Cryptocurrency halving is a two-fold reduction in the reward for mining a particular coin. The halving procedure is provided for in many cryptocurrencies mined using the Proof-of-Work protocol. It is an important component of the “life cycle” of various digital assets used in blockchain networks.
Halving in cryptocurrency: what is it in simple words
As we said above, halving of a cryptocurrency is called a periodic decrease in the mining reward by 2 times. As you know, the work of miners is to generate new blocks of transactions. For each block generated, a “miner” or, most often, a group of “miners” united in pools receive a reward in the form of a certain amount of cryptocurrency that “circulates” in a particular blockchain network.
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In many networks in which currencies are mined using the Proof-of-Work protocol, this reward decreases with a certain frequency. As a rule, a 2-fold reduction in payments occurs every 4 years with minor deviations up or down.
We can say that the history of halving dates back to the same time as Bitcoin. When Satoshi Nakamoto launched the first cryptocurrency in 2009, he immediately laid down 2 fundamental conditions in its protocol:
- The emission of Bitcoins is limited. The total volume of coins should be 21 million BTC.
- Every 210,000 blocks the reward for miners is reduced by exactly 50%. Taking into account the mining time of one block (at the time of writing the article on 10/22/2019, it is 8.5 minutes), halving is carried out approximately once every 4 years, as we wrote about above.
That is, at the dawn of mining, “miners” received 50 BTC for a new network element. In 2012, the award was cut by 50% for the first time. From 2012 to 2016, miners received 25 Bitcoins per block. In 2016, another halving happened. The reward has decreased to 12.5 BTC. This is how she is to this day. The next reduction is planned for May 2020.
The halving principle was adopted by Charlie Lee, the creator of the popular cryptocurrency Litecoin. In this network, the award is also cut in half every 4 years. At the time of this writing, a decrease in payments has already been announced in other popular networks, where this was not initially provided (for example, in Zcash). Ltc to btc has become very popular pair.
People who are poorly versed in the cryptocurrency field may think: why a reduction in reward is prescribed in blockchain networks, this is unfair. In fact, halving plays an important role in the development of a particular coin. We will talk about this in more detail later.
Why is cryptocurrency halving carried out?
Basically, the 50% decrease in payments for the production of a block occurs for two reasons:
- Support for the relevance of mining.
- Emission control.
The only representative has already gone through the next scheduled halving. On August 5, 2019, the block reward was reduced to 12.5 LTC. Halving had a positive effect, but unfortunately it was short-lived. Back in June 2019, interest in LTC was quite high (natural demand before the reduction in payments). During this period, the coin reached a local peak – almost $ 144. But then the decline began.
On the day of the halving, the price jumped and Litecoin was trading at 103 USD. However, by the end of August, quotations fell below $ 80. At the time of this writing, the LTC rate is 54.48 USD. According to Charles Lee, the halving of Litecoin did not give a price increase, since due to the decrease in payments from the network, a part of the miners “split off” and decided to switch to other assets. Be that as it may, the founder of Litecoin will continue to make every effort to make his brainchild reach more significant heights.
The next halving of Litecoin is expected approximately on August 03, 2023, where 2,520,000 blocks will be solved and 73.5 million LTC will be mined.