Acclamations were sung when Charlie Lee, the creator of Litecoin, meticulously replicated the key features of Bitcoin’s foundational code for his novel project. Litecoin, thus, shares many of the unique characteristics of its predecessor, including the intriguing implementation of “halvings” – a 50% culling in the new issuance rate of the cryptocurrency that occurs every four years.
These periodic modifications are intrinsic to Litecoin’s programming and are touted as facilitating mass adoption without compromising network security. This manifestation of disinflationary principles ensures that the miners, who invest computational resources to validate transactions and fortify the network, remain motivated.
Over the years, it is envisioned that the network will continue to nurture itself on transaction fees alone, gradually phasing out the miners’ subsidies. “Satoshi opted for a four-year block halving to allow the network to expand sufficiently, paving the way for transaction fees to eventually substitute for the subsidies,” Lee stated.
As interesting as this turnaround in the method of incentivization for miners is the post-halving projection for Litecoin’s price. Quantitatively, with the supply growth curtailed and approximated demand as constant, logically, the price should elevate as per the laws of economics.
Renowned as the oldest and largest digital currency, Bitcoin is perceived as a trendsetter in the cryptocurrency sphere. Its own quadrennial halving has been consciously observed by crypto traders, who have picked up a rhythm to its market price waveform that typically peaks just before a halving and plunges significantly after two years.
However, this anticipated uplift in Litecoin’s price is not an absolute certainty. As Lee aptly pointed out, “It’s a self-fulfilling prophecy. The price soaring due to halving is driven by the buying spree of people expecting the price to rocket.” The impact of halving on the price is essentially dependent on how effectively the market adapts to the change.
On a concluding note, Litecoin is up to 33% in 2023, preparing for its third halving event. While no drastic price swell is expected, the event could potentially serve as a teaching moment on blockchain dynamics as Bitcoin inches towards its next halving milestone in 2024.
Source: Coindesk
