Difficulty Adjustment Mechanisms

All these mining algorithms—SHA-256 (Bitcoin), Scrypt (Litecoin and Dogecoin), and kHeavyHash (Kaspa)—use difficulty adjustment mechanisms to ensure stable block times, but the way they adjust varies.

Bitcoin adjusts its mining difficulty every 2,016 blocks, roughly every two weeks to maintain the target block time of 10 minutes per block. If miners increase their hashrate, blocks are found too quickly, and difficulty rises. If hashrate drops, difficulty decreases to make mining easier.

Litecoin and Dogecoin both use the Scrypt algorithm and have different difficulty adjustment schedules. Litecoin adjusts difficulty every block based on the time taken to mine the previous block, ensuring a consistent 2.5-minute block time. Dogecoin initially used a slower difficulty adjustment but switched to a 1-block retargeting mechanism similar to Litecoin. This helps keep Dogecoin’s 1-minute block time stable.

Kaspa operates differently with its blockDAG structure, producing one block per second. Instead of adjusting difficulty at fixed intervals, Kaspa uses a continuous difficulty adjustment model that reacts dynamically to changes in hashrate. If mining power increases, difficulty rises almost instantly to maintain a stable block time.

Do All These Algorithms Have a Halving?

Bitcoin follows a strict halving schedule, reducing its block reward every 210,000 blocks, roughly every four years. The most recent halving occurred in April 2024, cutting the reward to 3.125 BTC per block. The next halving, expected in 2028, will further reduce it to 1.5625 BTC. This predictable supply reduction has historically influenced Bitcoin’s price cycles, tightening supply as demand grows.

Litecoin mirrors Bitcoin’s halving mechanism but occurs every 840,000 blocks, also about every four years. The latest halving in August 2023 reduced the block reward to 6.25 LTC, with the next halving projected for 2027, lowering the reward to 3.125 LTC. Since Litecoin was designed as the “silver to Bitcoin’s gold,” its monetary policy closely follows Bitcoin’s, ensuring a decreasing issuance rate over time.

Unlike Bitcoin and Litecoin, Dogecoin does not have a halving mechanism. Instead, it transitioned to a fixed block reward system in 2015, permanently setting rewards at 10,000 DOGE per block. This results in an annual issuance of approximately five billion DOGE, making it an inflationary cryptocurrency. This constant supply increase prevents scarcity, but when merged mined it reduces the effects of the Litecoin halving on profitability.

Kaspa does not follow a traditional halving schedule but instead uses a continuous emission reduction model. Instead of sudden block reward cuts, Kaspa gradually decreases its issuance every month and will continue declining until the total supply cap of 28.7 billion KAS is reached around 2031. This model avoids abrupt supply shocks while still limiting inflation over time.

Mining Strategies for Altcoins

Altcoin mining presents a range of strategic options depending on a miner’s risk tolerance, market outlook, and financial goals. Altcoin miners often have to decide how to manage their rewards in a way that maximizes profitability. The most common strategies include selling for fiat, holding mined coins in hopes of price appreciation, converting earnings into Bitcoin, or selling hashrate directly on marketplaces like NiceHash.

Selling for Fiat on a Regular Basis

Some miners prioritize cash flow and regularly sell their mined altcoins for fiat currency to cover operational expenses (such as electricity, equipment maintenance, and hosting fees) or secure profits. This approach limits long-term upside potential.

Holding Mined Coins (Speculative Strategy)

Another strategy is to hold the altcoins mined, betting that their value will increase over time relative to Bitcoin. This strategy is particularly common for emerging cryptocurrencies like Kaspa (KAS). By holding, miners take on additional market risk but could benefit significantly if the altcoin outpaces Bitcoin’s price growth. However, this approach requires a strong belief in the project and an ability to withstand price volatility.

Converting Altcoins into Bitcoin

A more conservative approach is to mine altcoins and immediately convert them into Bitcoin through exchanges. This strategy appeals to miners who prefer BTC’s long-term stability over the uncertainty of altcoin markets. By selling altcoins regularly, miners lock in profits and avoid the risk of their holdings depreciating.

Selling Hashrate on Marketplaces Like NiceHash

Instead of mining a specific altcoin, some miners choose to sell their hashrate on platforms like NiceHash. This allows them to receive Bitcoin directly without worrying about altcoin price fluctuations. On NiceHash, buyers rent mining power for different algorithms, often paying a premium during periods of high demand. This method provides a steady Bitcoin income and eliminates the complexity of mining different coins and managing conversions. Selling hashrate and getting paid in BTC also allows altcoin ASIC miners to capitalize on stronger Bitcoin mining economics when these occur, making the investment in altcoin mining less risky.

The best approach depends on a miner’s financial goals, risk tolerance, and market conditions. Holding altcoins can be highly profitable if timed well, but it carries significant risk. Converting altcoins into Bitcoin provides a more stable store of value, while selling hashrate on marketplaces is easy, offers flexibility and eliminates exposure to individual altcoin price swings.