Litecoin: An Overview
Litecoin has always been known to be a clone of Bitcoin. However, one major distinguishing feature of Litecoin has to do with its mining procedure. Though Bitcoin and Litecoin both use a mining method called Proof-of-Work (PoW), they use different algorithms. Litecoin uses an algorithm known as Scrypt, allowing it to handle more transactions because it can generate blocks 4 times faster than Bitcoin.
During the PoW process, miners compete to solve extremely hard mathematical problems to verify transactions and, subsequently, receive rewards. Each individual transaction requires validation to prevent double-spending. The first “miner” to solve the problem is incentivized with a unit of cryptocurrency as a reward. This process consumes a lot of electricity and may not be practical due to the ongoing costs and high initial investment required.
Early miners of Bitcoin used to conduct CPU mining, the easiest and cheapest method for beginners of solo mining. In solo mining, a standard CPU of a computer runs a software at high processing speeds in order to verify a transaction. However, this kind of mining consumes a great amount of energy as a cooling system has to run at all times in order to maintain a certain CPU internal temperature.
Recently, the market has realized that GPU (graphic processing unit) mining is a much more efficient and faster way to mine cryptocurrencies. This is because the GPU handles display functions and manages the video rendering system. Due to the abrupt rise in cryptocurrency mining and popularity, the price of graphic cards have increased dramatically to reflect an increase in demand.
Cloud mining companies rent out their facilities to allow miners with lesser capital to participate in the market. It’s an alternative solution to reduce mining costs and increase efficiency. At present, Scrypt algorithm miners can earn $7.50 per 1 MH/s in cloud mining including a minimum hash rate of 1MH/s, maintenance fee $0.005 / 1 MH/s per 24 hours.
Pooled mining is another approach to mining where several people contribute to mine a block and then splitting the profit amongst the participants proportionately. It’s important to consider the public reputation of a mining pool prior to joining because this will provide long-term stability and help you avoid scams. You also need to consider the hash rate of the mining pool because a higher hash rate means lower variance in profits.
Today, reward per block is 25 LTC. Every 840,000 blocks, the reward will be divided into two. So in August 2019, the reward will be 12.5 LTC (check out a live countdown here). Halving happens until the block rewards reach 0 so the maximum supply of Litecoin has been distributed. When that time comes, miners will only get the fees in mining a block. In solo mining, miners get to keep the reward to themselves, whereas in cloud and pool mining, the reward is split between the contributors proportionate to their initial investment.
Is Litecoin Mining Profitable?
A mining calculator is needed to help people understand how much profit they can get when using a specific Litecoin miner. The good calculator should consider the amount of electricity consumed, fees, cost of the hardware, difficulty of the problems, hash rate and so on. Mining calculators need to be up to date and reliable in order to help you make sound decisions. Some popular mining calculators include Litecoinpool.org, CryptoCompare, and CryptoRival.
Is Litecoin Mining Safe?
Litecoin mining is safe, simple and profitable if done properly but you must also keep an eye out for scams, regulations and taxes, and the costs associated with mining.
Cryptomining can also be complicated and certainly not an environmentally-friendly way to make money. However, as cryptocurrencies gain popularity and value, competition among miners will also explode, making it more difficult and expensive to succeed as a miner.
Related: Read how Litecoin compares against Bitcoin and Ethereum this year.