An Introduction to Litecoin
Litecoin is often marketed as the silver to bitcoin’s gold. This is because gold has traditionally been a symbol of value, while silver is also valuable, but easier to move around and exchange. Litecoin is designed to be quicker than bitcoin and easier to use in general, making it more suitable for business transactions.
However, with Bitcoin Cash and other cryptocurrencies, the utility of Litecoin remains to be seen, as they are faster and even more efficient than Litecoin.
But what Litecoin has going for it is that it is seen as a complement to bitcoin, while Bitcoin Cash and the others are its competitors in many ways. If you think bitcoin is going to go up, then Litecoin undoubtedly will too.
In many ways they are a duo, and it is really BTC + LTC against all the other cryptocurrencies. People who invest in Litecoin believe in bitcoin too.
Another thing that Litecoin has is marketing, backing and adoptability. Many bitcoin ATM’s across the world also enable Litecoin withdrawals. You can withdraw $500 Litecoin for a $2 fee in few minutes.
With bitcoin, it could cost $50 with an 8 hour wait (give or take. Times vary). Litecoin is lighter, faster and has widespread adoption and even if other coins have better technical features, they are not as well known or connected as Litecoin is. It is also one of the oldest coins in existence.
Litecoin is pretty much the same as bitcoin, except faster. It has a set supply of 84 million coins compared to bitcoin’s 21 million.
It also has a quicker block generation time, 2.5 minutes as opposed to 10 minutes. In theory, this means that Litecoin transactions will be 4 times faster.
How to Mine Litecoin
Mining Litecoin is easier than mining bitcoin. Litecoin uses a Proof of Work (POW) methodology to validate its transactions, much like bitcoin. Transactions are verified and added to something called the blockchain, an essential concept when learning about cryptocurrencies and cryptocurrency mining.
Every cryptocurrency has its own blockchain which is a ledger of records. Every transaction is grouped into a block and this block of transactions is then verified by miners.
Once the miners validate the transaction the block is then added onto the blockchain. In this way it is impossible to validate a transaction that is not authentic, as each block builds on the last and the solution to the cryptographic puzzle is broadcasted to all miners on the network.
Generally, the process of mining is incredibly intensive in terms of energy usage, and specialized hardware is needed. This is definitely the case for Bitcoin, the first cryptocurrency which now requires specialized mining rigs to verify transactions.
Litecoin miners have to produce a cryptographic hash of the block of transactions that meets certain criteria. The processing of doing this is called hashing. The faster a processing unit can generate hashes/answers the quicker they will generate money/Litecoin.
Thus, a higher hash rate is a key metric in Litecoin mining hardware, as units with higher hash rates will result in increased profitability, generally speaking.
The terms mining Litecoins and verifying transactions are synonymous, and this is what confuses so many people in relation to mining. When a block is verified the miners get rewarded, thus releasing new Litecoins into the marketplace.
To maintain a steady supply of bitcoins and Litecoins, the difficulty of mining bitcoins and Litecoins gets adjusted based on the speed of block verification. A block takes 10 minutes to get verified in the bitcoin network, and at this rate, the bitcoins will be released at a steady rate until 2140. If a block takes less than 10 minutes to verify, then the difficulty will be adjusted.
The same is the case for Litecoin verification with its 2.5 minute block verification time. The difficulty to mine a block is quantified with a number called the network difficulty, around 4,500,000 right now.
Note that transactions are technically instantaneous on the network, but the delays are in the validation of the transaction itself, which varies from cryptocurrency to cryptocurrency.
In order to mine a block, you first need a Litecoin wallet where you can house your coins. The Litecoin token is the LTC, and Litecoin is 6th in terms of cryptocurrency market cap at the time of this writing.
But it is an old coin and has been in the top ten pretty much since it was created. It is not going anywhere. After you have your Litecoin wallet, which is easy to download, you will need Litecoin hardware and software.
Litecoin Hardware and Software
Mining Litecoin is easier than mining bitcoin, being easier to start and consuming less energy. This stands to reason, in that Litecoin is basically bitcoin but quicker and with more features. Miners are rewarded 25 Litecoins when they create a block.
Like bitcoin, in the early days of Litecoin mining, it was profitable to mine using CPU’s and GPU’s. But this is no longer the case today. To mine Litecoin profitably an ASIC (Application Specific Integrated Circuit) is necessary. These are designed specifically to mine Litecoins.
Litecoin ASICs and bitcoin ASICs are different in that Litecoin uses an encryption algorithm known as scrypt, while bitcoin uses SHA-256. Litecoins scrypt is considered easier and more beginner friendly compared to SHA-256.
Essentially, bitcoins SHA-256 is more sophisticated and specialized, meaning that it is harder for technological beginners to break into the market compared to Litecoin. Many have suggested that Litecoin was developed in part to allow more cryptocurrency miners into the market as bitcoin became too expensive and too technical to mine profitably.
Even with free electricity, the profits of mining Litecoin with a GPU or a CPU would be tiny. And even if you do invest in a good ASIC, it is not a guarantee of success and there are more variables to consider.
The other factors are the network difficulty, the Litecoin USD exchange rate, and the cost of electricity. Also, ASICS have a low resale value and a tremendous upfront cost for those without the liquidity. And they can take long to be delivered, which can compound losses on an initial investment in a rapidly changing industry.
If mining Litecoin is not a viable option for you, consider investing in some LTC coins, which are quite easy to purchase on all major exchanges.
Most ASICs come with integrated software to make mining quite easy. In some cryptocurrencies, configuring software to work with a mining pool can be quite tricky, but with Litecoin ASICS this issue is circumvented as the software comes pre-installed.
You can still mine Litecoin with a CPU if you are interested in learning the basics. CPU mining is far easier to set up than GPU mining, and there is no real reason to GPU mine Litecoin as you are not going to make a profit either way unless you use an ASIC. A good Litecoin CPU software is CPU miner, which is easy to configure as far as mining software goes.
One of the most popular Litecoin miners at present is the Bitmain AntMiner L3+. It features a BM1485 ASIC chip to mine scrypt coins with a hash rate of 504 Mega Hash per second. It is the best Litecoin ASIC available. Other models include the L3 (355 Mega Hash per second) and the A4 Dominator by InnoSilicon (280 Mega Hash per second).
The Antminer is an incredibly efficient machine in terms of the comparison between raw power and electricity costs. The L3 is nearly twice as efficient as the A4.
Antminers are quiet and weigh only 2.5kg and are the ultimate mining ASIC’s at this time. They also have an easy-to-use configuration interface and are quite compact.
Note that you can use your L3 to mine other coins with multi-mining pools, so you are not tied into Litecoin mining. The cost of Litecoin Antminers is between $500 and $1,500, but this number will change depending on supply and demand as well as advances in ASIC technology.
What are Mining Pools?
Solo mining is not really done by anyone except large operations with huge resources. Individual miners join mining pools to receive Litecoin fast. It could take year or longer to make any Litecoin with a single machine.
But with 50 machines or so in a pool, you could expect to see some Litecoin every week. By sharing their processing power, miners are rewarded faster.
There are three primary methods of mining pool reward categories for Litecoin. One is a proportional system. When a block is found, each user is rewarded proportionally to the shares they have found.
An alternative and more common mining reward system is a PPS (pay per share) system. Every share receives a fixed payment known in advance, based on statistics.
When the pool does not have the coins to cover the advance, credit is given. A score-based system is where each share submitted receives a score based on its age, and a block reward is split between participants according to the number of shares submitted.
There are obviously many variants and hybrid systems in use, such as Pay Per Last N Shares(PPLNS), Pay Per Last N Groups (PPLNG) and Recent Shared Maximum Pay Per Share (RSMPPS). PPLNS is the most common type found today. A share is given to pool users who submit valid proof of work to verify transactions.
There is a cost to joining a mining pool, which will depend on the individual pool and the reward system used. Fees generally range from 0-3 percent. Aside from fees deducted from earnings, there may be other types of fees.
Transaction fees are either kept by the pool operators or they are shared between miners. For beginners, the best method is the pay per share system and this is the most common, its evolved version being the PPLNS.
Litecoinpool.org is a beginner-friendly and well-established pool that is safe and recognized. Other notable pools include GiveMeCoins and WeMineLTC.
The problem with joining established pools is that it appears that the mining pools are becoming more and more centralized, especially in bitcoin. The purpose of cryptocurrencies was to decentralize money and other operations.
But more miners keep going to the biggest and most well established pools, meaning that centralization is occurring at the mining level.
Of course, these pools are generally made of miners of all ages and countries on different machines, but the potential lies for corruptibility if mining pools have too much power and they get in touch with one another. Large mining pools are those that have more than 5% of the total network hash rate.
Joining a bigger pool does not mean larger or quicker payouts. Beginner miners are often encouraged by cryptocurrency developers and operators to consider moving to a smaller pool if they are members of a larger pool.
There is a Litecoin awareness campaign in operation called “Spread the Hashes” in order to spread awareness that miners should mine in a variety of pools. The pay rate does not make that much of a difference overall and many smaller pools offer 0-1% fees.
Aside from single-currency pools, it is also possible to join multicurrency pools. These work with several different types of cryptocurrency. You can simply switch from one form of cryptocurrency to another if you wish, which is a nice feature many are taking advantage of.
What is even better is that multi pools actually automatically switch from one coin to another based on profitability using an internal algorithm. Popular multi pools include MultiPool and HashFaster.
For those who like to analyze and take risks, then IPO Miner is the way to go. You select the coin to mine and sell on the same platform. It requires the user to sell coins at their peak, which sounds easy but is almost impossible in practice for everyone except experienced specialists.
Litecoin Mining Summary
Mining Litecoin requires an expensive purchase of an ASIC along with an analysis of electricity costs and other variables. If you have the money to spare and are interested in mining for the long term, then this could be a great initial investment.
If you want to find out the basics of mining you can use an ordinary computer with Litecoin software, though you might take a hit on electricity costs. Litecoin mining is easier than bitcoin mining and Litecoin mining is an excellent cryptocurrency start with.
It arguably has better financial prospects than mining bitcoin, which has a saturated market requiring specialization and expertise.