Litecoin or Bitcoin?

With Litecoin’s first ever halving soon to be upon us we are already beginning  to see the affects.  So, what a better time to discuss exactly that. Sit back  because this going to get interesting.

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The Halving Explained

By no means is Litecoin the first coin to be halved. In fact,  back on November 28th, 2012  Bitcoin underwent its first-ever halving. So we alredy have a good idea of  what to expect  just by looking at history. Okay, so what do we actually mean  when we refer to a coin as “halving?”  Well,  it’s pretty simple: it means the mining reward halves.  In the case of Litecoin, miners are currently awarded 50 new coins for  solving blocks.  After halving, miners will be rewarded 25 Litecoins per block.  This process only takes place once half of all the coins are in existence.

And then another half, and another half, and so on and so forth.  The halving process doesn’t just happen once. For both  Bitcoin and Litecoin this is set to happen  every four years as is stated in their code. But for other coins,  this may vary. While nobody really knows for sure  when the last few coins will be mined, we expected to it be around  2142 for Litecoin and 2140 for Bitcoin.  based on the reward over this time. Of course by then,  only 0.00000672 Litecoins will be mined each day.  Until eventually all 84 million Litecoins are in existence.

Clearly, this is a positive thing as inflation slows each time,  less coins for the market, and therefore everyone’s coins rise in price  as a result. So why does Litecoin actually look like  this before the halving? Well, the most likely answer is that people are  expecting the price to rise  so in anticipation they are buying up these “cheap” undervalued coins–in their mind–  while they are at this current price. We should also point out that crypto  currency has come a long way since 2012 when Bitcoin underwent  its first halving.

Thus in turn, this sudden rush and  demand of people wanting to buy-in  has, in turn, pushed the price of Litecoin higher.  There is however, one more part to the equation:  the miners.  As we know miners invest in  specialized equipment in order to actually mine the coins.  Just like any other business, they need to make a profit.  Otherwise it’s just not worth them doing so. And now that income is about to be  cut in half  a lot of their ineffective equipment is about to be shut off.  That is, unless the market price of the coins rise to a point where they can  continue to make a profit.

By the way, the miners face one of two options. Those being:  the price rises and everything stays pretty much the same as it is now.  However if it doesn’t, a lot of miners will no longer be able to operate.  In turn, the network hash rate will drop as they begin to shut off.  Leaving only mining farms in places such as China  working. Resulting in a less distributed network.  If a network hash rate drops low enough, The mining difficulty will automatically  adjust itself.  Meaning those who stopped, may be able to start mining again  at a profit. While we do not know how high the price of go during this period,  we do expect that after all is said and done, the price will settle higher  than it was in the few months leading up to the halving.

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Litecoin or Bitcoin?