Vertcoin Just Underwent its First Block Reward Halving
Popular altcoin, Vertcoin (literally green coin) underwent a block reward halving on December 11. The effect will be all newly mined blocks will see their reward dropped from 50 VTC to 25 VTC, with the halving occurring on block 840,000.
What is Vertcoin?
Vertcoin is a currency-use focused cryptocurrency that is staunchly anti-ASIC and pro-decentralized mining. It’s a Lyra2RE based project with blocks every 2.5 minutes. The total eventual supply of Vertcoins is 84 million. While on the surface Vertcoin shares a number of features with Litecoin, the philosophy guiding it and technology it is based on, differ quite significantly.
Most notable is the ASIC resistance mentioned above. On the official Vertcoin page, the team notes that they have “pledged to take whatever steps are necessary to protect this coin from specialized mining equipment and make sure that it will always be possible to mine with consumer grade hardware.”
Why focus on ASIC resistance? On a different Medium blog post, this is explained by saying that involving ASICs into cryptocurrency mining “creates an environment where the [ASIC manufacturers] ultimately control the ASIC coins and have a vested interest to pursue profit over progress. This sentiment is best understood when we look at the relationship between Chinese mining giant Bitmain and Bitcoin and Litecoin. Bitmain operates multiple, massive, industrial-scale mining operations in China, and they exert a large degree of control over the two cryptocurrencies. The Vertcoin team, simply put, wants to avoid this.
Vertcoin is also SegWit activated and is currently going through trials to support Lightning Network transactions. Vertcoin has a wide and devoted following online. At press time, Vertcoin is trading around $8.50. In October, the cryptocurrency was trading at just under $2.
Economic Impacts of the Reward Halving
Most cryptocurrencies that are mined have diminishing mining returns built into their design. This is usually done to control supply and to ensure that new coins are released through mining for longer periods of time. The halving events ensure that the maximum supply of vertcoin will reach 84 million, with the next event in around four years time, when the block reward will fall again to 12.5 VTC. This process continues until the block reward is diminished.
If the cost of electricity is close to zero for Vertcoin miners, we should see the hashrate remain robust. In return for dedicating computing power and electricity to the network, miners receive a fixed amount of vertcoin, which has been 50 VTC throughout the altcoin’s history. Miners in a pool will split the block reward proportional to the amount of hashing power they are contributing. Now, the miners will have to divide 25 VTC for each block.
The reward halving can have multiple effects on the economics of a cryptocurrency. Typically, the number of people mining will drop. This, in turn, lowers the difficulty, until eventually more miners join in again and an equilibrium is reached. As the supply of new coin reduces, prices often rise in response. Unlike bitcoin, the difficulty for vertcoin is adjusted every block instead of every 2016 blocks meaning there should be a quick readjustment.
Bryan Goodson of the Vertcoin Dev Team also includes comparisons to the economic impacts on other currencies that had halving events. Specifically, he uses bitcoin and litecoin and examples. Goodson notes that after their halving events, “historically LTC and BTC saw no long-term negative [effects] in price due to halving.
He does note, however, that it took Litecoin nearly six months since it’s halving event before prices saw any significant increase.
While we don’t know the exact impact on Vertcoin the halving will cause, history has demonstrated that usually, halvings are eventually followed by a healthier economy for the coin.