coinculture.com
In 2011, Litecoin creator Charlie Lee discovered the uniqueness of Bitcoin when he read an article about its exclusive use as a payment method on Silk Road, a marketplace for illegal drugs. This achievement was beyond what traditional payment methods could achieve at the time.
Impressed by Bitcoin, he started his project and cloned Satoshi Nakamoto’s code, incorporating many key features of the original blockchain, including periodic “halvings.” These halvings, which reduce the pace of new cryptocurrency issuance by 50% every four years, have become an essential part of Litecoin’s blockchain since its inception.
The third halving in Litecoin’s history is expected to occur around 15:09 UTC (11:09 am ET) on Wednesday, according to litecoinblockhalf.com. During a Twitter livestream, Lee explained that these disinflationary halvings help drive mass adoption while maintaining network security.
Like Bitcoin, Litecoin uses a “proof-of-work” security mechanism that relies on miners who use computational resources to process transactions and secure the network. Miners receive rewards through transaction fees and a predetermined subsidy, which halves approximately every four years (every 840,000 transaction blocks in the case of Litecoin).
The ultimate goal is to shift miners’ incentives from subsidies to transaction fees over time, allowing the network to be sustained by transaction fees. Satoshi chose the four-year block-halving cycle to provide sufficient time for the network to grow, enabling fees to take over as the primary source of miner compensation eventually.
The challenge is to keep miners incentivised while gradually reducing their payouts. As fewer new cryptocurrency units are created, the price of the cryptocurrency may experience a boost due to a slower increase in supply, driven by the principle of supply and demand.
Established in 2009, Bitcoin remains the largest cryptocurrency and is often seen as a barometer for the digital asset markets. Crypto analysts closely monitor Bitcoin’s quadrennial halvings, which typically lead to bull markets starting a year before the halving and extreme sell-offs two years afterwards. The same trajectory is expected for Bitcoin’s next halving, projected to take place in 2024, as evidenced by its 77% year-to-date price increase following a 64% sell-off the previous year.
Litecoin’s price has seen a 33% increase in 2023, but analysts aren’t predicting a significant uptick related to this week’s halving. Price actions often follow a self-fulfilling prophecy, where people anticipate a price increase before or after the halving, leading to buying activity. However, the market’s response to the halving will ultimately determine its impact on the price of both Bitcoin and Litecoin.