Litecoin halving: what will happen to the cryptocurrency exchange rate
Litecoin has settled in the TOP-10 of cryptocurrencies for quite long. In three months, however, LTC will reduce the block’s reward by half. This will directly affect the exchange rate and the mood of the miners.
In 2011, Charles Lee launched
Litecoin, as one of the main competitors of the prime cryptocurrency. Although, it is Bitcoin code that lies in the basis of LTC, the coin is much "lighter" than its predecessor. In particular, miners can mine blocks in the network many times faster, and therefore LTC transactions are much “faster”. For example, now the extraction of a block in the bitcoin blockchain takes about 10 minutes, while for Litecoin this figure is 2.5 minutes.
There are other features. Litecoin is based on the Scrypt algorithm, unlike BTC, which runs on SHA-256. It is more resistant to
mining on specialised ASIC devices, which supports “equality” in the system. Therefore, ordinary users can get LTC on their home PCs without huge cash injections.
Such features made LTC one of the most popular cryptocurrencies in the world. Now, according to Coinmarketcap, Litecoin ranks 6th in terms of market capitalisation, which is at $ 5.4 billion. And if bitcoin in a crypto community is called “gold”, then LTC is called silver.
Already in August of this year, "silver" has to survive one of the main tests for the sustainability of its ecosystem. The developers planned to cut the unit's mining premium twice in the last month of summer - a process known as halving. And it will significantly affect the life of this top cryptocurrency.
Reducing the block reward by half is an essential process for almost every cryptocurrency. It was originally incorporated into the coin algorithm, and is designed to control inflation in the ecosystem. After all, each cryptocurrency has its own “ceiling” of emission, which cannot be exceeded, otherwise it will become like fiat money.
If we talk about Litecoin, halving in its blockchain occurs every 840,000 mined blocks. And, as in others, the mining reward is halved.
Litecoin has already had one of the halvings. It happened in 2015. Back then it also occurred in August. But the price of cryptocurrency had begun to "prepare" for the event since the beginning of the summer. According to Coinmarketcap, in the spring of 2015, the LTC price fluctuated in the corridor of $1.5-2 per
token. By the end of July of the same year, the rate overcame the $3 mark, and in July the price came close to $7. In August, after the halving, LTC fell to $ 3-4, and the exchange rate in Litecoin history did not fall below this mark.
Such growth is quite standard for halving. The BTC itself is steadily becoming more expensive after reducing production. Why does this happen - no one will say with 100% certainty. The most common theory says that with halving, cryptocurrency supply decreases, and demand grows or stays at the same level as it supports the asset price upwards.
At the same time, halving beats miners the most, because in the end, their incomes suffer. For example, before halving in 2015, the power in LTC systems collapsed by 15%. This can be explained by the fact that some miners have switched to mining more profitable cryptocurrency. But the “outcome” was completely uncritical for Litecoin. After all, a holy place is never empty, and others have come instead. Moreover, hash rates recovered very quickly, and they only were growing afterwards.
What will happen to Litecoin in August
According to the plan, this year the Litecoin halving is going to happen around August 7 on the block at number 1 680 000. Then the reward will decrease from the current 25 to 12.5 LTC.
As for the price, it is already growing now. Since the beginning of May, Litecoin has risen in price by 20%. However, there are no direct evidences that this is happening precisely because of the upcoming event. Rather, this is due to the general situation on the market, which in May finally knocked the bears out of a rut. On the other hand, there are also no strong prerequisites for the growth of the entire crypto market — neither strong positive news, nor fundamental prerequisites for the bull run. So soon crypto enthusiasts can expect the same powerful fall.
Anyway, as we know from the history, Litecoin may well continue to grow. And the closer it is to the target date, the more this growth will increase.
There are risks, however. When reducing the reward for the blocks extraction it is miners, who are the first to suffer. And they can arrange "a rebellion on the patch."
According to a SatoshiFund developer Andrei Sobol, sabotaging halving might be quite realistic. Moreover, it is quite simple to do. You would need a hard fork to do that, however.
“From a technical point of view, it’s very easy to change a few lines of code and release a new version. From an organisational point of view, you will need to convince everyone to use this new version. And that is almost unreal, ” says Andrei Sobol.
Indeed, there are no visible prerequisites of the Litecoin sectioning. Usually, speaking on this cryptocurrency, they say "either good or nothing." Moreover there aren’t many scandals associated with the leaders of the coin. However, it is also true when talking about disputes over the future of the coin. And Litecoin has not yet gotten its Craig Wright, who would actively promote an alternative chain of blocks.
Of course, the risk of hash rates drop in the system remains. The possible effect, however, might be short-term and insignificant, just like the previous time.
Halving is an important event for any cryptocurrency. Canceling it means that the developers and the community are not ready to follow the original plan and are pursuing their own interests. Just like the Central Bank of a country that prints money for short-term gain. But the long-term effect of this is terrible - rapid inflation, a fall in people's living standards, and a complete collapse of the economy. Venezuela is a prime example.
Litecoin loyalists understand that and do not plan to abandon the halving. So, it is quite possible that the market will soon see another Litecoin rally before the production reducing.
Author: Alexey Ryabukha