Extensively considered as Bitcoin’s little brother, the decentralized cryptocurrency Litecoin, much like the original digital asset, undergoes regular halving. As crypto assets become more and more widely represented and with Bitcoin’s next halving right around the corner, you may be wondering what Litecoin halving really is and what all the hype is about.
Here is everything you need to know about Litecoin and what is likely to happen on halving day.
A brief History of Litecoin
Developed by computer scientist and Google employee (formerly engineering director at Coinbase) Charlie Lee in 2011, Litecoin (LTC) is a fork of the very famous Bitcoin core client. In creating Litecoin and its network, Lee brought to life a faster version of Bitcoin, generating a new block every two and a half minutes. The protocol also uses a different hashing algorithm and has a higher supply limit than its predecessor (84,000,000 LTC).
Litecoin’s price has experienced some important fluctuations since its early days, the most noteworthy being during the month of November 2013, when its aggregate value spiked up by 100% within 24 hours.
The cryptocurrency reached the market cap’s top 5 in May 2017 and has remained among the top crypto assets ever since, sometimes even achieving rank 2.
What is Litecoin?
Litecoin is an open source software and peer-to-peer cryptocurrency project launched in October 2011 under the MIT/X11 license. The cryptographic protocol on which it is based allows for the creation and transfer of coins without the need to rely on any central authority. The altcoin (or Bitcoin spinoff) uses a different consensus mechanism (scrypt) which is also based on proof of work. Litecoin means to provide investors with a more scalable solution thanks to possible evolution in the protocol itself or in the transaction fees. The latter are also much lower than Bitcoin’s, which hover around $0.50, and while Litecoin’s have fluctuated, they are usually below the $0.1 mark.
Investors praise Litecoin for its transaction speeds (2.5 minutes per block instead of Bitcoin’s 10 minutes), but its mining distribution method is also considered by many to be fairer. Similar to Bitcoin, a finite number of tokens ensures sufficient scarcity (mitigated by regular Litecoin halving) to make the asset gain in value.
What is Litecoin halving?
What does Litecoin halving mean, really? In the simplest terms, it is an event where the number of Litecoin tokens given to the miners as a reward each time a block is added to the chain is halved. LTC halving happens every four years. As we write these lines, the mining reward is at 12.5 Litecoins per block, reduced from 25 in 2019.
Why does Litecoin halving occur?
To understand the purpose of a Litecoin halving, it is important to understand that, unlike fiat currencies which can grow indefinitely, the total number of Litecoin tokens in existence is capped. This means that, even though not all LTC coins have been mined yet, one day, they will be, and it will become impossible to ever produce more. This is the reason why cryptocurrencies are often compared with raw materials and precious metals such as gold: their supply is not inexhaustible.
The fixed supply creates scarcity, making Litecoin a deflationary asset. This strategy ensures the currency does not lose its value over time (as printed currencies do). On the contrary, the theory is that as the tokens become rarer and rarer, the price of Litecoin should keep going up (provided demand does not falter).
To make the process last a little longer, however, a Litecoin halving schedule is in place so that the supply is cut by half every 840,000 blocks until all 84 million LTC have been mined.
How does Litecoin halving impact miners?
Every time a Litecoin halving occurs, miners receive half as many Litecoins for verifying transactions as they previously did. The impact of such a drastic cut may vary based on the fluctuations of Litcoin prices. Unless the value of the token goes up very significantly, mining becomes much less rewarding and the drop in profitability can be so significant that small miners can no longer offset electricity costs. Following a halving, the Litecoin hashrate has been known to fluctuate, though, which may play in their favor if they are patient enough. Others, who would rather not become vulnerable to a potential 51% attack (when a single mining organization monopolizes the hashing power) may decide to start mining other cryptocurrencies.
Past halving dates
When was the first and when was the last Litecoin halving?
There have been two Litecoin halving dates in Litecoin’s history, one of the 25th of August, 2015 once 840,000 LTC had been mined, and another on the 5th of August, 2019 when the 1,680,000 milestone was reached.
How do halvings impact the price of Litecoin?
Whether or not the price of Litecoin is significantly impacted by Litecoin halvings remains debatable.
In the few months preceding both the Litecoin halving of 2019 and that of 2015, a slight increase in the value of Litecoin was observed. Yet, these were by no means the most impressive spikes in the cryptocurrency’s history and they were relatively short-lived too.
Many people believe that, if the demand stays the same, then halving the supply can only make the asset gain in value. Others consider that the effects of a Litecoin halving are already accounted for in the price of the currency, which should therefore not be impacted by this long-planned event at all. The reality is probably somewhere in between, though, and many other factors have an influence on the evolution of Litecoin’s value. As technologies evolve and digital payment methods gain momentum, Litecoin – which is originally designed to provide its users with a means of payment – will be relevant as much more than a simple asset. This may impact the price of the currency positively.
When will be the next Litecoin halving?
There will be no Litecoin halving in 2020, but the next Bitcoin halving, set to happen in May of this year, could have repercussions on the price of the LTC token. The next event is to occur on the 6th of August 2023, and the effects of this Litecoin halving in 2024 could be important as the world is facing evolution in a variety of forms.
Some Litecoin halving predictions are very optimistic as the altcoin, now well established, provides an interesting alternative to Bitcoin for investors and miners alike and is unlikely to lose its relevance in the upcoming years.
According to WalletInvestor, a 20% drop in the price of Litecoin may happen around the time of the next Litecoin halving, only to spike a few years later and be worth over $1,500 by 2025. Longforecast predicts a 25% price hike between 2020 and the next halving in 2023. DigitalCoinPrice estimates Litecoin’s value will plummet in 2020 before gaining momentum again in the long run. Finally, TradingBeasts foresees a slight increase of the currency’s value between 2020 and 2022.
While sources diverge, bullish patterns seem to be likely and the coin’s popularity could remain steady without any major events impacting its impetus. The global pandemic the world is facing in 2020, for instance, may have far-reaching consequences. The impact of such an unprecedented event is difficult to estimate as the fluctuations cryptocurrencies undergo are tightly correlated with the movements of other markets.
As always, prudence and reason should be exercises when investing in and trading crypto assets of any nature and our words should not be considered as providing recommendations. The volatility of crypto markets is such that it is impossible to hazard a true prediction as to what results the next Litecoin halving will hold. This is perhaps part of what makes digital currencies so fascinating and worth researching. One thing is sure: Litecoin will continue to evolve and its value will experience ups and downs for years to come.