How to Mine Litecoin
- Real Vision
- September 8, 2021
- 2:22 PM
Since Litecoin is a Bitcoin fork with a few tweaks and changes to its source code, Litecoin mining works similar to mining Bitcoin. Just like Bitcoin, Litecoin is a decentralized cryptocurrency, whose digital ledger is maintained by a decentralized network of nodes instead of one single party. As a result, there is no central entity to distribute the cryptocurrency out into the world. The distribution of coins has therefore been designed in a decentralized manner as well.
In place of a pre-mine, where the entire stack of Litecoin units would be created in one fell swoop before the network’s launch, Litecoin is issued and released by the protocol in a pre-programed way. The receivers of the newly issued Litecoin units are the so-called miners. These vital network participants are the ones doing the mining and are in return rewarded with the cryptocurrency. The term mining is an analogy that is borrowed from the process of extracting precious metals from the ground as they also need to be mined at the cost of labor and energy.
While costs and energy are incurred for Litecoin miners as well, they are not the result of digging into the ground in the search of precious metals. The energy used to mine Litecoin is going into dedicated computer machines, powering processors in a global competition to solve cryptographic puzzles at the cost of computing power. Whichever miner successfully solves this puzzle first and thereby outcompetes his contenders and gets to add a new block to the blockchain is rewarded with some additional Litecoin in what is called a block reward. Ultimately, the miners are handsomely rewarded for providing computational power to the Litecoin network and thereby making the network secure for the decentralized handling of peer-to-peer transactions.
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How many litecoin units are there to mine?
Similar to Bitcoin, Litecoin also has an upper fixed coin limit. With Litecoin there exists a fixed supply of 84 million Litecoin units that will ever be created. As of July 2021, about 67 million of these have already been created and are currently circulating in the open market. The remaining supply of about 17 million units are still up for mining until around the year 2142. At that time, the supply limit will be reached and no more Litecoin will be issued by the protocol.
At the time of writing, 12.5 Litecoin are issued as block rewards on average every 2.5 minutes. In about two years from now, the issuance amount per block will be cut in half with the reward dropping to 6.25. From there, every four years going forward, Litecoin will experience another halving, bringing Litecoins issuance down to 0 eventually.
how to mine litecoin
Contributing to the mining of Litecoin equals providing processing power, also known as hashpower, to the Litecoin network. Because Litecoin represents an open, permissionless system like Bitcoin, anyone with access to computer processing power can participate in mining. In the early days of Litecoin it was very well possible to mine the cryptocurrency using home gear computer hardware like classical CPU or GPU (both of these are computer processing units). With ever more hash power being provided by more as well as more professional actors, mining has become increasingly difficult. Today, Litecoin cannot be mined efficiently with CPU or GPU graphic cards anymore.
In order to competitively mine Litcoin, so-called application-specific integrated (ASIC) mining machines are needed. These ASIC mining processors have been uniquely designed to mine Litecoin. While Bitcoin also uses ASIC miners, these machines are predicated on a different algorithm. For Bitcoin, the mining algorithm used is SHA-256. In contrast, Litecoin uses a fundamentally different algorithm called “Scrypt” to process hash functions. So while ASIC miners used to mine Litecoin cannot be switched to mining Bitcoin, they can easily be changed to mine other coins, most notably Dogecoin, which also adheres to a scrypt-based algorithm.
Just like the Bitcoin mining industry, Litecoin mining today is also dominated by mining pools. If someone is in possession of only a handful of scrypt-based ASIC machines, it is best to plug these mining machines into so-called mining farms. This way, a smaller miner can team up with a lot of hash power, making it more probable that he will get a steady flow of block rewards out of his minings machines. Whenever the respective mining farm finds a new block, the smaller miner gets a share of the rewards proportional to the hashing power he has contributed. As this illustration shows, currently three mining pools share more than 50 percent of the hashing rate.
How much can you earn mining lTC?
A miner’s individual profitability depends on four different variables: Energy costs, hashing power provided, the current Litecoin price and the current block reward. The most important of these parameters are the energy costs, which strongly vary depending on a miner’s geographic location. The other 3 variables are similar for all miners. Therefore, miners tend to set up their equipment in places where energy costs are comparatively low making their mining business more profitable.
Looking at the new ASIC miners that were recently brought to market by mining hardware provider Bitmaint, we can estimate their monthly earning potential. They offer hash rates of 9,500 MH/h. The power consumption of these units is 3425W. So if we assume energy cost of 0.13 kWh, which is about the average price a residential customer in the United States pays for electricity, we see that one device makes you currently around 0.25 LTC a day, which is around 23 USD a day.
Since Litecoin is a proof-of-work mining coin and real energy has to be provided, miners incur recurring costs that need to be amortized. This is why miners have to sell parts of their earned Litecoin from time to time in order to pay for running costs, being mainly electricity and hardware equipment.
How to start mining litecoin
There are a few basic steps you need to follow:
- Acquire suitable hardware: In order to most profitably mine Litecoin, you need to get ASIC machines. These can be bought from official producers or resellers. It’s not unusual to encounter supply bottlenecks.
- Download and install the respective software necessary to run the ASIC miners. Make sure they are really running according to the scrypt algorithm.
- Join a suitable mining pool. For Litecoin mining, f2pool might be a good address to begin your search for a suitable mining pool.
- Configure your mining devices: Once you have an account with a mining pool, you must use this account to connect your mining machines to one of the mining pool’s servers in order to be able to mine Litecoin.
- In order to collect any revenue from the block rewards, you need to register your payout address. If you don’t have a Litecoin wallet yet, then now is the time to download and set up your personal Litecoin wallet, so you can receive reward payments from your mining operations.
- Start mining. Once everything is set up, your mining pool’s account settings monitor your hashrate, revenue and payout. A mining pool like f2pool provides you with a dashboard or even an app.
