Despite the impressive growth of the crypto industry over the past decade, the recent bankruptcy crisis has affected Bitcoin (CRYPTO: BTC) and Litecoin (CRYPTO: LTC) may highlight ongoing challenges. The primary challenge faced is the unprofitability of post-halving mining with no mitigating options for investors.
Seasonal tokens looking to be a leading solution to this problem. Designed to adapt to seasonal trends and patterns, Seasonal Tokens can offer an innovative solution. By facilitating effective support for miners, this solution promotes a more sustainable and profitable mining economy.
What are seasonal tokens?
Seasonal Tokens are a set of cryptocurrencies (Spring, Summer, Fall and Winter) designed to incorporate seasonal variations.
Seasonality is evident in crops such as soybeans or cotton, which show predictable price fluctuations throughout the year due to factors such as harvest times and production levels. This pattern of price changes is referred to as seasonality.
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In the case of seasonal tokens, the production rate of each seasonal token is systematically halved, reflecting the idea of seasonal changes in price changes. Specifically, every nine months the production rate of one of the tokens is halved, creating theoretically predictable periods of fluctuations in supply and demand.
In addition, the price of each token is designed to fluctuate relative to each other, allowing investors to increase their holdings over time by trading more expensive tokens for cheaper ones. Built on the blockchain using proof-of-work (PoW), seasonal tokens work through a fair, decentralized and trustless process without human intervention.
Mining bankruptcy crisis in Bitcoin and Litecoin?
To understand how Seasonal Tokens can help solve the Bitcoin and Litecoin mining bankruptcy crisis, it is important to understand the basics of Bitcoin and Litecoin mining.
Like Seasonal Tokens, Bitcoin and Litecoin use a proof-of-work (PoW) mining mechanism. PoW mining is essentially a process where computers compete to solve complex mathematical problems to validate transactions and add them to the blockchain. In return for their computational effort, miners receive a reward in the form of BTC or LTC.
Over time, the reward for mining to manage the supply is halved, which can lead to difficulties for miners in terms of profitability – especially if the price of the crypto drops sharply. Core Scientific, one of the largest bitcoin mining companies, is a recent victim – declaring Chapter 11 bankruptcy due to a combination of high energy costs, falling bitcoin prices and a reduced production rate following the recent Bitcoin halving.
How seasonal tokens support miners
Unlike Bitcoin and Litecoin, Seasonal Tokens can be used to save the profitability of mining after a halving event. This is made possible by having four tokens in the ecosystem.
Specifically, as one token halves, the other three tokens act as reservoirs of hash power and capital, reducing the effect of the halving on the mining economy. In other words, miners can switch to another symbol to maintain profitability.
As time passes and capital flows from the other three tokens to the halved one, miners can switch back. Overall, this process is meant to stabilize the shocks of the halving, ensuring that both miners and investors can handle it gracefully.
The halving process
The upcoming halving of Summer Tokens further demonstrates the unique stabilization process of the Seasonal Tokens ecosystem.
The production rate of Summer Tokens will be halved, resulting in declining profitability for miners due to the low market price relative to production costs. However, miners are not expected to go bankrupt. Instead, they can switch to mining one of the other three tokens, Spring, Fall or Winter.
Although unprofitable in the short term, the eventual shortage of Summer Tokens is expected to increase in value in the following months as production slows. This in turn usually increases the price of Summer Tokens relative to the other three tokens, which will allow miners to resume mining Summer Tokens profitably.
A better future?
Seasonal Tokens may offer a promising solution to the bankruptcy crisis facing Litecoin and Bitcoin. The four-token ecosystem allows miners to switch to other tokens to maintain profitability after a halving event, stabilizing the shocks of the halving.
Having demonstrated the success of this mechanism in the spring halving of 2022, the upcoming summer halving on March 6 may provide another opportunity for traders and miners to see the process unfold in real time.
Featured image by Art Rachen on Unsplash
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