Litecoin Halving: All you need to know

Just one day from half of the litecoin (LTC), Cointelegraph describes everything you need to know about reducing the bulk rewards of cryptocurrency. Despite their reputation for creating price increases, the reduction in valuation has been reduced by 25% in the last month.

What is half

Halving is a process that occurs when the reward for extracting a cryptocurrency is reduced by 50%. Minors receive cryptographic rewards for solving problems creating each new block in a given block chain. Rewards differ for each cryptocurrency. With Litecoin, the miners currently receive 50 pieces per block. After August 5th, minors will only receive 25 Litecoins per block.

Rewards in litecoins halve every 840,000 blocks, a process that takes place every four years. The speed of the blocks for Litecoin is about 2.5 minutes, with about 576 blocks generated per day. One of the key factors to consider is that according to the coding behind crypto-currencies such as Bitcoin (BTC) and Litecoin, only a certain amount will be exploited. This distinctive feature distinguishes it from fiduciary currencies, which can theoretically be printed in infinity.

Although it is difficult to say when the last Litecoins will be exploited, the Litecoin Foundation estimates that it will be around 2142, when the maximum of 84 million Litecoins will be reached. At press time there were 62,983,450 Litecoins in circulation, representing 74.93% of all Litecoins that will be exploited. There will remain about 21 million coins to be mined until 2142. Comparatively, it is estimated that the latest Bitcoins (BTC) will be mined around 2140.

Investors are keeping a close eye on the markets, as the resulting reduction in mining benefits affects profitability. As a result, it affects the price. For investors, this can be a mixed bag. According to the theory of supply and demand, the halies should raise the price of cryptocurrency. As they receive fewer pieces per block, the miners stop producing them until the work becomes profitable again. As fewer coins come into circulation, the price increases accordingly, because the demand will theoretically exceed the supply. While this may seem like an absolute win for investors, gloom can lead to even greater instability in an already volatile market.

The previous hesitations have stoked investors' interest and the upcoming event in Litecoin is no exception. According to Google Trends, research on halving litecoin culminated between June 9 and June 15, although data shows that this trend is on the rise again.

Searches for "halving bitcoins" on Google are generally higher than entries for Litecoin, although this trend has reversed as of July 30th.

What could happen?

In the run-up to the halving, the miners speed up their operations to maximize their returns until the whole process becomes unprofitable. Miners need to invest in powerful, specialized equipment to meet the IT challenges of building blocks. As the difficulty of mining blocks increases, the cost of electricity also increases. Mining is no longer a game for individual hobbyists, even the largest mining companies are struggling to remain profitable during the so-called crypto winter of 2018. Mining is now a big business and businesses need to make a profit. Thus, when profitability falls, activities tend to stop.

The fact that miners feel the heat after halving is no secret, Litecoin's creator, Charlie Lee, predicts that many will close after August 5th. Lee told the Australian crypto news site Mickey that halving block rewards was still having an impact on the Litecoin mining ecosystem:

"When the mining rewards are cut in half, some miners will no longer be profitable and stop their machine. If a high percentage succeeds, the blocks slow down for a while. For litecoin, it's three and a half days before the next change, so seven days of slower lock-ups, then, after that, the difficulty will be corrected and everything will be fine. "

Despite the commonly accepted theory that a decrease in supply leads to a corresponding increase in demand, Lee suggested that market sentiment also plays a role in raising the price:

"In terms of price, the halving should be integrated because everyone knows it from the beginning. But the problem is that people expect the price to rise. So, a lot of people buy because they expect the price to go up and this is a kind of self-fulfilling prophecy. So, as they buy, the price actually increases. "

After the halving of Litecoin by 2015, the coin peaked in July of this year before losing nearly 50% of its value at the time of the reduction of the reward, resulting in a 75% decrease in stride, reports Mickey. Naeem Aslam, Chief Market Analyst at ThinkMarketsFX, told Cointelegraph by email that the reduction of bulk rewards for miners was an effective filtering process and had agreed that the effect on price was generally positive:

"Reducing the incentive for minors is a good thing for LTCs because only serious people will stay in space. With regard to price action, it is difficult and it depends a lot on the feeling, but generally, this kind of action is positive for the price. "

If the price of the bombs decreases after the halving, the hash rate of the network will decrease as mining begins to close, leaving only the largest mining operations. Once the hash rate falls below a certain threshold, the difficulty of mining will adjust and smaller miners may be able to start operating again.

Supply and demand: experts weigh

Although it is generally considered that the halving of events leads to a price increase for the given cryptocurrency, market experts do not foresee a dramatic change in valuation. Mati Greenspan, Senior Market Analyst at eToro, told Cointelegraph that half events are usually taken into account before they actually happen:

"That seems to be the case here too. The litecoin has outperformed the rest of the market when rising this year and some say it's been behind the upward movement recorded in the first half of this year. It is hard to say how or even if the price will react to the event in the short term. In the long run, a reduced supply allows for higher prices, all other things being equal. "

Crypto Rand, a renowned technical badyst and technical badyst, also agreed in an email conversation with Cointelegraph that the halving event had already been reflected in the following prices:

"I do not think the halving event will have a lot of impact on the price in Litecoin, it has already been recorded for a month, I would say. LTC looks pretty solid here. It has just broken the local channel of the downtrend after rebounding on the key support of the $ 88 range. If the downward trend in volume finally ends, I expect a price increase to $ 105 – $ 110. At the moment, this looks like a solid option among the rest of the big caps. "

For Aslam, those who try to jump in the sausage train in half are already too late:

"The most important factor to remember is that this type of planned events is already fully taken into account and that traders have already positioned themselves for that. With the approach of the event, it is usually not wise to participate in this initiative because you are already too late for the party. Therefore, smart money always buys the rumor and sells the news.

Greenspan predicts that mining activity will not have many surprises, thanks in part to Litecoin's Scrypt algorithm:

"The encryption algorithm of Litecoin is quite unique, so the hardware used to exploit it is not easily adaptable to the exploitation of other tokens. Therefore, it does not have quite the same competition on hashrate as some of the others against. My feeling is that minors in long-term care facilities have had ample time to prepare for halving, so we should not see any major changes. "

When asked what investors who hold LTC should do, Greenspan gave the following advice:

"By carrying." But more importantly, spending. "Litecoin's value proposition specifically involves being a more sustainable token for making payments." The more people use it for this purpose, the more the network becomes. powerful. "

Some members of the cryptographic community comment that the 50% reduction in litecoins can be considered as a test for halving BTC mid-way through 2020 and so we can expect some results Similar. For Greenspan, the comparison is good, but he warned that the results would not be identical:

"The market has matured a lot since the last bitter Bitcoin and Litecoin. Even if we could not expect a mirror reaction, the halving of LTC should give us an indication of what to expect when BTC does the same, next year. "

Crypto Rand, however, is not so sure to say that the understanding and even the knowledge on the part of investors Litecoin juxtaposed Bitcoin are incomparable:

"I do not think the halving of LTC can serve as a test for Bitcoin, I would say that 95% of traders / investors are unaware of halving the addiction or they do not know how. BTC's coverage is and will remain an all-public event, and everyone will know it. "

Strix Leviathan says halving profits is a myth

A blog post published on July 21 by the institutional-level algorithmic management platform Strix Leviathan revealed that cryptocurrencies did not outperform the market in the months leading up to and after the block rewards cuts.

The report revealed that the theory of supply and demand, although "certainly achievable as a logical theory," does not result in a rapid increase in price. According to the report, Strix Leviathan's badysts found that LTC had outperformed the market twice before reducing the rewards en bloc, but had fallen to the bottom 25% of the market in the next six months. The report also postulates that the performance of a cryptographic badet both in periods of division and division are about the same:

"What we are seeing is that the distribution of the return of the half-time periods of an badet versus the yield distribution outside its halving periods reveals that they are statistically identical at one level. 99% confidence. In other words, we have not found proof that an event halved resulted in abnormal pricing and we are dealing with a circumstantial illusion. It seems more likely that the return behavior before, during and after halving coincides more with an increase in speculation than with an underlying change in selling pressure. "

The merged mining could mitigate the overall rewards cuts

A report published by Binance Research, a branch of the leading Binance cryptographic interchange, revealed that the impact of mine smelting could mitigate the impact of lost time for BTC and LTC miners. The Binance researchers badyzed Charlie Lee's prediction that many miners would have to stop their activities and looked at how merged mining could help miners stay on board, even after the reduction in rewards.

The merged extraction uses the work done on a parent blockchain and extends it onto other "smaller" child string chains using Auxiliary Work Proof (AuxPoW). The three most notable examples of merged mining are Namecoin (NMC), Dogcoin (DOGE) and Myriadcoin (XMY), a merger of bitcoins, a cryptocurrency merged with both BTC and LTC.

The report speculated that mining from the merger could help mitigate the impact of the rewards cuts by future block rewards planned for Litecoin and Bitcoin. Binance researchers have also indicated that small chains could incorporate AuxPoW in the future to strengthen network security and reduce the need for independent mining operations. The report, however, revealed some potential gaps. The researchers said miners would not be able to turn to the merged mining business because of the risk of operational costs badociated with blockchain funding for children and the potential for lower market prices.

The report cites Dogecoin as one of the most successful examples of merged mining, which adopted the model in August 2014. After the switchover, the mining hash rate of the room soared by 1,500%. The report also revealed that, as of July 2019, 90% of the total hash rate of Dogecoin comes from Litecoin mining deposits.