Litecoin Miners Left Out Of Pocket

Changes to the Litecoin infrastructure mean that Litecoin miners could potentially be left out of pocket, after Litecoin halved it’s miners rewards. This is as a result of Litecoin reaching a specific block within it’s blockchain that kick starts a series of events, the consequence of which is that the mining reward is eventually reduced. This ‘trigger block’ is situated at height 1,680,000. According to Coindesk:

“The litecoin blockchain reached the trigger block height of 1,680,000 at 10:16 UTC on Monday, according to the litecoin explorer from mining pool operator BTC.com. The event marks a major threshold for miners, as the litecoin network is designed to reduce its mining rewards by half every 840,000 blocks (roughly every four years). For this halving, the mining reward for every block has been reduced from the previous 25 LTC to 12.5 LTC.”

To most people, this event does not have any significant consequences, no this will not reduce the value of your own Litecoin significantly and no, it doesn’t mean that your own Litecoin holdings will be halved, it simply means that Litecoin mining has suddenly just become half as profitable, as now, miners need to put in twice as many resources to reap the same rewards. Yes, this is bad news for Litecoin miners, but let's just remember that this sort of thing does happen all the time. Investment is volatile, but so is mining.

One big impact this could have is on interest in Litecoin mining. With reward values down, new miners are far less likely to want to get involved given the sheer cost of Litecoin and cryptocurrency mining in the first place. As pointed out by Coindesk:

“The halving will likely have an affect on the interest in mining participation, as several widely used litecoin mining devices will now have a tough time generating enough LTC to offset electricity costs. According to a miner profit index from f2pool, one of the world’s largest mining pools by hash rate, the three most profitable LTC miners made by InnoSilicon and FusionSilicon X6 had a profit margin of between 55 and 60 percent before Aug. 5. Other older models such as Bitmain’s AntMiner L3, however, already had a profitability that was less than 50 percent based on an electricity cost of $0.04 per kWh and LTC’s price before the halving.”

With electricity prices on the up and mining rewards down, the mining industry is becoming less and less profitable by the day. Now, in order to meet energy demands, huge amounts of resources are needed in order to be able to mine enough cryptocurrency to make a profit. Thankfully though, as the value of crypto rises, these profits begin to rise too.

In short, this downtime should only be temporary.