Journeys in Blockchain: Charlie Lee of the Litecoin Foundation – Cointelegraph Magazine

“It was kind of crazy to leave Google.”

Charlie Lee was a software engineer for YouTube, which had become part of the world’s dominant technology company. He loved the start-up feel. “You get to work on really cool, new stuff, except that it’s a start-up that’s guaranteed to succeed.” Anything Google launches, he explains, gets millions of users on day one.

The Google campus was just a five-minute drive from Lee’s home, and the company offered a phenomenal salary, top-notch benefits, and a hefty stock incentive scheme to round out the compensation package.

But the possibilities of joining a young crypto exchange in San Francisco caught Lee’s interest. It was more than an hour commute one-way, with a salary and benefits nowhere close to matching what Google offered. Despite this, Lee decided that after six years of working for the massive company, it was time to try something new.

“I decided to do it because I was excited about working on crypto full-time.”

Getting in at the top

While he has since gained some notoriety for selling his Litecoin holdings at the peak of the 2017 crypto market frenzy, Lee had first-hand experience of buying at the top. He caught the crypto bug when he encountered Bitcoin and its characteristic volatility in 2011. Lee purchased some Bitcoins at the then-peak price of $30 and worked at learning everything he could about crypto. 

Soon after his initial investment, he watched the price plummet to just two dollars, but he persisted with his newfound passion. 

While working at Google, Lee spent much of his spare time on Bitcoin forums exploring crypto. Tinkering with the technology, he helped develop an altcoin dubbed Fairbrix. The tech was based on Tenebrix, a cryptocurrency which used the Scrypt algorithm for mining with a CPU. Powerful GPUs had rendered CPU mining of Bitcoin unprofitable, so Tenebrix became an attractive alternative for miners.

But Tenebrix had an all-too-familiar problem. Seven million coins were pre-mined and held by its anonymous creator, whose explanation for the pre-mine was that the coins would essentially serve as a money-laundering tool. 

“You would send him coins and then he would send you clean coins from those seven million clean coins. It was supposed to be a service to clean your coins, but who knows if that’s what’s going to happen. He basically had seven million coins he could just dump on the market and exit scam whenever he felt like it.”

The justification for the pre-mine is preserved for posterity on the Bitcointalk forum.

Lee pushed to relaunch Tenebrix with no pre-mine, calling the new solution Fairbrix. It was based on a complicated fork with numerous bugs and tons of issues at launch, he says. “Fairbrix sputtered out of the gate and didn’t do well.”

Following the failure of Fairbrix, Lee decided to create another coin, but to “do it the right way.” He branched off the proven Bitcoin codebase instead, aspiring to keep everything as close to Bitcoin as possible.

The newly launched Litecoin changed a few parameters, improving functionality and speed along with adding in Scrypt mining.

It wasn’t clear that the new coin would succeed, Lee says, as it was just one among dozens of new coins. But the “silver to Bitcoin’s gold” tagline resonated strongly with the community. The fact that it was CPU-mineable helped kickstart the network. Just about anyone could get involved with CPU mining, he says, which bolstered initial adoption.

When Bitcoin ASICs later emerged as the preferred mining tool for the dominant network, the timing was again fortuitous for Litecoin, Lee says. Just as miners were switching to using ASICs for Bitcoin, “all the GPUs that were previously mining Bitcoin switched to Litecoin.” Thus, many former Bitcoin miners migrated over to the alternative network. “It was in the right place at the right time.”

By 2013, Lee found himself fully immersed in crypto, shifting from what was once merely an open-source passion project to building solutions in a rapidly growing industry. “So, I decided to try to figure out what I wanted to do in the crypto space.”

Lee wrote a letter to Coinbase asking if they would support the growing Litecoin network. The company replied with an insistence that the focus would remain on Bitcoin for the time being, with possible support for Litecoin in the future. The conversation was fruitful nonetheless, as they expressed a need for engineers and soon hired Lee.

And crazy as it may have been, Lee left Google for something… more interesting.

Always on the move

Lee’s willingness to “go with the flow” seems to stem from events he experienced at a young age. An unstable political situation in the Ivory Coast compelled his parents to send Charlie, thirteen years old at the time, and his brother Bobby (now also an active member of the crypto community) to boarding school in America.

At the time he left, Lee was well ahead of his classmates. In his first day of grade one mathematics, his teacher sent him to the second grade, deeming him too advanced for first grade. He then spent one day in second grade, after which the teacher sent him on to third grade. 

“I basically jumped two grades in math. So a really small first-grader was taking math class with third graders. It must have looked really weird.” By seventh grade, Lee had exhausted the available curriculum.

Starting in New Jersey as an eighth grade student, Lee acknowledges, was “a big shock. My brother was there, so that helped a little bit, but still I was kinda by myself, separated from my parents.” 

During this period, Lee learned a great deal about controlling his own finances. His parents sent him an allowance enabling him to get used to budgeting and financial planning at a relatively young age. “As a thirteen year old, I learned to save for things in the future.”

He first learned about the value of sound money from his grandfather, who left China with gold bars sewn into his clothes. “It was the only way he was able to take his wealth out of China to Hong Kong.” This understanding of money enabled Lee to make a connection between gold and Bitcoin when he first encountered it.

It’s a natural progression, Lee explains. Before crypto technology’s inception, gold was the best form of money. “It’s sound money. It’s inflation-proof. Governments can’t just create more gold out of thin air like they do with fiat.”

“With crypto, people call Bitcoin digital gold and Litecoin digital silver because of the fact that it’s very similar to gold and silver in terms of its monetary properties. But it’s better than gold and silver because it’s digital. There’s no or low cost for storage compared to gold and low cost for transport. It’s next to impossible to move a lot of gold cross-country. But with Bitcoin, Litecoin, and cryptocurrencies, you can.” is hiring

After completing his studies at MIT in computer software and electrical engineering, Lee graduated at the peak of the boom. He was a hot commodity. “Companies were hiring like crazy back then… Offers were pretty incredible for college grads.”

Lee soon decided to join a startup, Kana, a company pegged at a “crazy” valuation of $4 billion, Lee says. “The offer was kind of incredible. If the stock price had stayed the same, the stock value that they gave would be worth a million dollars, a million and a half.” But a year later, internet companies were plummeting. Many companies fell in value by 90% or collapsed entirely. “I got in at the top, so to speak,” Lee laughs.

Kana sputtered along after the crash while a number of Lee’s colleagues started Guidewire, an automated insurance software company. Lee joined them for three years before opting for Google.

Exploring Litecoin

Following his departure from Google and subsequent stint at Coinbase as Director of Engineering, Lee returned to exploring possibilities with Litecoin. The enthusiastic community was delighted with the news. At first easing back on his hours at Coinbase, he eventually shifted to focusing full-time on his brainchild, eventually leaving the exchange to dedicate himself to the activation of the controversial SegWit scaling solution. “There was a lot of FUD around SegWit. My theory is that it came from Jihan Wu and miners trying to block SegWit because it hurt their income.”

Many in the community were unsure of the technology’s implementation, but Lee felt Litecoin was the perfect network for testing its efficacy and security. 

“No one’s going to attack a testnet because even if you succeed you can’t make money from it. You need real value to test the game theory.” 

Lee realized that if they could activate SegWit successfully on Litecoin, they could show the legitimacy of the scaling solution. “In reality, SegWit was actually very good technology that would help Bitcoin… with very little downside.”

It wasn’t easy, Lee says, but eventually he convinced Litecoin miners to activate SegWit in April of 2017, to great success. He believes this innovation led to SegWit’s eventual implementation on Bitcoin. “It made it clear-cut that there was nothing wrong with it and they should just activate it.”

About selling Litecoin at the peak…

The 2017 market peak put Lee in a no-win situation. His Twitter follower count had exploded during the market surge, and his tweets appeared to exert considerable influence on the value of Litecoin. 

Lee explained that a simple “announcement of an announcement” à la Justin Sun could cause prices to spike. “I didn’t want to have incentives to do that, to just care about the price and pump the price.”

The conflict of interest troubled Lee and he decided it would be best to divest himself of his holdings in Litecoin, much to the bitter disappointment (and vocal criticism) of the community, who questioned his commitment to the cause and wondered if he contributed to the subsequent price crash. He explains that he did not have a lot of coins to begin with, certainly not enough to crash the market, unlike some other creators who held on to pre-mined large sums of their own created coins. “I bought and mined the coins just like everyone else. The only difference is that I was early.” 

“There were thousands of people there at the beginning, probably thousands who owned more coins than I did. But being the creator and central figure of Litecoin, I figured not owning coins and still pushing for adoption, still working on it, was the better way of doing things.”

Lee admits that, in hindsight, the timing created bad optics. But, he points out, he was already financially secure by this time in his career. “I was early in Bitcoin so I was already very well off. Being relatively early at Google, Guidewire and also Bitcoin, it’s not like I needed the money.” Now, Lee says, he only cares about the price of Litecoin because he cares about its adoption.

Lee warned of the cyclical nature of the crypto market well before his sell-off, he adds. Even before selling, he tweeted that the market was very volatile and warned that prices could easily drop 90%. 

New people come in and buy near the top during hype phases, Lee says, but they’re not ready for the crashes. These same people will sell when prices plummet. “They’ll be buying high and selling low, which is quite unfortunate. If I could help it, I’d rather the price not pump that much because the fall would be devastating for most people.”

It’s hard whenever people are critical toward Lee on social media, he admits, “I probably shouldn’t engage…” He figures the best thing to do is to put his head down and just keep working on Litecoin.

Why does privacy matter if you’re not doing anything bad?

Bitcoin, Lee says, is the best form of money that humans have ever seen. “It’s gold, but better than gold.” But one property of sound money that Bitcoin is not good at, he explains, is fungibility.

Lee explains fungibility and privacy are key priorities for cryptocurrency development. For many, the issue of privacy seems irrelevant. Why, some might ask, does privacy matter if you’re not doing anything illegal? 

He offers an example to illustrate the problem:

Someone buys 20 bitcoins on an exchange and withdraws the funds to a wallet. The next time they use Bitcoin for something from that address, the original 20 Bitcoin input remains visible. “You could see on a block explorer that I sent, whatever, 0.1 BTC to someone and it came from an input that has 20 Bitcoins. So the guy who received it saw that I have 20 Bitcoins. They can go back and look at my transactions and try to figure out exactly how many I have and it wouldn’t be too hard to figure out…” 

This lack of privacy is not good for money, he explains. “You want money to be fungible. You don’t want to give someone twenty dollars and for the merchant to know you have $100,000 in your bank account. Or that your paycheck was whatever amount.” Financial privacy is important, he says, “even if you’re not doing anything bad.”

More fungibility, Lee says, is always good for money.

Lee is on a mission to make transactions more private with MimbleWimble. The technology is not perfect, he says, but it’s “good enough.” The key characteristic, Lee says, is that it is scalable, an important consideration for blockchains. 

MimbleWimble will be implemented on Litecoin using extension blocks, like a sidechain that is attached to the main chain. Every block has an extension block that holds MimbleWimble transactions. Users can move coins between the two chains with everything remaining private on the sidechain. The funds can then be withdrawn back to the main chain where transparent transactions take place.

Unlike SegWit, Lee is doubtful that MimbleWimble technology will ever come to Bitcoin. Unless it works perfectly on Litecoin and shows that it is, indeed, the future. “I don’t think it will come to Bitcoin in that form, but we’ll see. It’s good to be able to experiment on it.”  

Lee plans to continue working on Litecoin, but says he will eventually step away when the time is right. Having him around is both good and bad for Litecoin, he says. Being a central influence for the cause of the Litecoin network, Lee can push to get things done more easily and efficiently than the more decentralized Bitcoin development community could ever do. But this also makes Litecoin more vulnerable.

“Let’s say the government wanted influence on Litecoin, they can put pressure on me. Or if I start doing something bad, I can really hurt Litecoin. Eventually, when Litecoin doesn’t need me anymore, when it’s more mature and decentralized, it will be best for me to step away, but until then I’ll do whatever I can to help it succeed.”

The king of crypto

Bitcoin is still the king of crypto, Lee insists:

“I try to help Bitcoin when I can.” 

The next big thing for Bitcoin? An ETF, Lee says. “You need to make it easy for anyone to have exposure to Bitcoin… There’s a lot of money out there that can’t get exposure to Bitcoin because there’s no easy way.” Lee figures it’s only a matter of time. “Even the gold ETF took a while. It will take some time, but it will happen eventually… We just need more history and more, bigger exchanges you can trust.”

Even with the mass adoption of Bitcoin, Lee believes there’s still plenty of space in the market for Litecoin. It offers cheap, fast transactions, Lightning Network compatibility, and the ability to perform atomic swaps between Litecoin and Bitcoin.

“In the future, I think people will use money without even knowing what the underlying technology is. Whether it’s the Bitcoin network, whether it’s Lightning, whether it’s Liquid, whether it’s the Litecoin network or anything else. In the end, that’s going to be abstracted away from the user. All they care about is sending value.”