Disclaimer: Your capital is at risk. This is not investment advice.
The Litecoin halving is coming up on Monday 5th August at 12:30pm BST. In this article we will look at a brief introduction to Litecoin and what is the Litecoin halving. We will be releasing an article on the Litecoin Network every day this week in the lead up to the halving. Make sure to follow us on twitter to stay up to date with the latest articles and on-chain developments.
This week we will be exploring the following questions:
- What is the Litecoin halving?
- How does the Litecoin halving impact price?
- What is the difference between the Bitcoin and Litecoin Networks?
- How do we measure Litecoin’s payment velocity?
- What is Litecoin’s Network Value to Transaction ratio?
- What should you look out for on the day of the halving?
A brief introduction to Litecoin
Litecoin is an open source, decentralized cryptocurrency that forked from Bitcoin in 2011. Litecoin has many of the same properties as bitcoin, differentiating itself on the rate that new blocks are added to the chain. A new block in Litecoin is produced every 2.5 minutes, x4 faster than bitcoin’s 10 minutes. Litecoin also has x4 the total supply, with 84 million to bitcoin’s 21 million. The higher inflation rate and total supply means Litecoin is considered to be the silver to Bitcoin’s gold and serves as a testbed for Bitcoin future growth.
Before we can understand the halving concept, let’s take a look at how new Litecoin are introduced into the economy.
What is a mining reward?
Litecoin is a proof-of-work coin, similar to bitcoin. This means that the new Litecoin are introduced into the economy through the network of miners. Miners commit their computing power to the network and receive Litecoin in return for this work. Rewards are payed to miners each time a new block is complete, which for Litecoin equates to around 2.5 minutes. The amount that miners receive in this reward changes over time.
What is the Litecoin halving?
Halving means that the number of Litecoin paid to the miner is cut in half. As an example, a Litecoin miner currently receives 25 LTC ($2.2k) every time they find a new block. You can track the latest block reward, USD value of the reward and total fees in each block through the ByteTree Dashboard.
After the halving, the miner will receive 12.5 LTC ($1.1k). The halving process doesn’t just happen once. It is programmed into the core code of the Litecoin blockchain to happen every four years (which is the same as bitcoin). The final reward pay-out is scheduled to occur in 2140, when all 84Million Litecoin are in existence.
What does it mean for the miners?
Since the mining reward is effectively cut in half, the revenue that they generate from each new block is also halved. The miners’ ability to continue to mine the network will depend on their current cost base - miners will only mine the blockchain if it remains profitable for them to do so.
Why does price rise towards the halving?
Halving increases the scarcity of coins and the market anticipates a price rise in the lead up to the halving period. The price goes up prior to the halving itself since the market already anticipates this scarcity and prices it in. We will be diving deeper into the relationship between the halving and the price of Litecoin later this week.