In approximately 176 days, Litecoin (LTC) will undergo a reduction of half the block’s reward, reducing the coin’s reward for miners from 25 to 12.5 LTC. What can we expect?
Litecoin rallied strongly in the first six weeks of 2019, sparking speculation that investors may be evaluating the price of a supply cut that is scheduled for August.
The fourth largest cryptocurrency in the world by market capitalization is currently trading at $ 44, having reached a maximum of $ 47 last week. At that price, LTC rose 56 percent so far this year, according to data from CoinMarketCap.
LTC obtained an offer close to $ 20 in December, following the corrective rally in bitcoin, the largest cryptocurrency in the world by market capitalization. Both moved almost in unison in January. However, things changed last week, with LTC surpassing the 7 percent increase in BTC with a 41 percent increase.
LTC’s solid performance occurs at least five months before the mining reward is halved, or the time when the amount of litecoins produced as a network subsidy for each transaction block is cut in half. . On August 8, the mining reward will be reduced from 25 LTC to 12.5 LTC.
The markets are always oriented towards the future and, therefore, could have a price in the imminent fall of the offer. The validation of this argument is historical information, which shows that the cryptocurrency had recovered in the months prior to the first reduction of the mining reward, which took place on August 25, 2015.
As seen above, LTC achieved a long-term low of $ 1.12 in January 2015 and peaked at $ 8.72 in July before falling below $ 4.00 before August 25, a day when mining rewards fell. from 50 LTC to 25 LTC.
According to the crypto trader, Moon Overlord, with the next halving getting closer, Litecoin could be ready to get to the bottom, as happened the last time in 2015. And if it follows the same path as the last time, we could also see a new peak in 2021 exactly two years after half.
There may be some reasons why many Litecoin fans expect this bullish move. In fact, Charlie Lee, of the Litecoin Foundation, recently announced that Litecoin will seek confidential transaction features to improve the security, anonymity and security function that LTC offers its users. In this search, LTC is exploring the implementation of the MimbleWimble bulletproof extension blocks with the support of software development company Beam, a feature of other privacy currencies in the market.
This solution to Litecoin’s fungibility issues and its corresponding promise of additional security and anonymity has supported the bullish LTC market outlook. In fact, it was this upward movement that briefly caused Litecoin to overtake Tether as the sixth largest cryptocurrency in the world on February 5 in terms of market capitalization.
What should we know about Litecoin’s halving?
As mentioned above, it is expected that on August 8, 2019 Litecoin (LTC) will suffer what would be its second reduction. However, the exact date could be a little before or after the estimated date, this will depend on the speed at which Blockchain LTC blocks are added.
At present, there are about 60 million Litecoins in existence that is 71.73 percent, to be exact, they are already mined. Only 2,746,100 LTC remain to be removed now.
Halving is a process that is designed to control the general supply and thus reduce the risk of inflation in cryptocurrencies through an algorithm known as Proof-of-Work (PoW). In this way, in a predetermined block, the reward of mining is reduced by half, hence the name “halving”.
What we have learned in the past is that this event can have a series of consequences both positive and negative for miners, investors and users of LTC or Bitcoin (BTC), which are also reduced to a certain rate.
PoW is the original consensus algorithm discussed by Satoshi Nakamoto in the BTC technical document published in 2008. Consensus algorithms are the processes by which transactions are confirmed through a P2P (peer-to-peer) network using the Distributed accounting technology (DLT).
As an accounting book, they include all transactions in a network such as BTC or LTC. This ledger is distributed to the general public so that no central authority controls it. BTC and LTC are networks based on Blockchain that implement an integrated PoW protocol with a halving system
To confirm the transactions in the chain of blocks using PoW, the miners compete with each other to solve a mathematical problem (or algorithm). The other nodes in the network must confirm that the answer is correct.
In other words, there must be a consensus. To use an analogy, the miner who first solves the problem must write the answer on the board and show how it came to him. Then, the rest of the class must confirm that the student, or miner, solved the problem correctly.
Clearly, the miners have an important role in this event. We know that, when a consensus is reached, the miner who solved the algorithm correctly in the first place gets a reward; basically that is the primary incentive within the activity. However, with the halving process, the rewards received by the miners are reduced by half as part of a programmed system. LTC and BTC have a limited supply of coins that will be extracted, which means that the miner’s reward should eventually reach zero.
It is important to note that the total LTC supply will be reached when 84 million coins have been distributed. In this way, a halving occurs every time block number 840,000 is reached. In contrast to Bitcoin, which has a total supply of 21 million, with a halving every 210,000 blocks.
Since the creation of bitcoin 10 years ago, the cryptocurrency has experienced two halves of reward, the first on November 28, 2012 and the second on July 9, 2016, and it is estimated that it will undergo a third in May 2020.
If the reward for mining is reduced from time to time, why keep the activity?
Obviously, if the reward for mining is reduced by half, this means that the income that a miner can obtain from mining decreases in a similar way. This can discourage miners to continue mining.
However, miners also benefit from the transaction fees received from each transaction that is extracted. When there are no more coins to extract, the only reward for the miners will be derived from the transaction fees. However, it is possible that the rates of future transactions do not allow the same level of profits as the current mining rewards program.