Bitcoin is considered the first widely successful cryptocurrency, launched in 2009. The cryptocurrency’s success spawned several other cryptocurrencies, also known as altcoins. One of these was Litecoin, which was created as a fork of Bitcoin in 2011. As one of the oldest cryptocurrencies in the market, Litecoin was originally designed as a low-cost alternative to Bitcoin, offering users lower transaction fees while consuming significantly lower resources.
Litecoin mining is the process through which transactions on the Litecoin blockchain are validated and new LTC created. This article will explain how you can mine Litecoin.
Key Points
- Litecoin was created in 2011 by former Google engineer Charlie Lee.
- Litecoin mining is similar to Bitcoin and requires specialized hardware and software to operate.
- Litecoin can be mined on regular computers using CPUs and GPUs. However, competitive Litecoin mining requires significantly more hardware (ASIC miners).
What Is Litecoin?
Litecoin was created in 2011 by former Google engineer, Charlie Lee, becoming one of the first altcoins in the crypto space. An altcoin is simply the name given to a cryptocurrency other than Bitcoin and Ethereum. Litecoin was envisaged as the silver to Bitcoin’s gold and was introduced to address concerns that Bitcoin was becoming too centralized and to prevent mining firms from gaining an unfair advantage. Although Litecoin failed in this objective, it realigned itself as a viable alternative to Bitcoin.
Litecoin runs on an open-source blockchain protocol independent of any influence of any centralized authority. Node operators maintain a copy of the blockchain, ensuring that transactions are up-to-date and do not contradict transaction history. It uses a Proof-of-Work consensus mechanism. However, unlike Bitcoin, which uses the SHA-256 hashing algorithm, Litecoin uses Scrypt, allowing it to work with regular CPUs and achieve faster transaction times.
Prior to launch, Charlie Lee released Litecoin’s source code, allowing users and developers to test mine the cryptocurrency before its official launch.
What Is Litecoin Mining?
Litecoin uses the Scrypt hashing algorithm, and requires specially designed mining software and hardware. The Litecoin mining process is how transactions are validated on the blockchain, and new LTC are created. Using Proof-of-Work, Litecoin uses computational resources to solve the nonce, which is part of the hash securing the block. Once the nonce is solved, miners are rewarded with new Litecoin. Litecoin can be mined on computers using CPUs and GPUs. However, it is less profitable or competitive than joining a mining pool or mining using an ASIC.
How To Get Started With Litecoin Mining?
When mining on Litecoin first began, miners could make significant profits using a simple CPU (Central Processing Unit) and GPU (Graphics Processing Unit). This meant investment into mining equipment was relatively small, while returns were fairly significant. However, users can now purchase specialized mining hardware called ASICs or Application Specific Integrated Circuits. These are far more powerful than CPUs and GPUs and give miners a much better chance of mining a block and winning block rewards.
However, the downside of the introduction of ASICs is that they are quite expensive and often out of the reach of the average user. This also puts those using CPUs and GPUs to mine at a significant disadvantage when it comes to mining. One of the most powerful Litecoin mining hardware available in the market is the Antminer L3+, made by well-known manufacturer BitMan.
To start with Litecoin mining, you must purchase mining rigs and software to run the mining process. The current state of Litecoin mining is such that a single miner with one ASIC and a computer stands very little chance of solving a hash and winning a reward. To start mining in earnest, miners need to purchase several ASICs and connect them to the internet. Once connected, they will have to choose a mining pool, set up the miner using the pool’s instructions, and begin mining. You must also choose a compatible wallet such as Exodus or Mycelium.
How To Select Mining Hardware?
You must consider several factors while setting up your mining hardware. These are
- Price
- Goals and expectations
- Energy cost
- Hashrate
Price
Purchasing an ASIC is quite expensive. The Litecoin Miner L7, while being one of the most profitable miners, comes at a whopping $18,500. As a result, it could take years to recoup what you spent on an ASIC. The amount spent dictates how productive and profitable mining endeavors are.
Goals And Expectations
It is also equally important to set goals before mining Litecoin. Some may want to mine LTC for extra money, while others may want to hold any LTC received as a reward.
Energy Costs
Energy costs are a significant factor that must be considered, with ASICs being extremely power-hungry. For example, the Antminer L7 uses $10 worth of energy every day, which translates to over $3000 per month spent on just powering the hardware. Factor in other items, such as cooling mechanisms for ASICs, and you could end up spending a significant sum, further reducing profits.
Hashrate
The faster the ASIC can hash, the more competitive you can be, whether on your own or in a mining pool. If you use a relatively slow miner, it would impact profits.
What About Software?
Let’s assume you’ve selected the Antminer L3 or L3+. Installing Litecoin mining software is relatively simple. The mining rig comes with an installation file and allows you to either solo or join a mining pool. To get started, all you have to do is
- Visit the Bitman website, and create an account.
- Press the IP reporter button on the main hardware controller and hold it until you hear a beep.
- Your IP address will be displayed. Enter that on the BitMan website.
- Enter the wallet address to which you want your mined LTC sent to.
How Does Litecoin Mining Work?
Litecoin mining has become relatively popular as more users become more comfortable with the concept. As a result, several mining options are available to users, depending on the budget and miner goals.
Solo Mining
Solo mining is when miners decide to mine alone, purchasing all the required equipment independently and not sharing any responsibility with other users or miners. The most significant advantage of solo mining is that you do not have to share the mining rewards with anyone else, unlike pool mining. However, the downside to this approach is the incredible investment required to purchase the mining equipment and the electricity costs involved.
This makes solo mining an exceptionally expensive endeavor.
Mining Pools
If solo mining is not an option, thanks to the costs involved, you can consider joining a mining pool. Mining pools allow miners to pool their resources (computing power, electricity), giving them a better chance at winning block rewards. Because the chances of winning block rewards are greater in mining pools, you stand to win consistent rewards. Mining rewards are shared with other miners in the pool, and some mining pools also require a joining fee.
There are several Litecoin mining pools to choose from, such as Antpool and Litecoin Mining Pool. Antpool is based in China and is one of the largest Litecoin mining pools in the market. It also offers mining pools for other cryptocurrencies. On the other hand, the Litecoin mining pool is one of the original Litecoin mining pools and has been operational since 2011. The pool uses a pay-per-share system, meaning that miner rewards are based on the amount of resources they contribute to the pool.
Cloud Mining
Apart from solo mining and mining pools, you can choose a third option: cloud mining. The concept behind cloud mining is simple; you must pay a Litecoin mining rig to mine for you. The only thing you need is a functional computer. Cloud mining is an excellent option for beginners, saving them the cost of purchasing expensive equipment. It can also be considered by those users who have space constraints.
However, you will have to pay a fee to access cloud mining services and rewards. The more you invest, the greater the rewards. One point of consideration is which cloud mining company you use. This is because several scammers are pretending to offer cloud mining services and disappearing with your funds. This is why it is crucial to be extremely thorough with your research.
One of the most popular cloud mining services for Litecoin is Hashflare, which has been offering cloud mining services since 2014.
In Closing
Litecoin mining has evolved considerably, has become quite labor-intensive, and requires significant capital investments. This is why it is imperative to carefully weigh all the pros and cons before deciding to attempt Litecoin mining.
Want to learn more about Litecoin and other cryptos? Don’t forget to check CoinSmart’s GetSmart hub.
