May 29, 2023
4 min read
Halving is the process of complication of mining cryptocurrencies by reducing the awards of the miners twice. Such measures are necessary to regulate the issue of the coin.
Cutting the block mining reward is an integral process of almost every cryptocurrency. It is originally incorporated into the coin algorithm and is designed to control inflation. After all, each cryptocurrency has its own “ceiling” of emission, which can not be exceeded.
If we talk about Litecoin, halving in its blockchain occurs every 840,000 blocks mined. And, as in others, the reward for mining is reduced by half.
Litecoin has already experienced one of the halvings in 2015. Then it will also happen in August, 2019. But the price of the cryptocurrency began to “prepare” for the event since the beginning of summer. In August, after halving, LTC fell to $3-4, and below this mark, the rate in the history of Litecoin no longer fell.
The same BTC is steadily rising in price after production cuts. Why this happens – no one will say with 100% certainty. The most common theory is that halving reduces the supply of a cryptocurrency, and demand is growing or remains at the same level as it pushes the price of the asset up.
At the same time, halving hits miners most of all, because, in the end, their incomes suffer. For example, before halving in 2015, the capacity of the LTC system collapsed by 15%. This can be explained by the fact that some miners have switched to mining a more profitable cryptocurrency. But the “outcome” was quite uncritical for Litecoin.
Litecoin was traded at $30 on Jan. 1, and ended the first quarter at $61, representing a 2x times boost. That was Litecoins’s best first-quarter performance in history.
As you can see at the screenshot above, Litecoin carved out a long-term low at $1.1 in January 2015 and rose to a high of $8.72 in July before falling back below $4.00 ahead of Aug. 25 – at this day mining rewards fell from 50 LTC to 25 LTC.
The chart also shows that the cryptocurrency exited the bear market (long-term falling trendline) before the reward halving.
Both halvings were preceded months in advance by significant price growth and full-fledged bull markets after the event.
Litecoin’s recent surge is reminiscent of the price action witnessed in early 2015. As noted earlier, the cryptocurrency has appreciated by more than 50 percent in the six-weeks and has crossed the 12-month-long falling trendline. Looking into the 2015 halving, we can say that Litecoin should rise in price because last time it went almost 7x from its original price in July 2015 (a month before the halving).
Halving’s goal is to create a kind of coin deficit. In theory, the holding should lead to the fact that some miners will curtail mining, thereby reducing the growth of supply in the token market. A decrease in supply growth with continued growth in demand will automatically raise the price of the token.
Cryptocurrency halving can be discussed from two sides – miners and the network. For people, engaged in mining, the halving of the cryptocurrency is a negative thing: using the same computing power, a miner gets a smaller reward. On the other hand, halving is a stimulant that pushes miners to upgrade their mining equipment.
From the coin’s network position and its performance, the halving is absolutely positive. It allows you to limit the issue, and therefore not just to support the exchange rate of the cryptocurrency, and even push it to growth.
Of course, the division of the reward in half in the future may lead to the fact that the entire mining segment will be concentrated in the hands of a limited circle of miners who, as necessary, developed and modernized their technical base for mining. Whether such forecasts will be justified by 100%, it is impossible to say for sure.
And if the data is correct, halving will lead to higher prices for litecoin. After its first contraction in 2015, the LTC grew by 100%. Similar consequences can be expected this time. Prices will rise after declining twice before stabilizing. Another major impact that may seem more logical is that the number of miners mining LTC will decrease. The profitability of mining will be the most influential factor for litecoin.
In 2011, Charles Lee founded Litecoin as one of the main competitors of the first cryptocurrency. Although the LTC is based on the bitcoin code, this coin is much “lighter” than its predecessor. In particular, miners can mine blocks in the network many times faster, and therefore LTC transactions are much “faster”. For example, the production of a block in the bitcoin blockchain takes about 10 minutes, and for the litecoin, this figure is 2.5 minutes.
There are other features. Litecoin is based on the Scrypt algorithm as opposed to BTC, which runs on SHA-256. It is more resistant to mining on specialized ASIC devices, which supports “equality” in the system. Therefore, ordinary users can mine LTC on their home PCs without huge cash infusions.
Such “features” have made LTC one of the most popular cryptocurrencies in the world. Now, according to Coinmarketcap, Litecoin ranks 6th in market capitalization, which is at $5.4 billion And if bitcoin in the crypto community is called “gold”, then LTC is silver.
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