What is the Litecoin halving?
A halving is a process in cryptocurrency mining which automatically cuts the reward for mined blocks by 50%. So on the Litecoin Blockchain, the rewards halve after every 840,000 blocks. For the Litecoin halving that occurred Aug 4th, the block reward was cut from 25 Litecoins per block, to only 12.5.
The idea is to slow it down gradually until all coins have been minted. This cryptocurrency (like bitcoin) has a finite number of coins that will be minted over time.
When the block rewards that are paid out to miners decrease by half, there are expected (and often unexpected) results. Occurring around every four years, the Litecoin halving just took place on August 4th at 12:01am. The last one occurred during the summer of 2015.
According to the Litecoin Foundation, the final coins for Litecoin will be mined somewhere close to the year 2142, for a grand total of 84 million Litecoins. Currently, about 75% of all Litecoins have already been mined. Each time a halving occurs, the block rewards diminish by 50%, slowing down mining, creating some volatility and then scarcity, and then usually stabilizing the Litecoin price again to ready itself for more growth.
How are Litecoin miners affected?
Since mining rewards are reduced during a halving, the hope for miners (and the Network) is that with demand and scarcity up, this will cause a positive price trend. It will be harder for miners to compete with less rewards. But many feel that this keeps professional miners in the game while others that are not as committed to it may drop off. We may see more centralized mining pools having more authority in this type of situation.
If a lot of miners shut off their mining machinery due to the reduced block reward, the blocks could slow down significantly. Furthermore, if the price tanks after the halving, the hash rate for the Litecoin Network could enter a tailspin in reaction to miners shutting down due to decreased block rewards and LTC price.
During this type of circumstance, many times only the big mining farms can stay afloat. And even they will probably shut down some of their equipment, if not most of it. But the hash rate will only go so low before the mining difficulty adjusts again, usually a signal for smaller miners to again start up their mining rigs.
Litecoin Halving 2015 – What happened?
For Litecoin’s first halving in 2015, block rewards for miners went from 50 Litecoins to 25 per mined block. Shortly before this halving, the LTC price peaked and then dropped nearly 50% in value. This steep price drop leveled out with the long term effect on Litecon’s price in the positive.
At the time, the Litecoin Association noted that despite the price change, that price was not the currency’s primary goal. Instead, the mission involves:
- Enabling fast global payments, such as with remittances
- Storing information securely
- Allowing for peer to peer, self banking
- Providing all of the above in a decentralized manner
Litecoin Halving 2019 – Update
It’s been generally agreed upon that because everyone that’s involved with Litecoin knows about the halving event, the price adjustment was already made in the weeks leading up to it.
By looking at the chart below, you can see the dip at midnight of August 3rd. Litecoin’s price had a rough night and then by mid-morning on Sunday, the price seemed in full recovery.
With cryptocurrency in a bull market, (especially bitcoin, which has seen institutional and even governmental interest of late), price volatility may increase over the next few weeks for Litecoin. But overall, it’s difficult to say exactly how the market will react in the months ahead.
So far, the price dipped hard, stabilized, rose to its former price point and is now growing a bit more. However, this may be to due to new investors FOMO’ing in because of all the press about the halving. As you can see in the Google Trends readout below, there’s a huge jump in searches for ‘litecoin halving’ in the last two weeks. And it’s much larger than the search jump we saw during the period around the 2015 halving.
Interestingly, the bitcoin price took a little tumble as well during the midnight hours on the night of the halving. Maybe it was due to some sort of ghost postpartum regression since Litecoin is a hard fork of the Bitcoin Blockchain. As it was with LTC, bitcoin had a bit of a struggle through the night. But by 9 am Sunday, Aug. 5th, we began seeing a similar recovery.
Litecoin prices were pretty quiet during the actual halving, but that was not an unexpected trend. Traders had an idea of what to expect. The price leading up the halving increased due to the promise of pending scarcity. So as we would predict, prices for the most part already stabilized leading up the halving. We may see some level of frenetic activity directly after with newcomers FOMOing in due to all the news stories. Other than that, we will wait out the rest of the year to see more long term effects to Litecoin’s 2019 halving.