Litecoin, which was once known as "Digital Silver", is about to undergo a four-year "halving", when the block reward of Litecoin will drop from 12.5 LTC to 6.25 LTC, thereby reducing the issuance rate of Litecoin by 50%. According to analysts, this situation will help increase the "hard currency" mechanism of cryptocurrency prices.

Charlie Lee, the founder of Litecoin, read an article in 2011 and learned how Bitcoin became the only payment method on the dark web Silk Road, which was unattainable by any traditional payment method at the time.

Charlie Lee was so impressed that when he decided to launch Litecoin, he imitated the code of Bitcoin inventor Satoshi Nakamoto and included many key features of the original blockchain, one of which was the "halving mechanism", which slowed down the pace of new cryptocurrency issuance by half approximately every four years.

Litecoin founder: Coin halving will help facilitate mass adoption

According to the litecoinblockhalf.com website, the Litecoin halving is scheduled to occur at around 00:34 on July 3rd (Taiwan time), which is only about 8 hours away from now. This is also the third halving of the Litecoin blockchain since it went online in 2011.

Charlie Lee explained in a Twitter livestream last week that these transaction halvings will help enable mass adoption without sacrificing network security.

Litecoin, like Bitcoin, uses the Proof of Work (PoW) consensus mechanism, which allows miners to receive rewards for using computing resources to process transactions and protect network security. These rewards are halved every four years, which means that in the Litecoin blockchain, this happens once every 840,000 transactions. The average time to generate each block is about 2.5 minutes.

The ultimate goal is to allow these miners to no longer rely on mining subsidies, but to obtain rewards through transaction fees. Charlie Lee said:

Satoshi chose to halve the block reward every four years to give the network enough time to grow and eventually run on fees. The idea is that there will be enough usage on the chain to generate enough fees.  These fees are enough to pay miners to continue to help secure the network.

But for now, it is important to maintain the rewards for miners and gradually reduce the payments. Charlie Lee said that as the number of new coins generated decreases, the price will increase. "The price is driven by supply and demand. If the supply side is halved and the demand remains the same, then the price should rise."

What impact will halving have on the market outlook?

Taking Bitcoin as an example, analysts and traders have found that Bitcoin's bull market usually begins a year before the reward halving, peaks two years later, and then there is a crazy sell-off.

This is also the current trend, with Bitcoin's next block reward halving scheduled to occur in 2024. Bitcoin prices have risen 77% this year, reversing last year's 64% sell-off.

On the other hand, although the price of Litecoin has risen by 33% this year, cryptocurrency analysts do not expect the halving to lead to a sharp rise in prices. Charlie Lee said:

Like I said before, a lot of price action is self-fulfilling expectations. Just because people think the halving will cause prices to go up, they buy before the halving, or just after the halving.

For Bitcoin and Litecoin, sometimes the price goes up before the halving, sometimes it goes up after the halving, and sometimes it doesn’t actually have much of an impact on the price of the coin. It all depends on how the market reacts to the halving.

In any case, many industry insiders believe that Litecoin’s halving may provide a reference for Bitcoin’s price trend for the next halving.