Halvings in the block reward in altcoins provide insight on how BTC’s upcoming halving may impact miners. Altcoin halvenings, sometimes a reduction in the block reward less than 50%, have shown significant impact on the hashpower and price of altcoins in Litecoin and Dash.



Quick take:

BTC ‘halvening’ is forecasted for the week of the 18th of May in 2020

Litecoin saw significant hashpower increase before huge dropoff weeks before halving in August

Dash reduction in 2019 showed mining power increase in months before and after reduction and did not see significant drop off

BTC is showing mining trends similar to Litecoin’s trends pre-halving in 2019

BTC’s next halvening

As BTC’s upcoming reward halving approaches, the whole industry is speculating on what will happen to the hash rate, BTC’s market price, and the general outlook on cryptocurrencies for 2020. Historical mining reward reductions in other cryptocurrencies may help shed light on what will happen in around May when the BTC block reward will go from 15 BTC to 6.25 BTC, moving BTC’s inflation from an annual 3.68% to 1.80%.

While a speculative bull market may help miners stay afloat, this speculation is leading to significant increase in mining difficulty before the halvening. The mining difficulty of BTC has more than doubled in the past 12 months. Since BTC has only undergone two previous halvenings, some analysts are looking at more recent altcoin block reward reductions to gain insight on implications for BTC in 2020. Litecoin halving in 2019

Litecoin, similar to BTC halves its mining reward approximately every 4 years. On August 5, 2019, Litecoin’s block reward reduced from 25 to 12.5 coins rewarded per block. The halving in 2019 is correlated with significant changes in the protocol’s mining ecosystem.

2019 saw a strong increase in mining power with a start at 167 TH/s and a peak of 511 TH/s on July 14, 2019. While Litecoin saw this drastic increase before its halving, the hashpower sputtered at around 450 TH/s before dropping significantly for the rest of the year, reaching a bottom of 130 TH/s on the 13th of December (yes, on a ‘Friday the 13th’). Since then, Litecoin’s hash power has been steadily rising and is measuring in at just below 200 TH/s.

Litecoin hash power from 2019 to present

This type of market reaction sheds a darker light on what the coming months may be for the hash power of BTC, suggesting that if BTC follows a similar path, we will see a peak of hashpower shortly before the reward halving followed by a significant drop in hash power for a significant period of time.

BTC may not follow the same pattern as seen in Litecoin, however. The mining community of Litecoin differs from that of BTC, as Litecoin utilizes the Scrypt algorithm for block generation in effort to keep mining more accessible for every day users and less susceptible to ASICs powerhousing than BTC and other crypto currencies that run off the SHA-256 algorithm.

Dash reward reduction in 2019

Unlike BTC and Litecoin, Dash block rewards are reduced in increments of 7.14% every 210240 blocks of which are mined in approximately 383 days. While the block reward reduction for Dash may be less significant than bitcoin’s 50% reduction, there are still impacts to the mining industry regardless.

On April 10th 2019, Dash’s last reduction occurred, reducing the block reward to 1.55331350 Dash coins. In 2019, Dash’s hashpower started at 1.59 PH/s on January 1st and climbed steadily to a peak of 3.74 PH/s mid June, 2 months after the block reward reduction.

Dash Network’s hash power in 2019

Shortly after reaching a peak hashrate in June, Dash’s hashpower significantly dropped to around 50 TH/s (over a 98% drop in the total hashpower) for a few days in late june. Although this drop in hashpower was very significant, the hashpower jumped back to its levels from days before. The rest of the year showed an increase in hashpower, although at a rate less significant than what was seen before the block reward reduction with the year’s end peaking at just over 5 PH/s.

Dash’s market price faced a slight downturn after reaching a peak on April 1st at $114 (USD) less than 2 weeks before the reward reduction, going down to $109 on April 30th. This was followed by a bull market for Dash, where the coin reached a market price peak of $178 on June 26th.

Unfortunately for Dash miners, the price of Dash did not correlate with the steady increase in hash power with the price of Dash coins having declined steadily since July 2019, reaching a low of $39 in late 2019. The hash power has likely remained consistent due to more efficient rigs and more amicable legal landscapes for miners.

BTC miners – where is it going?

BTC has seen approximately a 300% increase in hash power since the beginning of 2019, reaching a peak of 125 EH/s at the end of January. Since peaking, the hash power has been moving between 120 EH/s and 100 EH/s, parallel to the price of BTC, which has been struggling to push above a market evaluation of $10,000 (US).

BTC hash power 2019 to present

This pattern looks similar to that seen in Litecoin in June/July of 2019 before its halving, but BTC is still several weeks behind where Litecoin was in relation to its halving before it reached its mining power peak. Litecoin reached its mining power peak 23 days before its halving, and BTC is still over 2 and a half months away. Time will tell and foresite will surely be 20-20.

Written by Nate Christenson

hashPoWah editor, eCommer Program Manager