Charlie Lee Breaks Down the Fungibility of Litecoin (LTC) and Bitcoin (BTC)
Lee, the LTC creator recently explained the fungible nature of BTC and LTC during a crypto show. Samson Mow, the Blockstream CSO, also chipped in and talked about tainted coins.
Right now LTC is seeking to implement Confidential Transactions. This will ensure it is fungible according to a tweet made by Lee at the start of this month.
Watch Magical Crypto Friends Episode 16: Putting the Fun in Fungibility.
In this episode: Magical Crypto Conference, Grin, Confidential Transactions on $LTC, WEF in Davos, Satoshi Roundtable,… @SatoshiLite @fluffypony @Excellion @WhalePanda https://t.co/UFihzgDR05
— Magical Crypto Friends (@magicalcrypto) February 12, 2019
Fungibility According To Lee
In his explanation, he said that each coin is indistinguishable. Thus, it can never be discriminated against. For instance, if someone pays $5 for coffee, he, or she picks a bill from their pocket and does not really care which one it is. According to Lee, this is not the case for BTC and LTC.
He said that an account could be shut down if BTC is found to originate from the dark web, a gambling site, or any other illegal place.
Thus, the coins you spend are not fungible. When you buy coins at an exchange; you might not wish people to know how coins you have or link them to other coins. Thus, you can pick a different output. He added that this was not good for money when your transactions can be traced.
Confidentiality will mean that people do not know how many coins you have. He added that the solution was not perfect, but it was still useful.
Samson Mow Chips In
The idea of tainted coins came about since there was no fungibility in crypto. This has led to some coins being considered dirty and others clean. This is because when coins are used on the Silk Road, it might be for illegal purposes.
Thus, people will usually want to use fresh coins that have just been mined. This way, your coins are clean at all times, and there is no fear of them being rejected. In his opinion, such differentiation was not good for the crypto world. Being fungible is one of the ways in which the current fiat world manages to thrive.
Being fungible is an issue in the crypto world. Right now, there does not appear to be a good solution. However, LTC is working towards privacy since Lee believes in making LTC as private as possible. BTC has no such measures in place. In fact, the only thing people get is anonymity.
It is among the reasons authorities have not taken crypto too seriously. It is quite easy to trace BTC to a known source with the right resources. As a result, BTC is not very popular with criminals. However, other crypto projects continue to pop that has a major focus on privacy.
This could complicate things for the crypto world as it is viewed as being used by criminals. However, the lack of fungibility could also keep genuine people from joining crypto as it eliminates privacy.