SaaS Interviews with CEOs, Startups, Founders
951 How He Created LiteCoin, the Silver to Bitcoin Gold
02 Mar 2018
Chapter 1: Who is Charlie Lee and what is his background?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Charlie Lee.
He's the creator of Litecoin, the most popular alternative currency to Bitcoin. He was previously director of engineering at Coinbase, the most popular cryptocurrency wallet and exchange. Before joining Coinbase, he spent six years at Google working on YouTube Mobile, Chrome OS, and the Google Play Games platform.
Charlie earned a bachelor's and master's degree in electrical engineering and computer science from MIT. Charlie, are you ready to take us to the top?
Sure, definitely.
All right. Very good. So I was going to ask you, you know, Coinbase is very particular about the currencies it supports and Litecoin is one of them. I was going to say, how did you get in? But I think I know now.
Well, I think Litecoin, the demand has always been there for people that want to buy Litecoin easily with fiat currencies. So and after Coinbase added it, it was pretty clear that that was the right decision as Coinbase is now making money. a lot of money from it, having large trade volumes.
And people really want to get their hands on Litecoin and be able to send it to others and use it as a wallet.
So what is Litecoin at now? It's the end of the year here in 2017. What are some of the key indicators you look at to measure the health of the coin?
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Chapter 2: How did Litecoin gain traction on Coinbase?
This was when I was at Google. So I joined Coinbase in 2013.
So when you were at Google, you were working on, I believe, YouTube and YouTube mobile specifically. What did you read or what influenced you to go, wow, there's going to be a market here. I better go invent the silver version of cryptocurrency.
I mean, even before joining Google, I've done commodities trading. I understand the concept of gold and why that's valuable and how that's good money versus fiat currency today. So I've always known that. And when I saw Bitcoin, I realized it's like a better version of gold. The only difference is there's no physical form of it.
And because of that, people complain that there's no intrinsic value. But from what I can tell, it's actually just a better version of gold. It's gold where you can send instantaneously from one place to the other side of the world for low fees. Even today, $10, that's extremely low compared to if you want to send an ounce of gold from here to China, that's going to cost you a lot more than $10.
So I see just basically Bitcoin being like a super competitive version of gold and Litecoin I want to position as like as silver.
Well, again, though, what influenced you early on when you were still at YouTube to say, yeah, it's time to do this? You saw at that time kind of transaction fees going up and that's really what drove you?
Yeah. What drove me, I actually created Litecoin just for fun, kind of just wanted to play around with it. But I've kind of suspected all along that Bitcoin, there won't be just one cryptocurrency, that Bitcoin, it's a kind of inevitable that the fees will go up because in order to stay decentralized,
Bitcoin has to kind of err on the side of being decentralized, having smaller blocks and having higher fees than to go to other kind of the other route, which is to have large blocks, but having a more centralized. So if Bitcoin wants, it's kind of like you have to choose as the block rewards go down, you can't have the cake and eat it too. Initially, people were
um were spoiled where fees were low transactions were fast blocks were empty and bitcoin kind of satisfied both needs and that's because of the block rewards the block rewards were something that were the miners were getting for free kind of and that will reduce over time initially it was 50 bitcoins per block and now it's only 12.5 bitcoins is that because there's a set amount of bitcoin available and that's why as demand goes up the price will go up there's a set supply
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Chapter 3: How does Charlie Lee measure the success of Litecoin?
We love that. I bug the hell out of them. They always get back to me. So I've got you 30% off along with $100 in free AdWords credit. To grab it, just go to HostGator.com forward slash Nathan. But you got to do it now. Again, HostGator.com forward slash Nathan. Now, Charlie, you have to forgive me for this question, or maybe not really.
Maybe you'll never forgive me, but I'm going to ask it anyway. You've obviously done well, right? I mean, I see like a $10,000 restoration hardware chandelier hanging behind you. I just bought the same one. I love it so much. But like, you're doing well, right? How do you...
most people I talk to who don't know crypto, they think, well, if I do crypto, I'm just making the early people billionaires and really rich and I don't want to help them get rich. Like, so I'm not going to do it. How do you fight that stigma? Like what would you tell people who would tell you that?
Um, well, I mean, you can make, anyone can invest in, in crypto, right? So people who invest in crypto were spending their own money on something that was risky. I mean, buying Bitcoin and Litecoin was really risky. It could easily go to zero. Even today, I tell people like, don't spend money you're not willing to lose. Like Bitcoin and Litecoin could crash 90%.
So is that, how do you make money on Litecoin? Is it only if the value goes up or do you have other deals with Coinbase where you take a cut of transaction fees and all that kind of stuff?
I mean, for me, it's only if the value goes up. Like I have an investment in Bitcoin and Litecoin and if the value goes up, I make money. And that's true for most people. Yeah, and if... And you have the largest holding, right?
I imagine since you created the thing, you probably got... No, definitely not.
I definitely don't have the largest holding. I know quite a few people who have more Litecoin than me.
And why is that?
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Chapter 4: What are the key differences between Litecoin and Bitcoin?
So I was there in the beginning, right in the beginning, obviously. So I had a chance to buy a lot of Litecoins at a lower price.
Charlie, is that like a startup? Like when you say you created Litecoin, you know, a lot of founders of SaaS startups, when they create their company, they create a par value that's very, very, very small, 0.0001 cents per They, you know, they create two million shares, you know, they give their founder a million shares and they keep a million for a 50-50 split, but they pay very little for it.
Is it the same kind of analogy?
No, not. It's quite different, actually, because Litecoin and Bitcoin, the coins are created by mining. So when I launched it, there were zero Litecoins out there. You had to actually spend computational resources to mine a coin. So that costs money, right? So whoever's mining it is paying electricity costs. Even today, you're paying electricity costs to mine Bitcoin and Litecoin.
So they're paying electricity costs to mine Litecoin. And then there's a market that forms to decide how much a Litecoin is worth.
um so like i don't control any of that right so i can if it's if i think that like when it's undervalued i would buy some right if i think it's over value i might sell something just like any other trader or investor now you create the mathematical equation though that determines how much is available correct yeah it actually follows a schedule that is uh very pretty much identical to bitcoin because i didn't want to change what
I know is not broken. I'm not just going to tweak some numbers just because I feel like it. So I kept it very similar to Bitcoin where every four years the reward halves. So it has enough runway to succeed. If you make it half too soon, then the coin, before it succeeds, the rewards will run out. You're overpaying the earlier miners than...
So in terms of keeping the code up to date and keep the community strong, is there a company around this? And have you raised capital, like traditional capital for the company? How are you funding all this?
Yeah, so just this year we created a Litecoin foundation, a nonprofit organization that takes donation and we sell merchandises to try to raise funds. And all we do is we use that fund to pay for developers, to pay for members to help Litecoin, to help promote Litecoin, to help develop Litecoin.
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Chapter 5: What is the significance of Litecoin's market cap and transaction fees?
Yeah. Are they out of the house yet or are they young?
Uh, they're young.
They're young. Okay. So that might be contributing to very little sleep, huh? Yeah. How many, how many young ones do you have?
Uh, two.
Two. Okay. And, uh, last question here. How old are you today, Charlie?
I'm 40.
All right. Take us back 20 years. What's something you wish your 20 year old self knew?
Um, I mean, other than investing in Bitcoin and Litecoin. Let's see. So what I wish I knew. I would say work on things you enjoy as opposed to things that make you money and money will come.
There you guys have it from Charlie. Work on things you enjoy instead of things that make you money, and the money will come. He was at Google many years ago when he started tinkering with Litecoin. He didn't say, I want to do this full-time. Joined Coinbase closer to 2013. Took a big pay cut to do it and tripled or quadrupled his commute time, which is a bigger deal.
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