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Tag #Litecoin

Litecoin halvening – what next?

Reduced block rewards for Litecoin miners raise questions for hashrate and price – with implications for Bitcoin’s own halvening next year.

 

Litecoin hit a major milestone earlier this week, with its third halving. Block rewards fell from 25 LTC to 12.5 LTC. Like Bitcoin, Litecoin halvings happen every four years, so the next one will take place in 2023. 

 

Litecoin is worth watching because it often signals what Bitcoin will do. It’s not exactly the same as Bitcoin, of course. But Litecoin is a large, well-established proof-of-work network, with a large trading community and high liquidity. So it’s a reasonable way of gauging Bitcoin’s future moves.

 

Litecoin has a total supply of 84 million LTC – four times the supply of Bitcoin. 63 million, or around three-quarters of these, have now been mined. With 12.5 new LTC being created every 2.5 minutes, that’s 2.6 million new LTC per year, or a little over 4%.

 

Litecoin and Bitcoin

Since block rewards are cut in half, it’s reasonable to expect some smaller miners to turn off their rigs – it becomes uneconomical to mine unless the price rises to compensate for the reduced supply. Just after the halving, Litecoin creator Charlie Lee tweeted,’Since the halving, 12 blocks have been found in 17 minutes. Seems like miners have not shut off their hashrate at all. Instead, we are mining at a rate of a block every 1.4 minutes on average, which is much faster than the expected 2.5 minutes. Litecoin network is healthy!’

 

It’s still early days, but can we gain a picture of what’s happening right now? And whether the same might occur for Bitcoin at its own Halvening in May 2020?

 

Firstly, price spiked around the halving itself, before dropping sharply. Overall, though, LTC is up over 200% in USD this year, even if it’s down in BTC terms.

 

Hashrate does seem to be holding steady. It’s still a little early to know for sure, but it appears that most miners have factored in the change. No doubt some will go offline in the coming weeks, but for now, little seems to have changed.

 

All of this suggests that miners and traders have been planning well in advance. The reduction in block rewards was priced in over a period of around 6 months. 

 

If we see the same for Bitcoin – if – then that looks like a major Christmas rally could be on the cards, and the network will remain strong post-halving.

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Watch Litecoin’s halvening

What happens with LTC is often a signal for what happens with BTC later.

 

Litecoin has gained a reputation as Bitcoin’s sandbox. As silver to bitcoin’s digital gold, Litecoin isn’t technically incredibly sophisticated, but it is more agile and faster moving. While it can take months or years to agree and implement changes on Bitcoin, Litecoin can do the same far more quickly. Litecoin offered SegWit long before Bitcoin. And Litecoin’s price movements often signal what bitcoin will do too. LTC bottomed and bounced before BTC, for example.

 

The Halvening

Next month, Litecoin’s block rewards will be cut from 25 to 12.5 LTC. This Litecoin Halvening will take place nine months before Bitcoin’s own Halvening event.

 

Halvenings are keenly anticipated in the crypto world, because the supply reduction means more net demand on the market – and therefore higher prices in the long run. In the short term, the markets can get very choppy as traders try to anticipate what the market will do.

 

Last Bitcoin halving event, in 2016, took place in the middle of a massive bull run. The Halvening itself had little immediate effect on price, but surely contributed to the surge to $20k as there was less BTC for miners to sell. This time, the crypto community expect the same: an epic bull run, driven not only by greater awareness from institutions and the public, but by the simple economic impact of reduced supply.

 

Caveat emptor

But Buyer Beware: in the medium-term, that reduction of supply may have less impact on price this time. Bitcoin could be trading above $10k precisely because speculators anticipate the effect of the halving in nine months.

 

For Litecoin – which has seen 500% growth from the bottom in December – Charlie ‘Satoshi Lite’ Lee says it’s already priced in. He has warned that many Litecoin miners may shut down – and that there could be a savage crash when the bubble pops, as there was last time.

 

We have to ask whether Litecoin will offer a signpost for Bitcoin’s future, as it so often has before. So: watch Litecoin’s Halvening. Observe what the market does and factor that into your bitcoin trading strategy.

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Introduction to Litecoin and trading LTC

LTC is silver to bitcoin’s gold. In other words, if you think BTC is volatile…

 

Litecoin was created in 2011 as ‘digital silver to bitcoin’s gold’. It’s faster than bitcoin, with 2.5 minute blocks, and it’s easier to mine. In the early days, that made a bigger difference, though now you’ll still need Scrypt ASICs to do the job properly. If you’ve got into bitcoin and are wondering what else is around, you could do worse than look at LTC.

 

What’s Litecoin good for?

The fact that Litecoin has shorter block times, and the fact that there’s more space in blocks, means that it’s excellent for small, fast, low-cost transfers. If you need to move small amounts of cash between exchanges, or different wallets or other services (like cloud mining services, for example), it’s a great option.

 

More broadly, Litecoin tends to implement features faster than Bitcoin (which is not surprising, since Bitcoin is glacially slow). Litecoin’s team implemented SegWit before Bitcoin, giving it a reputation at Bitcoin’s sandbox.

 

Trading LTC

Like physical silver compared to gold, Litecoin is incredibly volatile. As we noted on Saturday, it tends to move in step with BTC, but rises in BTC terms as BTC rises against the dollar, and falls against BTC when BTC drops in USD price. This gives an exaggerated effect to price swings. Look at where BTC and LTC bottomed: $3,100 and $22 respectively. And while BTC has almost doubled in price since then, LTC has almost quadrupled.

 

This makes LTC very risky to trade. It’s available on most large fiat exchanges now, including Bitstamp and Coinbase, making it easy to access. And it’s supported with many different wallets, including mobile ones, so it’s easy to store. But trade carefully: LTC can be hugely rewarding if you buy at the right time, but it can lose a large proportion of its value in a heartbeat if you get it wrong.

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(Don’t) Show me the money! LTC looks to Beam for confidential txs

The two teams are working together to explore whether MimbleWimble is the right fit for Litecoin.

 

Here at Inferno we’ve made no secret about our interest in MimbleWimble, the exciting new blockchain protocol that manages to combine both privacy and scalability thanks to its approach of avoiding storing any sensitive information on the blockchain at all. Earlier this week, we looked at Beam, an Israeli project that implements MW in a standalone blockchain.

 

As it happens, Charlie Lee, known as ‘Satoshi Lite’ recently expressed his intention to improve the privacy and fungibility of Litecoin by adding confidential transactions:

Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy.
I am now focused on making Litecoin more fungible by adding Confidential Transactions.

 

He stated at the time that his dev team was exploring MimbleWimble, and now a new development has arisen. Team Litecoin and Team Beam are working together to figure out whether Litecoin should use MW to improve Litecoin’s privacy – essentially by removing the transaction path, amounts and addresses from the blockchain where confidentiality is desired.

 

Beam recently posted a Medium blog to this effect, writing, ‘We have started exploration towards adding privacy and fungibility to Litecoin by allowing on-chain conversion of regular LTC into a Mimblewimble variant of LTC and vice versa. Upon such conversion, it will be possible to transact with Mimblewimble LTC in complete confidentiality.’

 

This would be a fantastic development, because we believe that MimbleWimble is hands down the best privacy solution out there. But it’s not for the faint-hearted, and Charlie Lee knows there are challenges involved. On a technical level, it would involve moving coins from the Litecoin main chain into a MW sidechain, or another similar solution. And, when you’re dealing with a $2 billion network, there’s little room for error. Plus the quirks of MW mean that you can’t just send money to an address; both sender and recipient have to be online at some point to arrange the terms of the transaction, which may cause some inconvenience – especially where cold storage is concerned.

 

Nonetheless, it’s a great move and shows real vision on the part of Litecoin and a commitment not to stand still. The market responded positively to the news, with LTC rising 10%.

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