Litecoin's Mining Power Tanks to Lowest in Year Following Price Plunge

Litecoin's price plunge in recent months has whittled away the profitability of mining the cryptocurrency, leading to a shakeout among computer operators on the network seen as a faster and cheaper but less secure version of bitcoin.

Under the network's original programming design, rewards for mining new blocks of data were slashed by 50 percent on Aug. 5, an every-four-years event known as a halving.

The combination of factors has cut the profits of mining litecoin using the popular Innosilicon A6+ computers to $1.68 per 24 hours, from $2.65 in mid-June, assuming a standard electricity cost, according to f2pool.

Operators using the older-model and less-powerful Antminer L3 computers are currently getting a negligible profit of just 6 or 7 cents a day, f2pool's mining profitability calculator shows.

Many smaller litecoin miners are now simply choosing to drop off the network, evidenced by a decline of more than 70 percent since July in the network's hash rate, which measures the combined computing processing power of all operators.

On Nov. 30, litecoin's hash rate touched 149.6 terahashes per second, the lowest in a year.

"If miners are underwater, or running non-economical gear, most likely they will decommission that equipment," said Greg Cipolaro, co-founder of the cryptocurrency analysis firm Digital Asset Research in New York.

Under the litecoin protocol, mining new units of the cryptocurrency automatically adjusts to become easier when the hash rate falls, a mechanism designed to lure operators back in following a sharp price drop or a cut in the rewards.

That's what's happening now: Litecoin's mining difficulty - reassessed every 2,016 blocks, or roughly every 4 days, to keep block-production times around 2.5 minutes - is now at is lowest in a year.

So despite the cut in the size of the reward for mining a new block, it should now be easier for operators who are still in the market to mine new blocks, helping to mitigate the damage to profits, according to Ryan Alfred, president of Digital Assets Data.A price recovery could woo miners back into the market, as could a further easing in the difficulty of mining new blocks, Alfred said.