Litecoin is one of the most successful altcoins. It is a fork of Bitcoin that operates almost similar to the top digital currency. For that is known as the “digital silver.” This is about Bitcoin working as digital gold.
Both digital currencies come with limited supply. Litecoin comes with a maximum supply cap of 84 million. That is the highest number of Litecoin that will ever be available on the market. Once it reaches this number, no fresh Litecoin will ever be distributed.
Litecoin is decentralized such that it has no controlling authority. It means nobody will ever decide to change the numbers once it is complete. This is unlike the fiat currency controlled by the government. The government can increase or decrease supply, depending on inflation.
At the time of writing, there are 66,003,758 coins in supply. It means there are 17,996,242 Litecoins left for mining. Even though it’s a little hard knowing when the last coin will be out, some data places it at 2042. After then, the system will rely on the available currencies for transactions and transaction verification.
The process of creating new coins is called mining. The miners use special machines to create new coins. Earlier, it was easy to mine Litecoin using the common CPUs and GPUs. Still, as time goes by, the competition became more robust, leading to the need for more processing power.
Mining involves solving different algorithms. The right answer creates a hash, which becomes a new addition in the blockchain. All the miners in the system must verify a hash before it becomes part of the block.
The verification helps in the security of the blockchain. It helps avoid the possibility of double payments using the same details. For that, miners are not only crucial for Litecoin creation but also security.
The need for more power led to the creation of special machines that are energy-intensive to operate. For that, special mining centers have been coming up in recent years. The mining companies can afford the devices and pay for power. The companies are also mostly located in countries with cheaper electricity like China.
The miners who successfully create the blocks get rewards in the form of Litecoin. The rewards depend on the period as it reduces by half after every halving.
Which brings us to the next concept on Litecoin halving;
Litecoin halving is the case where the rewards for successful mining reduces by half. The halving occurs after every 840,000 blocks. This happens to be after every four years.
Litecoin has undergone two halvings since inception. The first one was in 2015 when the coin rewards changed from 50LTC to 25 LTC. After that, the next halving was in 2019 when the rewards changed from 25LTC to the current 12.5 LTC.
Halving is also essential to the system as it helps determine supply. The value of rewards going down means most miners would lose interest. The reduction in supply with similar demand leads to a price increase. For that, most of the halving comes with a value increase.
Halving has become one of the most critical events in the crypto world. The event creates a lot of buzz on the coin even before it happens. That is why, in most cases, the price of the currency would go up even before the event.
The other concern is what will happen when the rewards for mining reaches zero. The rewards are likely to hit this number before the coins are all mined. Yet, the miners are so crucial to the community for security. The system must find a way to keep motivating the miners.
The best way to go about would be to increase transaction costs. Litecoin is currently one of the most affordable virtual currencies to use. It comes with reasonable prices making it an option for most.
The need for miner motivation will lead to increased transaction costs. This should not be a worry. Most of the traders understand the need for security. For that, they will be willing to pay the more for miners to operate. Still, the costs will remain industry standard. Other coins, like Bitcoin, also has the same phenomenon.
As a product, Litecoin depends on the market forces to determine its worth. It is only as worth as what the market deems it. The products derive the value from demand and supply. Any good that is readily and cheaply available becomes less valuable.
So far, Litecoin has successfully kept its worth due to the restricted supply. The limited supply means there are no risks of oversupply in the market.
Litecoin also draws its worth from the use cases. The coin has grown to be one of the most useful in the crypto world. It works perfectly as a transfer of value. It also comes with the ease of use that has seen most people prefer it over other coins.
Litecoin also comes with some impressive transaction speeds. It is four times the speed of Bitcoin,
Like with the fiat currency, the most reliable store of value become the currency of choice. Currently, the US dollar has been the most reliable currency. The USD acts as the world’s top reserve currency. Currencies that lose value like the Zimbabwean dollars sees the country consider using the dollar.
The recent fiat currency slowdown has seen the cryptocurrency come into contention as the ideal store of value. The Coronavirus pandemic has hit the traditional stocks market so hard, with most currencies losing value. The same period has seen cryptocurrencies improve.
Litecoin will keep increasing in importance as the use cases increase.
Litecoin draws it’s with from the limited supply. It has a maximum supply of 84 million. After which no new coin will ever come into existence. There are currently 17,996242 left for mining.
This follows the already mined coins being 66003758. The last coin will be mined in 2042.
The coin’s limited supply is its principal value drawing factor. The limited supply means there is no risk of oversupply. For that, miners keep playing a role in the system.