Litecoin was one of the earliest spinoffs of Bitcoin which came into existence in October 2011 and since then the coin has stayed pretty identical to Bitcoin. Just like the Bitcoin, Litecoin too would be undergoing the mining reward halving process in August 2019 and every stakeholder needs to be prepared for the event as to what could be the probable consequences. Binance Research explains
Litecoin’s block profitability will be cut in half in the span of 5 minutes
In crypto world, halving is a fixed event when the block rewards cut into half and the profitability from a block is reduced to 50%. For Litecoin, its chain’s block rewards for mining are perpetually reduced by one half every 840,000 blocks. With the way, the current block generation time is set to ~2.5 minutes this event is occurring is scheduled to happen every four years. Litecoin’s current block reward is set at 25 litecoin per block and will subsequently decrease to 12.5 litecoin per block around August 6th (at exactly block 1,680,000)
Litecoin has had just one block halving in August 2015 when the price of the coin increased from around 1.5 USD (3 months before halving) to over 3 USD post-halving, with a peak of 7 USD in mid-July 2015 while the hashrate dropped by roughly 15% around the event, before quickly rebounding in the two weeks following the halving.
While the past is behind us there are four possible “watch outs” for Litecoin block halving this time. These include
- Price Rallies Before Stabilizing at a new high: The price of Litecoin has already started rallying since the beginning of the year, exhibiting a 200% year-to-date return, while the broader market is up by 40% YTD
- Hashrate Increases Before The Halving: This too has already happened. As the rewards will be halved, more miners may decide to start mining Litecoin (instead of other currencies) as they want to mine as much litecoins as possible short-term in anticipation of the future decrease in mining rewards
- Mining Profitability Adjust as Miners Exit the Market: If some miners were to leave the market and/or switch over to mining other, more profitable coins, the hash rate would decrease. As a result, this reduced competition would help compensate for the loss of profitability due to the absolute block reward reduction.
- Permanent Drop in Mining Profitability: If Litecoin’s post-90-day price post-halving would be near its historical long-term median, all other things being equal, it would result in lower profitability for all Litecoin miners
While there could be many possibilities depending on how the coin is placed closer to the halving date. However, rational miners would still consider the marginal profitability and opportunity costs of mining each PoW cryptocurrency over the same time periods to decide whether or not it is more profitable to mine Litecoin or other cryptocurrencies. While the event is important for every Litecoin stakeholder, with no much history in place it becomes difficult to predict what would actually happen.
What do you think would be the possible outcome of Litecoin halving? Do let us know your views on the same.
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Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.