A halving of Litecoin is an event in which the number of Litecoin rewards generated is halved.
Around every four years, Litecoin halvings are planned to maintain the purchasing power of Litecoin. On August 5, 2019, the last halving Litecoin was when the mining price decreased from 25 Litecoins per block to 12,5 Litecoins per block.
The next halving is scheduled for 6 August 2023, when the prize will be that from 12.5 to 6.25 Litecoins.
The purpose of a Litecoin halving
To understand why Litecoin halving events occur, the process behind the development of LTC tokens helps to understand.
Litecoin is limited in number and can be created. In total, 84 million coins will be in circulation and can not ever be generated once mined.
Since Litecoin has a fixed supply, it is a scarce and intrinsically deflationary asset. If its stock were not limited, its purchasing power will gradually deteriorate over time-as is the case with fiat currencies that are produced at will.
The Litecoin halving schedule is scheduled to take place once every 840,000 blocks until the network generates a maximum of 84 million Litecoins.
So far, around 75% of all Litecoins have been mined, with around 63 million of the 84 million in circulation at present.
Impact on miners
Litecoins are released by block rewards in a consistent pattern.
Miners receive Litecoin rewards for adding new network blocks. When a Litecoin halving takes place, miners earn 50 percent fewer Litecoins for checking transactions.
The Litecoin network block output time is about one block every 2.5 minutes. With a new supply of 7,200 LTCs on the market, about 576 blocks will be generated every 24 hours following the 2019 halving–half of the previous daily level of approximately 14,400 LTCs. With every halving event, markedly fewer Litecoins are added to the market.
Litecoin halving events are likely to affect people’s mining interest, as a range of widely used Litecoin mining tools have a harder time producing enough LTC to cover energy costs.
Also, mining issues–an indicator of how difficult it is to maintain and add to the blockchain–do not automatically react to the decline in mining profits.
As a result, miners could choose to mine other cryptocurrencies, which could lead to a decrease in the hash rate. According to BitInfoCharts, Litecoin is currently at 157 TH / s–far below 523 TH / s in July.
Some Litecoin enthusiasts consider these effects to be relatively short term because computing power tends to grow in the months after a halving to offset mining profitability drop. For example, during the halving on 25 August, the Litecoin hash rate fell by 15 percent in the next two weeks before rebounding.
Others, nevertheless, are concerned about the falling hash power of Litecoin which makes it vulnerable to a 51% attack when a single miner or cartel assembles more hash power than any other participant.
If more than one half of the total hashing power in the network is obtained, other miners can vote out and gain control of the transactions in the blockchain.
Litecoin traders should expect increased volatility during a halving of Litecoin. Litecoin currently trades at $45, 53% less than its $97 August 5 worth.
A similar event happened in 2015 when Litecoin peaked at $8 in July before dipping below $2 by the halving-day of August 25.
The latest price drop did not help the sixth-largest crypto-monetary year on the market, the near connection with Bitcoin causing a lot of pain as Bitcoin entered its new bear period.
Some analysts argue that the revival of Litecoin is not imminent, because falls in the last six months suggest that supply cuts already cost traders.
So while a Litecoin halving may impact the value of the coin, at least in the short term, it is more important to predict its price in the future for the wider cryptocurrency market.