We are only less than 130 days away from the next LTC halving, which is scheduled for August 3, 2023.
It has been another four years since Litecoin’s last halving in the blink of an eye. As the LTC halving approaches, Litecoin miners, who have maintained the daily operation of the network, are accelerating their deployment of new mining machines. The massive influx of new mining rigs has boosted the Litecoin hashrate, which reached a historical high of 886.17 TH/s on February 15. About 160 days later, the LTC reward will decrease from 12.5 LTC to 6.25 LTC per block, making LTC mining an investment opportunity that cannot be missed.
Source: https://www.coinwarz.com/mining/litecoin/hashrate-chart
Litecoin miners keep a close eye on not only LTC price swings but also the market performance of DOGE. Under today’s merged mining model, miners earn both LTC and DOGE on a daily basis. As the DOGE price soared in recent years, the additional DOGE reward has become even more appealing than the original LTC reward, evolving into a major source of income for LTC miners. However, with the halving event fast approaching, the daily LTC output will soon be reduced, which has raised concerns among many LTC miners about whether the DOGE reward will also go down.
For miners familiar with LTC & DOGE merged mining, it’s common knowledge that the block hash identified by LTC mining machines on the parent chain (Litecoin) can be utilized to validate blocks on the auxiliary chain (Dogecoin) through the Auxiliary Proof of Work (AuxPoW). Simply put, in merged mining, the auxiliary chain recognizes the work performed on the parent chain as its own, thereby enabling miners to receive rewards from both chains using the same hashing power.
Let’s go one step further:
Could we reverse the roles of Litecoin and Dogecoin? Would it be possible for miners to mine Dogecoin and receive both DOGE and LTC?
The answer lies in the mining difficulty: Whether a chain could become the parent chain has nothing to do with the value of its native token but instead depends on the mining difficulty.
- If a miner mined a block on the parent chain (Litecoin) at its current difficulty level, he/she will receive rewards from both chains.
- In contrast, if a miner mined a block on the auxiliary chain (Dogecoin) at its current difficulty level, he/she will only receive DOGE rewards.
- If a miner mined a block at a difficulty level that stands in between the Litecoin difficulty and the Dogecoin difficulty, he/she will still receive only DOGE rewards, which is similar to the second scenario.
* Click on the link to find out about the estimated profits of merged mining: https://www.viabtc.com/blog/ViaBTC%EF%BD%9CAdditional-Profits-are-Becoming-Miners%E2%80%99-Major-Income-Source-under-Merged-Mining-89?category=2&lang=en_US #ViaBTC
How is Litecoin connected with Dogecoin?
It is important to note that the parent and auxiliary chains in merged mining are mutually independent. With their own node networks, the chains differ from each other in terms of mining difficulty, network hashrate, and block reward. Therefore, the activation of LTC halving will have little impact on the operation and block reward of the Dogecoin network. The only possible impact might be hashrate fluctuations on the Dogecoin network due to mining machine shutdown and hashrate migration among LTC miners.
Will the LTC halving affect DOGE’s output?
In the past, mining pools allocated a fixed LTC to DOGE reward ratio: 1 to 2,000 (i.e., for every 1 LTC mined, the pool would give out 2,000 DOGE). However, a new rule was later introduced that calculates the mining profits based on the PPLNS model, which has been widely adopted by major LTC pools.
Under the PPLNS model, the pool distributes mining rewards based on the hashing power contributed by each machine over a period of time, after deducting the mining fees. As a result, after the new rule was adopted, the specific amount of DOGE earned by an LTC miner only depends on their hashrate contribution and the daily earnings of the mining pool, which is why the halving of the Litecoin block reward from 12.5 to 6.25 LTC per block will have no impact on the daily DOGE supply.
Although the LTC halving will not significantly affect the DOGE reward earned by LTC miners, it is noteworthy that Litecoin and Dogecoin are, in themselves, closely related. As such, it is expected that DOGE will face some degree of price volatility around August, which will affect the daily revenue of LTC miners.
Furthermore, if the LTC price fails to surge, after the block reward goes down from 12.5 to 6.25 coins, LTC mining will become a lot less profitable. As of February 24, 86.08% of the total LTC supply has already been mined, leaving less than 11.7 million LTC available for mining.
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