Just as Bitcoin’s block reward halved in the past, Litecoin will undergo the same same process on Tuesday, August 25th. In anticipation of the halving, the Litecoin Association says that it is a milestone in the cryptocurrency’s 4-year history.
The association also released a video that elaborates the entire process of Litecoin’s halving, informing that after the halving, Litecoin will reward miners with 25 coins rather than 50 coins per block. The video also explains that the halving process happens every four years for both Litecoin and Bitcoin, as dictated by their respective protocols. This halving is the first for Litecoin, whose protocol is set to halve the block reward every 840000 blocks.
Impact of Halving on Litecoin’s Exchange Rate
As August 25 approaches, August, miners have started showing concern over the halving. They are worried about how the diminished block reward will affect Litecoin’s price and mining profitability. However, the Litecoin Association does not feel worried about the Litecoin’s price, as it believes the price is not paramount to achieving the cryptocurrency’s goal. Furthermore, the released video shows that as inflation slows, there are fewer coins for the market and everyone’s price rises rather than falls. However, this issue cannot be overlooked, as Litecoin miners’ concerns are similar to those of Bitcoin miners when Bitcoin underwent its first halving, with the lower block reward affecting the returns on investment for mining rigs. Likewise, Litecoin miners will still have to remake the money they spent on their hardware before they can make profits, which may become more difficult when their block reward incomes are cut in half.
Will Litecoin Mining Profitability Fall after the Halving?
The Litecoin Association understands the questions and concerns miners have and attempted to address them by releasing an educative video, which explains that miners who invested in hardware can expect their income to fall by 50 percent. This could mean that continuing to mine may no longer be profitable after miners add in the cost of electricity.
The Association says that, in such a situation, miners face two options. On one hand, the decreased supply growth may raise the Litecoin price and miners will continue to operate as usual. on the other hand, if the price doesn’t rise, miners will no longer be able to operate. If this occurs, the network hash rate will drop as mining declines, resulting in a more centralized network. If the network hash rate drops low enough, the mining difficulty will automatically adjust itself. Then, the miners who had to stop mining will be able to resume.
However, there is no way to actually predict what will happen to the price. Though Litecoin has been the most successful altcoin, based on its adoption and acceptance, there is still a concern about the future of the cryptocurrency when it comes to mining, as things have moved passed GPU mining.
Trouble at the Front of the Litecoin Mining Hardware
Now, Litecoin mining is done with ASIC machines. However, there is less activity in the new ASIC mining hardware. Additionally, the first generations of miners are already getting obsolete, which leaves only a few miners still mining Litecoin. ASIC manufacturers are cancelling the development of new mining hardware and the Litecoin exchange rate is going down. At the current exchange rates, and if miners do not have more up to date hardware or free electricity, there is not much point to continuing mining with old hardware.
Thus, the worry goes beyond the halving of Litecoin’s block reward, as solving the mining profitability problem is complex. If Litecoin mining remains unprofitable for long, a lot of miners will shut down or move to regions with low power tariffs — much like what is happening to Bitcoin mining. This will also mean a rough deal for retail miners, as only big fish would be able to survive. Large data centers will crop up to maintain profitability. If that doesn’t work, then Litecoin just may be doomed.
What do you think will happen to Litecoin miners after the block reward halving? Let us know in the comments below!