Here is a question: "Does the scarcity of the digital asset make it more valuable or is it the utility of a token?"

The Litecoin blockchain halving was succesful at the block height of  1,680,000 at 10:16 UTC (Monday August 5, 2019). The halving reduces the  Litecoin reward in half, from 25 LTC to 12.5 LTC per block mined. There  was no immediate dramatic rise in the price of LTC, but it showed plenty  of optimism in the market. Litecoin, like Bitcoin, has a limited supply  which caps at 84 million LTC. The halving is an event that occurs on  the Litecoin network every 840,000 blocks or approximately every 4  years. As the name implies, it is a 50% reduction of the miner's rewards for every block they validate on the network. This is part of the  Litecoin consensus mechanism called PoW (Proof-of-Work) which is also  used in the Bitcoin blockchain.

The  halving creates digital scarcity, and to some analysts this means the  digital asset becomes more valuable. Whether it is due to the lower  supply of LTC or the hype surrounding the event, prices have not  increased at the levels some may have expected. Perhaps this is due to  the halving being priced in with investors already having accumulated  the digital asset ahead of time. If these transactions were done over  the counter style, then it will not really affect the market prices on digital exchanges. Some analysts believe there should be more to expect  in terms of the utility of the token rather than just anticipate the  digital scarcity will increase prices. Perhaps the law of supply and  demand doesn't exactly equate to expectations in a volatile  cryptocurrency market.

LTC  is used mainly in making direct P2P online electronic payments. It  functions like any other cryptocurrency, where the transactions are made  transparent and immutable, allowing for greater accountability. In  terms of speed, it isn't any faster than traditional payment systems  like VISA or Mastercard. However, LTC can instantly transfer value  across any border because of its P2P feature. The transactions also have  lower fees than money transfer agents or bank charges. When you don't  have intermediaries in the payment network, you can pretty much transfer  value easily in a frictionless manner. All that is needed is an  exchange that supports LTC that converts the cryptocurrency to fiat.

The  problem is that regulatory clarity has not fully accepted  cryptocurrency like LTC. Although it is being used by some people to  make payments or transfer value, it is not happening on a large scale  yet. Not all exchanges are available in all countries that support a  fiat to LTC pairing. If any exchange has a Litecoin pairing then it  would be easier to transact. This would be like how using the USD  becomes viable because of currency exchanges that support it. Therefore  it makes it accessible to everyone and it is the legal medium for  exchange. LTC on the other hand is not readily available to be used to  purchase items, unless the business supports it. So far there are very  few establishments that will accept LTC as a payment for let us say a  cup of coffee or breakfast sandwich. How easy it is to use fiat to pay  for those items.

There  is more concern among the mining community though. Since block rewards  have been cut in half, operations will be affected due to decrease in  profitability among miners. It would be fine if the price of LTC greatly  increases, but if not then the miners will have to absorb net losses.  The issue here is related to the electricity costs to cover producing  LTC from mining blocks. What this can result to is an exit among miners  who cannot absorb the costs, while established miners will continue  mining and making profit. The bigger mining pools can survive because  they have the resources to do so. The hash rate of the overall network  could also decrease, making the difficulty target easier and block  mining just as profitable for the miners who remain in the game.

Let's  look at how blocks are mined on Litecoin's blockchain. The block  production time, on average, is 1 block every 2.5 minutes, which is 576  blocks are produced every 24 hours. Due to the halving, each block mined  now rewards miners 12.5 LTC. That means that every day or every 24 hour  period 7,200 LTC is created. This will go on for the next 840,000  blocks which will be the next halving. With a total supply cap of 84  million LTC, the halving leads to less and less rewards for miners. The  incentive here is to produce blocks, but with less rewards there may be  less miners providing hash power to the network. The idea is that demand  will exceed supply, so miners will still be incentivized to validate  and mine blocks so the value of LTC will increase. The point here is  that the lower amount of LTC is not going to stop miners if the price of  LTC increases due to the demand. Fees should also be reasonable enough  that people will use LTC to make payments. So far it seems current fees  are low enough in terms of LTC/KB with 3 priority levels (the highest  level costing more than the rest). This is what the Litecoin team refers  to as "near-zero cost payments" i.e. cheap fees.

The  only thing that has not been determined is whether LTC will continue.  The LTC is only valuable if it is being used, but if it is just  speculation fueling the prices then there is really no utility behind  it. The developments in Litecoin need to catch up to the demand which is  what is creating it in the first place. There has been encouraging news  about new ways to bring privacy to transactions on the Litecoin  blockchain. Developers will need to make sure that the value of LTC  doesn't rely on pure hype and speculation alone. Instead it must  demonstrate that the technology is capable of providing the features of a  decentralized instant electronic payment system for the world.

First published on the CoinGraphIQ blog by Vtabora (Vince Tabora)

The Litecoin  blockchain halving was succesful at the block height of 1,680,000 at  10:16 UTC (Monday August 5, 2019). The halving reduces the Litecoin reward in half, from 25 LTC to 12.5 LTC per block mined. There was no immediate dramatic rise in the price of LTC, but it showed plenty of optimism in the…

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