GameFlip

Posts Tagged ‘LTC price

The creator of the crypto coin Litecoin (LTC) – Charlie Lee has tweeted that he is leaving Coinbase and will going in order to focus on his creation. Good news for one of the oldest altcoins and a total change from the “no need of further development attitude” from the last couple of years. In the last couple of months we have seen significant changes in LTC and that has lead to the revival of the altcoin after a long period of “sleep” and the news that Charlie Lee is focusing his attention on Litecoin is also a very positive one. We are already seeing the market responding to this positive news with the price of LTC rising…

official-litecoin-logo

Charlie Lee, the creator of of the popular alternative crypto currency Litecoin, has posted on Reddit a short and interesting analysis on why a few weeks after the first block reward halving the difficulty and price of LTC has returned to the level it was prior to the event. Below you can find his post quoted:

After the halving one would expect that either the price will go up or the hashrate must drop. This is because mining is designed with a Nash equilibrium of miner profit reaching 0 over time. So if miners are running at near 0 profit, and suddenly their revenue gets cut in half, miners would need to turn off their machines unless they are willing to mine at a loss.

The halving happened, and the price stayed the same. The hashrate dropped a little but then climbed back up pretty quickly to the previous level. That’s really unexpected, but I think I have an explanation. I talked to some Chineses miners at Scaling Bitcoin and learned something interesting. Most miners have found electricity for free or close to 0 cost. Chinese hydro power plants are sometimes generating too much electricity. That electricity goes to waste if it’s unused. So these plants have either sold the electricity for near 0-cost or they have partnered with miners to give them free electricity for a revenue share.

So this makes total sense now. If the electricity is free or close to 0 cost, then there’s no reason for miners to shut down their machines. They make half as much, but still profitable. These miners have also been asking around at the conference to try to buy old outdated Bitcoin/Litecoin ASICs. With 0-cost electricity, they can keep those machines running and still make money.

We considered the possibility that the reason behind was the introduction of newer generation of Scrypt ASIC miners from SFARDS and Innosilicon and the companies making them stacking up on hardware in their own mining data centers. But the possibility of a lot of Asian miners with zero cost to very very very cheap electricity mining with whatever hardware they can get and still profiting also sounds like a good enough reason. If that ends up being the actual reason it presents a bit of a problem for the normal home miners and small mining operations based outside of Asia that still need to pay for electricity and thus have higher cost for mining and smaller to no profit at all…

litecoin-difficulty-chart

After the recent Litecoin (LTC) block reward halving we’ve seen some drop in the total network hashrate and thus difficulty as well as a direct result from the new lower rewards as a result of mining. The exchange rate of Litecoin did not change much, but with the lower difficulty things were looking like they would balance – smaller reward, but easier to mine. Interestingly enough a few days after the block reward halving the difficulty of LTC has started rising again and has already reached back the level where it was before the halving and it seems that it will continue to rise. This development rises some questions as to what is happening, so that the difficulty is rising and the exchange rate remains the same while the block reward is half of what it was previously. The only reasonable answer would be that somebody is bringing online new generation of more efficient Scrypt ASIC miners, otherwise with old generation hardware a lot of people would be mining LTC at a loss. There are not that many options available, probably SFARDS is stacking up their new SF100 miners for own use in a data center or maybe Innosilicon is ready with their next generation of Scrypt ASIC chips and are doing the same…


top