others. So, at that time, like you got your Bitcoin and then what did you do, like what was the early Bitcoin scene like, and you know did you just kind of think, I’ll just hold onto this for a little while or what were your thoughts?

Charlie Lee:

My thoughts pretty early on was that this is going to be something big, so I was thinking like if, as an investment, I think it would be like a very good investment. Of course, you just don’t know because it’s like so new, and it’s kind of like investing in a startup, right, like if you had a chance to invest in Google, pre-IPO, it would’ve been a huge like one of the best investments ever, but it’s really hard to know that Google would become the Google of today like way back in 1999 or 2000, right, so it’s the same thing with Bitcoin, right, I saw it like had huge potential, I really saw the potential in it, and I kind of really wanted to get involved. I mean, back in 2011, like everyone in this space was like chatting on Bitcoin talk forums, right, and that was like one of the main sites where people talked about Bitcoin all the time and talked about different projects.

Laura Shin:

So, you would just like troll the forums…or not you know, but you would…I mean, you would browse the forums and just converse with people about…like what would you do on the forums?

Charlie Lee:

Talk about different like…I also started mining, right, just a lot of people talking about how like different kinds of setups, how to mine, which pools to use, different pool algorithms, yeah, just everything, right, including like collecting physical Bitcoins, for example, 00:05:38 coins came out I think around that time, and that was a very cool collectible you could get at the time. Also, I remember the first Bitcoin conference happened in June of 2011 in New York, and basically, who’s who in Bitcoin…I mean, pretty much like everyone in that space just gathered in New York and just had a good time.

Laura Shin:

Really, who were some of the people who showed up at that?

Charlie Lee:

The first day, like the morning before the conference, I went to kind of an event, and I met Roger Ver, Jesse Powell, Mike Gronager. Yeah, just basically people who are actually really well-known today, but who was probably like nobody back then.

Laura Shin:

So, Roger Ver was known early on as Bitcoin Jesus, now is affiliated with Bitcoin Cash, and Jesse Powell is the CEO of Kraken, and who’s Michael Gronager?

Charlie Lee:

He is now the CEO of Chainalysis.

Laura Shin:

Oh, right, right, right. That’s right. I did know that. I knew the name, but I couldn’t remember.

Charlie Lee:

Yeah, he’s not very out there.

Laura Shin:

Right.

Charlie Lee:

Yeah.

Laura Shin:

All right. Also, I wanted to ask about the mining, what did you use to mine the Bitcoin, like a CPU or a GPU or what?

Charlie Lee:

When I found out about Bitcoin, it was already GPU, so I built a couple computers each with like four GPUs in them, so large GPU cards like sticking out of the computer. It’s a pretty crazy setup, and it generates like so much heat and noise.

Laura Shin:

Yeah. Actually, when your brother was on the show, your brother Bobby, who people should know it’s kind of just a funny detail that Bobby and I were in the same freshman dorm at Stanford, but we didn’t really know each other that well, like the main thing I remembered about him was just he lived in the same hall as my friend, so it was like a big dorm with like 250 kids in it or something.

Charlie Lee:

Yes.

Laura Shin:

But no, I was going to say that he also said that he was mining it early and that it was like generating a ton of heat too, so.

Charlie Lee:

I think I sold my mining computer to him when I was done with it.

Laura Shin:

Oh, okay. Yeah. Yeah, he did say on my show…

Charlie Lee:

Or I gave it to him, I don’t remember.

Laura Shin:

Yeah, he did say on the show that you were the one who introduced him, and then also, when it dropped from 30 dollars to 2 dollars, what was your sense then, like were you still so convinced it would succeed?

Charlie Lee:

Yeah, I was because from my point of view the fundamentals didn’t change, right, so the price drop was just because it was over hyped in the beginning and went up to 30. I think when it like broke dollar parody, after it became more than a dollar, it went like pretty much straight to 30, and then it crashed down back to 2, I realized that fundamentals of Bitcoin hasn’t changed, so it still has huge potential, so definitely wasn’t worried, but I was kind of enjoying myself just like mining and just playing around with it.

Laura Shin:

I feel like you need to, I don’t know, be like one of those investment advisors or something and like you just seem so calm and to have such a level head, and I wish other people would have the same reaction. It’s kind of nice to hear.

Charlie Lee:

Yeah. I mean, the key is to not put everything in, right, don’t invest more than you can afford to lose. That’s like the tagline.

Laura Shin:

Exactly, exactly, for something, you know, super risky. All right, so before you started Litecoin, you also tried to, at least as far as I could tell from what I read online, you tried to revive a coin called Fairbrix or maybe that was something you launched. I saw like different…one post said that you tried to revive it and one said you launched it, so what’s the story about Fairbrix?

Charlie Lee:

So, the story about Fairbrix is there was a coin called Tenebrix that used the script mining algorithm, and it was a CPU minable coin when it launched, right, so the problem with Tenebrix is it was launched by an anonymous person, and he pre-mined 7 million coins for himself, so what that means is in the first block, he, basically, assigned 7 million coins to himself to an address he owned, and from that point onwards, everyone’s mining like, I don’t know, 10 or 20 coins a block, so if the coin became successful, he would become like extremely rich, right, and people liked the coin because it was the first coin that was CPU minable, so it brought back the CPU mining in this space, but then people weren’t happy with the pre-mine, so someone had an idea of creating a coin called Fairbrix, basically, a fork of Tenebrix, and the only difference is that it won’t have the pre-mined, so he needed technical help, and I offered to help him technically, so wrote the code and helped launch the coin.

The problem was that the code for Tenebrix was really buggy, and during the launch of Fairbrix, just lots of issues came up. Some of the blocks were mined with 00:11:24 coins, and I think the coin was also 51 percent attacked from the beginning, so just lots of problems and kind of decided to give up on that project.

Laura Shin:

Okay. Yeah. It sounds like that’s another way in which you sort of like learned the lessons of this space very early, actually, do you know what I mean?

Charlie Lee:

Yeah. Yeah. Definitely. I mean, I was pretty into this space from the beginning.

Laura Shin:

Yeah. Yeah. Well, all right, so then tell us why did you create Litecoin.

Charlie Lee:

So, after Fairbrix failed, right…well, it didn’t really fail, just the launch was a mess, I decided to kind of step back and create a different coin, right, start from instead of forking from Tenebrix’s code or from Bitcoin and modify a few things, so like with CPU mining, also with faster blocks, and launch something that is like as fair as possible. I realized people don’t want to invest and put effort into a coin that is unfairly benefiting the creators, for example.

Laura Shin:

And did you ever consider launching it anonymously the way that Satoshi did?

Charlie Lee:

Actually, when I launched it, I wasn’t a public figure, right, it wasn’t publicly known who was behind the user name on Bitcoin platform, right, so I went by the user ID of…?

Laura Shin:

Which is coblee?

Charlie Lee:

Yeah, coblee, and I didn’t come out until like a few years later with my real identity. When I started going to like Bitcoin conferences and kind of revealing myself, that’s when I came out.

Laura Shin:

Oh, wow. And was that like a decision that you were like, okay, I’m not going to be anonymous anymore?

Charlie Lee:

Kind of. There was a New York Times article, the author reached out to me to kind of write a little bit about Litecoin, and at that point in time, I decided, yeah, that’s fine, I’m okay with that and to come out publicly. I think that was the point when I became publicly known.

Laura Shin:

And why did you decide that rather than staying anonymous?

Charlie Lee:

I don’t know. Actually, I didn’t think too much about it. I wasn’t really trying to be anonymous, it’s just that there was no need to be kind of public about who I was, about my real identity. I mean, in hindsight, it might’ve been better if I stayed anonymous.

Laura Shin:

Oh, really?

Charlie Lee:

There’s definitely benefits of being anonymous.

Laura Shin:

Yeah, why do you say that, like what would the benefits have been?

Charlie Lee:

Just more privacy, right. I’m definitely concerned about like privacy and security and people being upset about me or just people would think that I have a lot of money and want to…yeah, just concerned about that.

Laura Shin:

Yeah. Yeah. It’s not the first time this week I’m having this conversation. I think it’s on the minds of kind of all the prominent people in this space, and I’m sorry that you have to deal with that. I really think it’s terrible that people would target other people for their money, but it’s the world we live in.

Charlie Lee:

Yeah, and it’s also the fear of being targeted, right. Maybe no one will ever target me, and that’s awesome if that’s the case, but then always living in kind of fear that you might be a target is just not that finite.

Laura Shin:

Yeah. No, I get it. I get it. Even in my own small way, you know I’m not like the actual people in this space, but yeah, like I wrote that big article about the phone hijackings that were going on, and you know before I released that, everybody I interviewed was like, oh before you publish this, you should make sure all your security is buttoned up, and so I did that, and you know I don’t know what they would’ve gotten, it might’ve just been like something to just annoy me because they were irritated that I had exposed what they were doing, maybe something like that, but yeah, like I totally get how you feel.

So, actually, let’s keep talking about the Fair launch concept. So, when you launched Litecoin, you only launched it with 150 coins pre-mined, so it’s like a tiny amount, but how did you decide on that, and in general, like how did you make it what you deemed fair?

Charlie Lee:

Yeah, so there’s a funny story behind that, so the idea was to launch it with…I originally only mined two blocks. The first block is a genesis block, right, and then I also mined a block on top of that to make sure that everything was working fine, and the way I launched Litecoin to try to make it as fair as possible is to release the source code in binaries, so applications where you can actually start mining. I did that the week before the actually launch, but the catch is that with the source code and the binary, you can’t mine the main net Litecoin, you could only mine test at Litecoin because I withheld the genesis block, right, so the hash of the genesis block is hardcoded in the code, but I withheld the details of the genesis block, like two constants that you need to know in order for you to actually mine on the main net, and what I did was that at launch time, I just posted those two constants, and all people had to do was update their config file, restart the client, and would start mining on main net right away, right, so that was one way that I did try to make it as fair as possible because some other coins were launched where either the binaries aren’t released like quickly enough or the source code wasn’t released, so there was no way for people to actually verify the source code or compile binaries for themselves, so it’s hard for people, unless they want to take the risk to actually start running code that you don’t trust, right, so I tried to make this as fair as possible to make it easy and for anyone to actually start mining the second it was launched.

Laura Shin:

Oh, that’s interesting. So, let me make sure that I understood this, you mined with a genesis block and one additional block just to make sure everything was working correctly, you found that, yes, it is working correctly, and you were able to get 150 coins, so at that point, then you released the source code and the binary, so people could kind of run their little mining machines, I guess, on test net, and then once they had had an opportunity to make sure that that was working, then what you did was release the details in order to be able to immediately switch to main net, did I understand that?

Charlie Lee:

Yeah. That’s right, and one of the reason I actually mined two blocks instead of just one was because I accidently connected my node to the internet for like an hour or so, and if someone connected to me, they would’ve downloaded the genesis block, and this is like some technical thing, so I, basically, mined another block and locked that in to make sure that no one could actually like secretly mine before the actual launch, so that was the idea, right, so no  one could secretly mine before the launch. So, when I launched it, I release the constants, the two constants to everyone, and people can update their software and start mining right away, and it was extremely successful because that also helped protect from 51 percent attacks because, first of all, no one could mine before the launch, and second of all, there will be like thousands of people mining at the same time, and it would be hard to overrun that network, for any one individual to overrun that network.

Laura Shin:

Oh, wow, and is that how many people you had mining from the start?

Charlie Lee:

From the looks of it, yes. From like the hash rate that we saw in the beginning, there were I would say like a couple thousand people.

Laura Shin:

Oh, wow.

Charlie Lee:

I mean, it’s not a lot, but for the start of a coin, it’s pretty good. It’s very good.

Laura Shin:

Yeah, and at that time too, when nobody really even knew what all this was.

Charlie Lee:

Yeah, the community, it was small, but there was definitely a healthy community to play around with all coins. The interesting thing is a lot of coins forked off from Litecoin and copied Litecoin, right, but very few coins actually copied the way I launched Litecoin, like people just didn’t copy that, and they launched it without binaries or there are a lot of coins that were launched with what they call like ninja mining where sometimes they’re launched to friends and family only for like the first week, so the creator’s friends and families are like mining before everyone else get a chance to mine.

Laura Shin:

That’s interesting. Well, I guess, you would think that they would have learned from the Tenebrix situation that like if you do that people are less interested in the coin.

Charlie Lee:

I think people in general are greedy, right. Yeah, I mean, if you look back on that, one of the reasons why Litecoin was successful, I believe, is because of the fair launch, right, but it’s hard to kind of figure out if that’s truly the case, right.

Laura Shin:

Oh, like meaning you can’t know if the developers are pre-market or…?

Charlie Lee:

No. No. You can’t know that that’s one of the reasons why Litecoin was successful.

Laura Shin:

Oh. Oh. Right.

Charlie Lee:

Right?

Laura Shin:

Right.

Charlie Lee:

Yeah.

Laura Shin:

Well, yeah. So, how do you define success, like would you say that so far, at this moment, that it is successful, like what’s your goal with Litecoin?

Charlie Lee:

Well, it’s extremely successful, right, so when I launched Litecoin, it was more just like a fun side project, right, just something I did on the side for fun. I didn’t expect it to become anything big, right, and to put it into perspective, when I first found out about Bitcoin, Bitcoin’s market cut was 200 million dollars. When I launched Litecoin, Bitcoin’s market cap was like around 100 million dollars, so Litecoin today is 5 billion dollars, right, so it’s 50 times as large as what Bitcoin was when Litecoin launched.

Laura Shin:

Oh.

Charlie Lee:

So, I mean, that’s extremely…I mean, I totally didn’t expect that to be the case to happen.

Laura Shin:

And at that time when you say that you launched it as a fun side project, like what did you imagine people would use it for, like did you just think, oh, this is going to be nothing or did you have some kind of goal for it or what?

Charlie Lee:

Yeah, well, when I launched Litecoin, Bitcoin was still like an unknown quantity, right, like no one knew where Bitcoin was heading, right, it’s a decentralized currency that no one’s really using for anything except for Silk Road, right, so no one really expected much from Bitcoin, and I didn’t expect much from Litecoin, right, so when I launched it, one of the things like I kind of saw it being was what I set out initially being like silver to Bitcoin’s gold, right, I saw Bitcoin as digital gold and I’ve seen throughout history of people using more than one currency in a case of gold and silver, and I saw like Litecoin complementing Bitcoin, right, being kind of a cheaper version of Bitcoin where fees will be less and people potentially could use it for more things.

Laura Shin:

Okay. And when you say silver to Bitcoin’s gold, so in the real world, silver has like particular uses, and so when it comes to the digital world, like what were those uses that you were imagining?

Charlie Lee:

I was thinking more along the lines of both gold and silver being used as money, and not necessarily the industrial use of silver, which came much later, right, so being just metals that are rare and sought after and has value, made gold and silver useful for money.

Laura Shin:

Okay. And so, then like what would be the different ways that you were imagining Bitcoin would be used versus Litecoin?

Charlie Lee:

Yeah, so, Bitcoin would be used for larger purchases, right, so fees would be higher on Bitcoin, so it wouldn’t make sense to buy coffee, for example, on Bitcoin, but you would do so on Litecoin because the fees would be lower and a smaller percentage of the actual purchase. The thing with cryptocurrency is that the fees for transactions are based on the size of the transaction not the amount of the transaction, so if you’re sending like a million dollars’ worth of Bitcoin, it will cost you the same amount in fees in general as if you’re sending like 5 dollars’ worth of Bitcoins, right, so when Bitcoin becomes really popular and people see the value in paying in using it, the fees will inherently go up, and we see that, right, when the blocks are full, then people are fighting for the block space, which is a valuable commodity, and people are willing to pay more because you’re comparing that to like, for example, wire transfer, something that takes like a few hours and has all the problems with wire transfer and also costs like 30 dollars to do a wire transfer, but if you can send Bitcoin, which you can send like 10 million dollars’ worth of Bitcoin and only pay 10 dollars, and it will confirm in like 10 minutes, that’s a very good use case compared to wire, so people are willing to pay the 10 dollars for fees, so that’s why you’ll see like Bitcoin fees go up because people actually value spending Bitcoin, and Litecoin having like a larger block size can kind of work alongside that, right, can complement Bitcoin for smaller purchases.

Laura Shin:

All right, and so actually, like after you created Litecoin, you ended up leaving Google to work at Coinbase, what did you do there?

Charlie Lee:

Yeah, so in 2013, I decided to kind of go all in on crypto and actually work on cryptocurrency, so I joined Coinbase because I realized in order for Bitcoin to succeed, it has to be easy to use, right, there has to be easy onramps and offramps, and Coinbase was really making it a lot easier for people in the US to buy and sell Bitcoin, so yeah, I decided to join them and quit Google.

Laura Shin:

All right, we’re going to discuss how Charlie famously sold all his Litecoins after the break, but first, a quick word from our fabulous sponsors.

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Laura Shin:

Back to my conversation with Charlie Lee. So, during this period when you were working at Coinbase, I think there was kind of a little stretch where you didn’t really work on Litecoin, so what made you get more involved again, and when did you get more involved?

Charlie Lee:

Yeah, there’s actually quite a stretch where I wasn’t working that much on Litecoin, I was focused on Bitcoin with Coinbase. I would say like early 2016, I decided to kind of shift my focus a bit. I saw kind of a need for me to kind of step back into to start working on Litecoin again. This was because I saw Bitcoin having problems with activating SegWit. There was a lot of just misinformation out there about how SegWit is not a good upgrade for Bitcoin, and I figured that there’s something I can do about that, right, being the creator of Litecoin, I can help try to get SegWit activated on Litecoin to kind of prove to the world that this is actually a good upgrade, that it leads to awesome things like Lightning Network, and there’s nothing to be afraid of, right, there’s a lot of just fake news around SegWit. People, for whatever reason, don’t want to see SegWit on Bitcoin, and they were just talking about the fact that if you use SegWit addresses, miners can just steal money from it, it’s unsafe to use SegWit, stuff like that. If you understand like Bitcoin and SegWit from the technical side of things, you realize immediately that’s just like FUD, right, people are just lying about it trying to scare people away from it.

Laura Shin:

Yeah, and for listeners, hopefully, my listeners know what SegWit is, but in case you don’t, and fud, in case you know SegWit is Segregated Witness, which was like, basically, a scaling solution for Bitcoin, and Fud is Fear, Uncertainty and Doubt, which definitely you should know that term if you’re interested in crypto. So, at that point, you decided to, basically, what leave Coinbase and then start working more on Litecoin in order to bring SegWit to Litecoin to show that all the misinformation about SegWit was not true, is that what your goal was?

Charlie Lee:

Pretty much, and also it’s good for Litecoin, right, so this upgrade makes it possible for Lightning Network to happen, and I realized that scaling on-chain is not a solution because it’s just first decentralization, so the solution to scale Bitcoin and Litecoin is to scale on second layers and Lightning Network was an up and coming solution that really I thought was awesome for helping scale Bitcoin and Litecoin, and SegWit was needed for that to happen.

Yeah, so in 2016, I told Coinbase I wanted to start working more on Litecoin, and I believe, I took three months off to kind of totally work on Litecoin, and then when I came back to Coinbase in like late 2016, I told them I wanted to leave Coinbase and focus 100 percent on Litecoin.

Laura Shin:

All right, so that, I guess, must’ve been, yeah, late 2016, so then a year later is when the crypto markets hit what we now realize was their all-time high, and you famously sold all your Litecoins, why did you do that?

Charlie Lee:

Over like 2016 to 2017, I became a lot more influential in the space because of my work on Litecoin and SegWit and helping Bitcoin with SegWit, and my Twitter follower account grew like exponentially kind of tracking the price of everything, but throughout that time, I realized that what I say potentially had quite a big influence on prices, especially Litecoin price, and like some of the tweets I posted, people were requesting my motives, right, am I saying this because I’m trying to pump the Litecoin price or am I saying this because it’s actually good for Litecoin, and people were questioning my motives, and I also kind of felt conflicted because I don’t want people to think that I’m doing this for the price or for my own benefit, right.

My goal for Litecoin to succeed is for adoption, right, price doesn’t matter. Yeah, price would fall low adoption, but I shouldn’t be focused on price, so after thinking about it for a while, I decided that I kind of don’t want the distraction of both people thinking I’m doing this stuff because I’m pumping the price for my own benefit and also because I don’t want kind of the distraction and questioning myself that I’m not doing this for the best for Litecoin, but only because I want it to make more money, so at that point, I decided to just sell everything and focus on the project and not the price.

Laura Shin:

Well, so the day that you announced that you had sold or donated all your Litecoins, that was the day after Litecoin hit its all-time high. I actually checked it on OnChainFX, and the day it hit its all-time high was 356 dollars, and now it’s like about 69, so how do you feel about that idea that it looks as though you sold at the top and left others holding the bag?

Charlie Lee:

I don’t think that’s exactly true because I remember after I sold, the price kept going up, right…

Laura Shin:

Oh, really?

Charlie Lee:

So, I sold at like…yeah.

Laura Shin:

Oh. Oh. So, the day you announced and the day you sold are probably…because…

Charlie Lee:

Yeah, maybe. Maybe.

Laura Shin:

Did you announce the day after you sold?

Charlie Lee:

Didn’t it hit like 400?

Laura Shin:

Oh, gosh.

Charlie Lee:

Like I think I sold…yeah, depending on which you exchange you look at…

Laura Shin:

Oh, okay.

Charlie Lee:

But it definitely hit like 400, but my last sale was at like 350 or something.

Laura Shin:

Oh, okay.

Charlie Lee:

But for sure, the timing is suspect, right, and that’s why people like kept trolling me about selling at all-time high because some people actually thought I caused the whole market to crash, which is ridiculous.

Laura Shin:

Wait, the whole market or just the Litecoin market?

Charlie Lee:

The whole market. Well, I mean, like…

Laura Shin:

Like the whole crypto market or just Litecoin?

Charlie Lee:

Yeah, but I mean, Litecoin didn’t crash more than Bitcoin, right, it’s very close. If you look at it today compared to the day I sold, it hasn’t really crashed. Maybe it crashed a bit more, right, but not much more. So, if I caused Litecoin to crash, then you’d have to kind of blame me for causing everything to crash.

Laura Shin:

Okay, but like they’re saying like your announcement, right, because in your announcement, you kind of implied that you had sold it all on GDAX, and it didn’t really move the market, so it doesn’t sound like it was like a ton of Litecoin.

Charlie Lee:

No, it’s not, right, so one thing about Litecoin that people don’t realize is I didn’t pre-mine anything, so all the Litecoins I own were either mined by myself or bought on an exchange, so I know plenty of people that had a lot more Litecoins than I did, so it’s not that unlike people like Vitalek, who has a lot of Ethereum or like creators of other coins or ICOs that just hold onto a lot of their own coins, yeah, I didn’t have a lot, so my selling coins didn’t really affect the market, and that’s also one of the reasons why I wanted to sell it before I announced it, right, so if I hadn’t announced it, I think the fearing how many coins I had would’ve hurt the price a lot  more, but by announcing that I already sold and it didn’t affect the price, there’s no fear that I’m going to sell more later, so I think that helped, but I think one thing I didn’t kind of account for is people are talking about how now that I don’t have Litecoin anymore, I don’t have skin in the game, right, and people said that they don’t believe in Litecoin anymore because I don’t own any, which is so stupid, in my opinion, right, if you’re not holding onto Litecoin because I don’t have any, then your reason for holding and using Litecoin is just sill to begin with, right, and the project is already a failure if that’s the case, right, this is supposed to be a decentralized currency, so just because the creator doesn’t hold it anymore shouldn’t affect how useful the currency is.

Laura Shin:

So, okay, I mean, I guess like you know to my mind, they’re just sort of saying, hey, incentives exist and a traditional way we motivate people to work on things is to incentivize them, you know, which is why people get stock options or you know equity or whatever, but you’re saying, oh, that’s the old model, that’s like the startup and it’s centralized, and in a decentralized world, that doesn’t matter or I mean, like what’s your take on incentives, like don’t you agree that kind of being…?

Charlie Lee:

To a certain degree, I agree, but unlike other things, like I’m still extremely incentivized to work on Litecoin. If Litecoin succeeds and does well, I do well, right, like just I’m not incentivized…

Laura Shin:

But not financially?

Charlie Lee:

Financially, I’m already fine, right. Like financially, I’m not motivated, right. I’m working harder today than last year or the year before, not because I’m financially incentivized. I’m working on something I’m passionate about, so I don’t need incentives, but people don’t realize that and for them it matters.

Laura Shin:

All right. Well, one other thing I wanted to ask you about was you’ve kind of hinted at…like you have I think strong notions of fairness, what’s your opinion on coins that allocate a percentage of the block reward to the developers of that coin?

Charlie Lee:

Oh, let me see, so I think as long as they’re up front about it, it’s okay, right, so people who are investing in these coins, they know that a certain percentage of block rewards are going out to fund developers, and I think that’s fine, and in some cases, it’s really needed, right. One thing about Litecoin is it’s kind of hard to find developers because we don’t have a lot of money to pay for these developers, so like the Litecoin Foundation, we work on raising money and using money to pay for developers, but unlike ICOs or other projects, we just don’t have millions sitting from selling our ICOs tokens to fund these developers, so yeah, I think projects that do that it’s kind of needed, but I think for coins like Bitcoin and Litecoin, if you really want to become like decentralized money, there can’t be any centralizing kind of actions like using money rewards to pay for developers.

Laura Shin:

So, how does the Litecoin Foundation raise funds then?

Charlie Lee:

We sell merchandises, we work off of donations, we try to be as efficient, as lean as possible.

Laura Shin:

So, what is the annual budget?

Charlie Lee:

Annual budget is like less than 100 thousand.

Laura Shin:

Oh, wow. Okay. Well, we’ll see.

Charlie Lee:

Yeah, we have a huge network of volunteers, right, people who are passionate about Litecoin and sound money and Bitcoin that volunteer their time, and we don’t pay them anything, and I’m very grateful to these volunteers that help us out a lot.

Laura Shin:

Yeah, this is really interesting because during that ICO phase or the Fat protocols phase…or not Fat protocols, but yeah, it’s even before the word ICO was used and when people are talking about AppCoins, I feel like, at that time, everyone was like, oh, like the point is you do a Crowdfund with these tokens and it incentivizes those people to grow the network. However, what we’ve seen is those were just speculators who frankly aren’t really incentivized to grow the network like a lot of these people aren’t using these coins, they’re just holding onto them, and so…

Charlie Lee:

Correct, and they flip it as soon as they can, right?

Laura Shin:

Yeah, and it’s fascinating how you guys don’t have that mechanism, and yet, you do have volunteers who I guess passionately believe in Litecoin and are trying to help promote it, so I think, basically, this means that all the crypto economics theorist, many of whom I’ve featured on my show because yes I do find these ideas fascinating, probably a lot of their theories have been proven incorrect, so we will have to see what actually turns out to work.

Charlie Lee:

Well, at least in the case of Litecoin, right. Litecoin is much different, at least the project, the foundation is very different from other coins and foundations.

Laura Shin:

Yeah. Yeah. For sure. So, you talked about that early vision, what is your vision now, is it different or is it the same, like what do you imagine it will be use for now, or you know what are the ways in which you’re trying to get it used?

Charlie Lee:

It’s very similar, right, I’ve always seen like Litecoin as a complement to bitcoin. I see Bitcoin still being used, like Litecoin is not out there to replace Bitcoin unlike a lot of other coins that try to say they’re better than Bitcoin. I think it’s tradeoff. So, a lot of people don’t talk about the tradeoffs. People talk about how the fees are cheaper, right. People in support of Bitcoin Cash constantly talks about how Bitcoin Cash transaction fees are like a hundredth of that of Bitcoin, but you get what you pay for, right, the Bitcoin security is more than 100 times that of Bitcoin Cash, right. Maybe the hash rate is not more than 100, but the fact that Bitcoin’s security is like you can’t attack Bitcoin. Whereas, you can easily attack Bitcoin Cash, so that matters a lot, right, so that’s why the fees are less, and same for Litecoin, right, Litecoin is cheaper, and the security is less than Bitcoin, so if I’m sending like millions of dollars’ worth of Litecoin, it’s not as secure as sending a million dollars of Bitcoin, so people who are actually moving lots of money, they would want to use Bitcoin, and I think that’s fine. I think Litecoin can complement Bitcoin perfectly fine. And with Lightning Network, one of the reasons why I think Lightning Network is really good for both Bitcoin and Litecoin, not only does it help it scale, it can also add like cross-chain atomic swaps where people can easily in a decentralized manner swap between two different coins instantly, right. I think technologies like that, we haven’t really seen the true potential of that, like I’m excited for like what we’ll see there.

Laura Shin:

Yeah. Just the concept of it is so cool. One thing though is so if the main purpose of Litecoin is for payments, why would someone use Litecoin over a stable coin?

Charlie Lee:

It depends, right, so it depends on how easy it is for you to get that stable coin, right, and the stable coin is it’s still likely to be controlled, right, by governments or companies, so you’re still at the whim of that centralized party, right. Whereas, Litecoin is decentralized like Bitcoin.

Laura Shin:

Yeah. Well, I mean, there’s kind of a spectrum of how centralized stable coins are.

Charlie Lee:

Yes.

Laura Shin:

Yeah, but then…

Charlie Lee:

But the decentralized stable coins have not proven to work yet, right. Possibly, we’ll find one that works perfectly, but the kind of attack surface for that is potentially pretty large, and it’s unclear if they actually work long-term. We’ve seen many algorithmic stable coins fail over time.

Laura Shin:

Yeah or be shut down by the FCC.

Charlie Lee:

Well, if they’re truly decentralized, then they can’t be shut down, right, but there’s also a possibility of them getting shut down, right, so like, for example, Tether could be shut down, and also you have to trust the company that they have enough money to back their reserves or enough reserves to back the coins, right, and then also with most of these stable coins, they’re not censorship resisted, right, that’s one thing about cryptocurrency, one of the values of cryptocurrency is the censorship resistant part, right, I would say that’s what gives cryptocurrency most of its value.

Laura Shin:

Well, what about Dai, I don’t think that’s censorable. However, it’s not very stable because, as we’ve seen, it hasn’t been able to keep the dollar peg, but that aside, I don’t think that one is censorable, right?

Charlie Lee:

I’m not too sure about that, but I think it’s also a bit…it’s centralized, right, it’s not perfectly decentralized…I mean, nothing is perfectly decentralized, but there’s a centralized aspect of it. I’ll look into Dai more. I honestly don’t know too much about it. I’m not really that excited about stable coins.

Laura Shin:

Okay. Interesting because that was all the rage last year and into this year, so we’ll see if you were right.

Charlie Lee:

It is, but it’s funny you talk about stable coins that is actually not stable, so what’s the point.

Laura Shin:

I know, I know, but I have to admit I’m a little bit obsessed with Dai. My listeners will know that from listening to my show.

Charlie Lee:

Yeah.

Laura Shin:

Yeah. I did a really, really long, double episode with Rune Christiansen of MakerDAO, which is you know for the Dai stable coin because it’s a very complicated system and just kind of endlessly fascinating, but anyway, so speaking of spending Litecoins, where can people spend their Litecoins right now?

Charlie Lee:

A lot of places, right, so Litecoin is, obviously, not as everywhere as Bitcoin. Even then, Bitcoin you can’t really spend it everywhere either, so you can spend Litecoin on pretty much everything, right, so like plane tickets, meals, buying stuff online. We have like a whole directory of places you can spend Litecoin, but I think the general idea is just to have more and more places that you can spend for Bitcoin and Litecoin, right, so I think in order for it truly to be successful is you can just spend it anywhere, right. It’s kind of like if you look at Visa and Master Card, like credit cards, you can pretty much spend it anywhere, right, and we want to get there, but it’s a chicken neck problem, right. For one thing, because the volatility of the currency, a lot of people don’t want to spend it because they think that it’s going to be worth more in the future, but that problem I think will solve itself over time, as it becomes less volatile, and you need more merchants to accept it before people can spend it anywhere, and you need more people to spend it before merchants realize the benefit of accepting it, so it’s a tough nut to crack.

Laura Shin:

Yeah, I mean, I feel like Coinbase went down this route with Bitcoin where they tried the merchant’s thing and it didn’t work out, so like why do you think that strategy will work for Litecoin?

Charlie Lee:

I think when Coinbase and BitPay did that, it’s a bit too early. I think we need like technologies like Lightning Network to make payments make more sense, and you need the price to become less volatile for payments to succeed, so when Coinbase and BitPay were doing it, it was in what 2013, 2014, I think it was early, right, so it will take some time.

Laura Shin:

Well, I don’t know, I feel like we could make that argument now still, and not only that, but this goes back to my question about the stable coins, but anyway, actually, let’s move on because also Litecoin is looking at adding privacy. I saw you mention that Confidential Transactions was one, technology you were looking at, and also the MimbleWimble protocol, are you planning on making Litecoin a privacy coin or will this be optional privacy and like with both of these technologies, like are you going to give users a choice of which type of privacy technology or what’s going on?

Charlie Lee:

Sure. So, the reason why I’m looking into it is I realize that one of the properties of good money that’s…I think the only property of good sound money that’s missing from Bitcoin and Litecoin is fungibility, right, the ability to treat every single coin exactly the same as every other coin, right. We don’t have that today. Like if I send you two different Litecoins, they’re different because of their history, which is public on the blockchain, so you can see where the coins came from, and you can use that to discriminate against one or the other of the coins. Whereas, like cash, for example, is fungible. If I go to a store and I want to pay for something with 20-dollar bills, I have two to choose from. It doesn’t matter which one I give the clerk, it acts the same, right, it’s money. For money to be like a good form of money, you want it to be fungible, and for cryptocurrency, privacy is required for fungibility, right, if you don’t have privacy, then you can always discriminate between two different coins, so I realize that I want to kind of add more fungibility to Litecoin in that sense, I want to add more privacy, and things I was looking at was Confidential Transactions and also MimbleWimble. MimbleWimble actually also has Confidential Transactions, so it’s pretty much like Confidential Transactions plus CoinJoin, and it’s something that we’re exploring right now, and the current thought is to add it as a soft fork and also opt-in, so you can opt into using MimbleWimble moving your coins to kind of the MimbleWimble side of things into the MimbleWimble extension block. Yeah, so we’ll see where we go with that, but still a work in progress, still a lot of work to be done.

Laura Shin:

So, will that be like Zcash the way that on the Zcash blockchain you can see some transactions but other ones you can’t?

Charlie Lee:

Similar, but it’s more you can think of it as moving your coins to kind of a side chain that’s kind of attached. Does that make sense? So, you can move into the MimbleWimble space, once you’re there, everything is private.

Laura Shin:

Oh, okay.

Charlie Lee:

And then, you can also move out, right, you can pull the coins out of the MimbleWimble space.

Laura Shin:

Oh, wow. All right, so are you definitely implementing that or you’re just exploring it right now?

Charlie Lee:

We’re exploring it. I really want to do it, and the community seems to like the idea, so once we have a good grasp on like what we want to do, we’ll put together a proposal for the community to review.

Laura Shin:

Oh, all right. Well, I’ll have to keep tabs on that because I find the MimbleWimble technology fascinating. I just did a couple episodes on Grin and Beam, and yeah, super cool stuff. So, recently, I did see some tweets that were critical of you and Litecoin, and I wanted to get your response to them.

Charlie Lee:

Sure.

Laura Shin:

You probably saw them, Mike Novogratz of Galaxy Digital tweeted gold has an 8.5-trillion-dollar market cap, silver is 15 billion dollars, that is 0.17 percent. BTC has a 90-billion-dollar market cap and LTC is 5.7 billion dollars, which is 6.4 percent of BTC, and then he said silver is at least useful for industrial product, LTC is a glorified testnet for BTC, I don’t get this rally, sell LTC, buy BTC, so that’s one, and then the other one was like a shorter one to Tushar Jain of MultiCoin Capital said LTC isn’t the silver to Bitcoin’s gold but the fools’ gold. What’s your response to tweets like this?

Charlie Lee:

Well, I did respond kind of to those tweets. Basically, there’s more value to Litecoin than just being a testnet, right, being a glorified testnet, and also like the comparison between gold and silver, you can’t take it too literally, right, just because silver is certain percentage of gold doesn’t mean that Litecoin has to be that percentage, otherwise, it’s overvalued or undervalued. I think that’s kind of silly to go to that extent of saying that because Litecoin ratio of Bitcoin is more than silver’s ratio to gold, it must be overvalued. I can’t imagine why anyone would make that comparison.

Laura Shin:

Well, the digital world has to be exactly like the real world.

Charlie Lee:

Yeah. Yeah, it’s kind of funny, but also, I do question like the motivation behind some of these tweets. For example, MultiCoin Capital has publicly said that they’re shorting Litecoin, right, so of course, every chance they get, they will bash Litecoin to even release an article or like a whole analysis on why they think Litecoin should go to zero, right, so they have skin in the game for Litecoin to not succeed, so I don’t really put much weight into their posts or their tweets, and I don’t know if Mike Novogratz has shorted Litecoin or anything like that, but you don’t know, right, so I don’t put too much value into people hating on Litecoin.

Laura Shin:

So, you’re the managing director of the Litecoin Foundation, how does governance work within the foundation and how much weight do you have within it, as the creator of Litecoin?

Charlie Lee:

In terms of what? I mean, for the foundation, I’m the managing director. We have a few directors, and we talk about stuff, right, so we respect each other and there’s really no formal process of how decisions are made, it’s kind of made within the directors, and I think just being the creator, I definitely have a lot of influence, right, because people trust me, and they trust my view, right, of things, and that helps a lot, and Litecoin is still a decentralized currency, right, so the Litecoin Foundation is kind of a centralizing company, but we can’t adequately make decisions for everything, right, and the community also has a huge voice in what happens to Litecoin.

For example, before the Litecoin Foundation, we had something called the Litecoin Association, right. It’s also a central foundation that was there to help kind of promote and help work on Litecoin, and they weren’t doing a very good job, and that’s why we formed the Litecoin Foundation to take over and do a better job, so if one day the Litecoin Foundation is like not doing a good job, someone else can kind of create another foundation to help out. It’s similar to how like the Bitcoin Foundation, a lot of people think the Bitcoin Foundation is not really doing anything, right, but they have the name, the Bitcoin Foundation.

Laura Shin:

Yeah. I have not heard anything that they’re up to for the longest time. I sometimes forget they even exist.

Charlie Lee:

Yeah, but they were a huge deal when they first formed, right?

Laura Shin:

Right. Right. I wasn’t around back then, but I can tell from the stuff I’ve read. All right, you grasped the concept of cryptocurrency early and kind of the potential there, so what do you think the world will look like in the future if crypto does become widely used?

Charlie Lee:

I think that we won’t even know that you’re using cryptocurrency in the backend. Yeah, so I think if cryptocurrency really does become successful, becomes used by everyone in the world, you won’t even realize it, so I think the whole point of this for money is transfer of value, right, all you care about is your transferring value from your wallet to the merchant’s wallet, and they give you the item that you bought, and in the future, that could happen with you sending the money, and you don’t realize that in the backend that it’s actually Bitcoin or Litecoin or anything, right, and that’s when it really becomes successful.

Laura Shin:

So, you think it’s really just about payments and like machines making those payments happen in a way that’s more efficient, but you’re not aware of it?

Charlie Lee:

Yeah, and some people call like Bitcoin kind of the internet of money or just money that can be API for money, right, so machines AI or you or humans will be using it, and it’s all about storing the value and spending the value, and that’s all that matters in the end.

Laura Shin:

All right. Well, we will see. We will see if this comes to fruition. So, it’s been so great having you on Unchained. I did mean to ask a question about Magical Crypto Friends, but we, basically, ran out of time, so where can people learn more about you, Magical Crypto Friends, and also Litecoin?

Charlie Lee:

Yeah, so I’m one of four people on the Magical Crypto Friends podcast. It’s me, Samson Mow, Fluffy Pony, or Riccardo Spagni, and WhalePanda, right. You can check us out at about Magical Crypto Friends. I think it’s magicalcryptofriends.com or you can find us on YouTube, and we’re also doing a conference, a Magical Crypto Conference in New York on May 11 and 12, come visit us there, I think it’s an awesome conference, and you can also follow me on Twitter, @SatoshiLite. I’m pretty easy to find.

Laura Shin:

All right, and also can I have a press ticket to Magical Crypto Conference?

Charlie Lee:

No. Sorry.

Laura Shin:

Oh, man. Harsh. Harsh.

Charlie Lee:

Yeah, like I want to buy a ticket for a friend, so I had to pay for it myself.

Laura Shin:

Oh, there literally aren’t press tickets?

Charlie Lee:

You have to talk to WhalePanda, how about that? I’m not in charge of press tickets, but like, yeah, we try to be as fair as possible, and possibly.

Laura Shin:

Oh, okay. Okay.

Charlie Lee:

How about that?

Laura Shin:

Okay. Okay.

Charlie Lee:

Better than no.

Laura Shin:

I guess, I’ll contact him and find out. He, of course, amongst the three of you, he’s the only one I don’t know, but anyway, I’ll have you put in a good word for me.

Charlie Lee:

Yeah. I’m sure he knows who you are.

Laura Shin:

All right. Well actually, also Charlie, thank you for joining us.

Charlie Lee:

Sure. Yeah. For sure. It was a lot of fun.

Laura Shin:

Thanks so much for joining us today. To learn more about Charlie and Litecoin, check out the show notes inside your podcast player. If you are not yet signed up for my weekly newsletter, go to unchainedpodcast.com right now to get my thoughts on the top crypto stories of the week, and be sure to check out our new channel on YouTube. Unchained is produced by me, Laura Shin, with help from Raelene Gullapalli, Fractal Recording, Jennie Josephson, Daniel Nuss, and  Rich Stroffolino Thanks for listening.