Updated on January 24, 2023 8:03 AM
Litecoin is one of the first altcoins. It was founded in 2011 by Charlie Lee, a former software developer at Google and Coinbase who went on to establish Litecoin.
Charlie designed the concept to be comparable to Bitcoin while yet having some peculiarities. Litecoin, like Bitcoin and other proof-of-work cryptocurrencies, has its value halved every four years.
Before jumping directly into the concept of Litecoin Halving, Let's discuss "What is Halving?" first.
A halving event occurs when the reward granted to miners that assist in the mining of a specific cryptocurrency is reduced. It slows the rate at which Litecoin is produced. Halving is built into the Litecoin blockchain and cannot be changed.
As previously stated, halving reduces the payout for miners. Mining is the process of creating cryptocurrency based on the Proof of Work algorithm. Miners are in charge of creating the specified cryptocurrency, in this case, Litecoin, by utilizing specialized computer hardware to validate transactions on a certain blockchain. As a result, the blockchain mining process generates a coin that is unique to that blockchain.
Also Read: How does Litecoin work?
As previously stated, the block reward incentivizes both Bitcoin and Litecoin miners. It also controls supply because the block reward determines the inflation rate in the Litecoin network by issuing additional LTC.
Litecoin halving is a function that influences LTC inflation. For every 840.000 blocks, the block reward is effectively slashed in half. When Litecoin first launched in 2011, the block reward was set at 50 LTC. The reward for the first Litecoin halving was decreased in half, to 25 LTC per block.
LTC inflation decreases with time, and with halving occurring every four years, the last LTC will be issued around the year 2142. The current block reward is 12,5 LTC, and the next Litecoin halving will take place around July 2023, decreasing it even more to 6,25 LTC for each block.
First Halving: The first Litecoin halving occurred in August 2015, with miners receiving 50 LTC as a reward. The payout was decreased to 25 LTC after the halving, and market forces caused the price to fall to around $4.
Second Halving: In August 2019, Litecoin saw its second halving, four years after the first. According to the design, the incentive for miners has been reduced by 50%, from 25 LTC to 12.5 LTC. LTC plummeted from around $140 in July 2019 to $50 by November 2019 and $40 by January 2020. Then, in May 2021, it reached its all-time high of $412.96.
Next Halving: The next Litecoin halving is scheduled for July 23, 2023, at 18:16 UTC, with a block height of 2,520,000. The total number of blocks that exist before a given block on the blockchain is known as its block height. As a result, the next Litecoin halving will take place at the 2,520,000 block - over 2 million blocks have been created on the Litecoin network.
However, unlike Bitcoin, the price of LTC has not been affected by previous Litecoin halvings. In the case of LTC, the halving is more likely to be priced before the event occurs. There is no evidence that the halving increased the price of Litecoin.
On the pricing of Litecoin, history reveals that after each halving, the cryptocurrency's market price drops. This could be due to panic or uncertainty among holders. However, after two years, each Litecoin halving since 2015 has resulted in a new all-time high. The prices fell after the incident in both 2015 and 2019 considering which one could argue that because both events occurred when the market was in a downward trend, they couldn't have had the same impact as the Bitcoin halvings.
However, this further adds to the argument that Litecoin's success is more likely to be explained by the ascent of Bitcoin, which carried the cryptocurrency market to a greater level. Nonetheless, the Litecoin halving is an occasion to remember because LTC will get scarcer with each subsequent step.
The incentive for Litecoin miners will be reduced by half, from 12.5 LTC to 6.25 LTC. This will also be reflected in the LTC price they receive. Assuming the current LTC price benchmark of $80 maintains consistent until the next halving, miners will receive $500 instead of $1,000 as a reward at 12.5 LTC.
Miners that want to be effective at cost management must exercise caution in how they deploy their devices as the reward decreases and the difficulty of validating a transaction increases.
Supply and demand are the two most essential factors influencing the Litecoin price. Keep in mind that more than 87% of all LTC has previously been mined. At this point, it is more vital to driving demand than scarcity in order to observe a price increase.
Halving is an important part of how Litecoin works. It is used to control demand and supply, as well as to decide miners' pay. In essence, following each halving event, miners receive half of their previous return.
The price of Litecoin and other cryptocurrencies that go through the same process as Bitcoin is likewise affected by halving. In order to estimate alternative outcomes after each halving, it is necessary to examine elements outside of the Litecoin ecosystem.
The third halving of Litecoin is scheduled for August 2023, with miners' earnings dropping by another 50% to 6.25 LTC. The crypto community's general assumption is that an asset's price will climb after halving - yet this is somewhat debatable.
According to reports, if this trend continues, the LTC surge might halt as soon as 92 days before the halving, which would be in May 2023.
The third halving is expected to occur in August 2023. This event will occur every four years for the rest of our lives.