With Litecoin’s first-ever halving soon to be upon us, we are already beginning to see the effects. So, what a better time to discuss exactly that. Sit back because this going to get interesting. By no means is Litecoin the first coin to be halved.
In fact, back on November 28th, 2012 Bitcoin underwent its first-ever halving. So we already have a good idea of what to expect just by looking at history. Okay, so what do we actually mean when we refer to a coin as “halving?” Well, it’s pretty simple: it means the mining reward halves.
In the case of Litecoin, miners are currently awarded 50 new coins for solving blocks. After halving, miners will be rewarded 25 Litecoins per block. This process only takes place once half of all the coins are in existence.
And then another half, and another half, and so on and so forth. The halving process doesn’t just happen once. For both Bitcoin and Litecoin, this is set to happen every four years as is stated in their code. But for other coins, this may vary.
While nobody really knows for sure when the last few coins will be mined, we expected to it be around 2142 for Litecoin and 2140 for Bitcoin. based on the reward over this time. Of course, by then, only 0.00000672 Litecoins will be mined each day.
Until eventually all 84 million Litecoins are in existence. Clearly, this is a positive thing as inflation slows each time, fewer coins for the market, and therefore everyone’s coins rise in price as a result. So why does Litecoin actually look like this before the halving? Well, the most likely answer is that people are expecting the price to rise so in anticipation they are buying up these “cheap” undervalued coins–in their mind– while they are at this current price.
We should also point out that cryptocurrency has come a long way since 2012 when Bitcoin underwent its first halving. Thus, in turn, this sudden rush and demand of people wanting to buy-in have, in turn, pushed the price of Litecoin higher. There is, however, one more part to the equation: the miners. As we know miners invest in specialized equipment in order to actually mine the coins.
Just like any other business, they need to make a profit. Otherwise, it’s just not worth them doing so. And now that income is about to be cut in half a lot of their ineffective equipment is about to be shut off. That is unless the market price of the coins rise to a point where they can continue to make a profit. By the way, the miners face one of two options. Those being: the price rises and everything stays pretty much the same as it is now.
However, if it doesn’t, a lot of miners will no longer be able to operate. In turn, the network hash rate will drop as they begin to shut off.
Leaving only mining farms in places such as China working. Resulting in a less distributed network. If a network hash rate drops low enough, The mining difficulty will automatically adjust itself. Meaning those who stopped, may be able to start mining again at a profit.
While we do not know how high the price of go during this period, we do expect that after all is said and done, the price will settle higher than it was in the few months leading up to the halving.
Read More: How to Exchange Litecoin to Decred