What Is Litecoin (LTC) Mining?
Litecoin (LTC) is a cryptocurrency created as a fork of Bitcoin in 2011. It uses a hashing algorithm called Scrypt that requires specifically designed mining software and hardware. It is minable, and continues to rank in the top cryptocurrencies for value and trading volume.
Litecoin mining is the process of validating transactions in the blockchain, closing the block, and opening a new one. Litecoin uses the proof-of-work consensus mechanism, which uses computational power to solve the nonce, which is part of the hash, that secures the block. The hash is the alphanumeric sequence of numbers that is encrypted by the hashing algorithm. When the nonce is solved, Litecoin is rewarded.
Litecoin mining became popular in 2011 when Charlie Lee, a software engineer at Google, announced its creation as a Bitcoin fork with modifications intended to help it scale more effectively.
Just like Bitcoin, it can be mined on computers using central processing units and graphics processing units. However, it isn't as profitable or competitive as purchasing an application-specific integrated circuit (ASIC) and joining a mining pool.
- Litecoin mining is similar to Bitcoin mining in that it requires specialized hardware and software for operations.
- While it can be mined on computers, to be competitive Litecoin requires several ASIC miners.
- Solo Litecoin mining profitability is extremely low because the cryptocurrency's mining network is very centralized.
- Profits from Litecoin mining are a function of your investments in hardware and software, pool fees, electricity costs, and Litecoin's price.
Understanding Litecoin Mining
Litecoin mining is very similar to Bitcoin mining. A mining program runs on a machine, computer, or device. Often, mining is described as a complicated mathematical process; however, the mining software randomly generates encrypted numbers and letters to attempt to guess a value lower than that of the nonce—a two digit random alphanumeric figure contained in the block's hash.
Miners are connected to the internet, and form a mining network. There is no limit to the number of mining program users within a network of miners, so anyone attempting to mine a Litecoin is competing with all other miners in the network to solve the hash.
The first miner to guess smaller than the target hash set by the blockchain protocol wins a reward of 12.5 Litecoin. The reward changes over time with hash difficulty.
How to Mine Litecoin
To get started, you will need to invest in hardware mining rigs and software to run the mining process itself. The state of the Litecoin mining network is such that a single miner with one ASIC, a computer, or laptop stands no chance—or a very limited one—of solving a hash to win a reward. However, you still may not be able to keep up with the mining network and large farms and pools of miners with one or even two ASICs.
For example, the Litecoin Miner L7 can mine at 9 GH/s (gigahashes per second, or nine billion hashes per second), while a CPU generally mines in thousands of hashes per second (KH/s). A mining pool can mine at more than 120 TH/s (120 terahashes per second, or 120 trillion hashes per second).
To begin mining Litecoin, you'll need to purchase one (or several) ASIC miner(s) and connect it to the internet. You'll then need to choose a mining pool to mine with, set the miner up using the pool's instructions—usually posted on the pool's website—and begin mining following the instructions for your machine, software, and pool.
You'll also need to choose a wallet to store your private keys in. You could use wallets like Exodus, Electrum, or Mycelium.
How to Select Mining Hardware
There are several factors that you should consider while looking into mining hardware or software for Litecoin:
- Your goals and expectations
- Energy use and cost
- Whether to join a pool
Your Goals and Expectations
Most importantly, you'll need to identify your goals for mining Litecoin. For example, you might want to mine for some extra spending money, or you might want to mine and hold the Litecoin you receive as rewards. Whatever your reasons, you'll need to make sure that you can get the returns you want before investing in expensive hardware.
The mining pool, F2Pool, lists current ASIC mining costs and revenue. TheLitecoin Miner L7 is one of the most profitable Litecoin miners, but with a price tag of $18,500, it could take you years to recoup the purchase cost. The amount you spend will dictate how productive and profitable you are as a miner.
You might be able to find used ASICs for sale at much lower prices, but it's good to be cautious because some of these machines have been used very hard.
Energy Use and Cost
You should consider the amount of energy used by an ASIC miner. The Litecoin ASIC miner, the Antminer L7, uses approximately $10 per day in energy. Your energy bill would increase by more than $3,500 per year, further reducing your yearly profits.
This cost represents only the energy used to power the miner. ASICs produce a lot of heat while they run—to be most profitable, they need to run 24 hours a day. An ASIC will run up your cooling bill unless you can find a way to vent the heat outside your home.
Hashrate is another crucial consideration. The faster your ASIC can hash, the more competitive you'll be on your own or in a pool. Many mining pools split the cryptocurrency they're rewarded, but most base individual rewards on the amount of work done per miner.
If you have a slow ASIC, your profits are likely to be much less than a miner with a faster mining rig or setup.
Whether to Join a Pool
Once you've decided what equipment you'll use to mine, you need to decide how to mine: solo or in a pool. Mining alone, you risk going long periods of time without finding a block. However, if you're lucky enough to mine a block solo, you'll keep the entire 12.5 LTC plus fees.
Pool mining, in which large numbers of miners combine and distribute the proceeds according to the hashing power contributed, is still subject to the vagaries of chance: your pool might open three blocks out of 10, then wait for 200 blocks to open another one. Your earnings are almost certain to be more steady with a pool; the tradeoff is that you only earn a small cut of each block the pool finds.
How Long Does It Take to Mine 1 Litecoin?
Litecoin's mining reward is 12.5 Litecoins per block. The average block mining time on Litecoin's blockchain is about 2.5 minutes.
Is Mining Litecoin Profitable?
Litecoin mining can be profitable if you have the proper setup and join a pool that splits rewards in a profitable way.
What Is the Best Way to Mine Litecoin?
The best way, and the only way to stand a chance of winning a reward, is to buy one or more ASIC miners specifically designed for Litecoin and Scrypt and join a mining pool. Otherwise, you simply will not have enough hashing power to compete.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.