Once you’re comfortable to buy Litecoin and selling cryptocurrency, it’s time to think about getting in on the real action: mining.
If you’re interested in mining Litecoin, it’s fair to assume you know a bit about it, but to recap, LTC is pitched as “the silver to Bitcoin’s gold” by its creator, Charlie Lee. It’s designed to be more usable as a currency on a day-to-day basis than Bitcoin.
Litecoin is four times faster than Bitcoin, creating a new block every 2.5 minutes to Bitcoin’s 10. Four times more will also be mined before reaching the hard cap — 84 million LTC compared to 21 million BTC.
What is mining?
Traditional mining as practised by Bitcoin and Litecoin is called Proof-of-Work. It’s a consensus mechanism responsible for maintaining and growing the blockchain.
Blockchains are immutable, meaning they can only be changed by adding new information onto the end of a chain of blocks of data. What’s already written is unchangeable. New blocks are created by miners, who validate transactions, load them onto the next block, and write it onto the blockchain.
To attract miners, they are paid two rewards each time they mine a block: transaction fees, and more importantly, a cache of newly created coins — Litecoin in this case. Currently, each block earns a reward of 12.5 LTC.
Miners are randomly selected in a race to solve a math problem that can only be solved by brute force: guessing over and over until someone gets the right hash. To keep the block times stable, Litecoin’s mining difficulty changes to accommodate a rising or declining hash rate as miners come and go. That’s how to mine Litecoin in a nutshell.
Why mine Litecoin?
There are a number of reasons you’d choose to mine Litecoin, beginning with the obvious making money.
However, you may also want to run a node for the good of the community. Immutability aside, blockchains are censorship-proof because the host nodes are located around the world. Blockchain is distributed ledger technology.
However, one of the reasons you would be mining for Litecoin is decidedly not to make use of your high-end gaming computer’s massive GPU when you’re not busy shooting things. While there are plenty of cryptocurrencies that can still be mined by desktop computers, Litecoin mining is so competitive that the only realistic way to do it is with specialized mining hardware — just like Bitcoin and Ethereum.
Remember, the question isn’t “how long does it take to mine a Litecoin? — the question is, “how long does it take me to mine a Litecoin?”
How does Litecoin mining work?
Those specialized computers are called ASICs — application-specific integrated circuits — which means they are built to do one thing and one thing only: mine blockchains. And not just any blockchain. Most are specific to a single cryptocurrency like Bitcoin, Ethereum or Litecoin.
While Litecoin is very similar to Bitcoin, it is not a fork. Creator Charlie Lee copied the Bitcoin source code when he launched Litecoin in 2011. But the speed and token cap were not the only differences. Bitcoin uses a mining algorithm called SHA-256 to process hash functions. Litecoin uses an alternative known as Scrypt, used by about more than a dozen cryptocurrencies, including Dogecoin.
The best-known Litecoin miner as of October 2021 is Bitmain’s now two-year-old Antminer L3++, which can be bought for about $1,200 — $1,400 on sites including Amazon, NewEgg, and eBay. It offers a 580 MH/s hashrate with a power consumption of 800W per hour. Running 24 hours a day, that’s 19.2 kWh, or 576 kWh per month. Bitmain’s top-of-the-line LTC miner is the $12,800, 9,500 MH/s Antminer L7.
One important caveat: When looking at Litecoin mining profitability, an important part is estimating your costs. Start by taking a look at the cost of electricity. Prices can vary wildly around the world, and power is much cheaper in some countries than others. In some larger nations, it can also vary from region to region — while residents in Washington state would pay an average of $59 a month to run an Antminer L3++, they’d have to stump up $129 a month in Massachusetts.
Remember to factor in Litecoin’s price, too. Crypto is very volatile, and a big dip will affect profitability if you’re mining to make money rather than become an LTC hodler. Your answer to the question “what to do with Litecoin” will determine if you want to shut down during dips.
While you can set up your L3++ and go mining for Litecoin as a lone wolf, the best way to mine Litecoin is to join a pool, in which hash power and rewards are shared. The biggest are Antpool, F2pool, LitecoinPool, and ViaBTC — though another major, LTC.top, was shuttered in the China mining ban, and may reappear elsewhere.
Of course if mining for Litecoin were as simple as buy litecoin a machine and signing up with a pool, it just wouldn’t be crypto now, would it?
Start with the obvious: Look at the pool fees. Look for a mining pool with a good reputation and history to avoid scammers. Understand that a big pool mines more LTC, which means more regular payouts. Look at server downtime. Look at the payout schedule — frequency affects payout size, and shorter times mean less risk if the pool collapses.
Then take a deep breath and dive into payout schemes. There are dozens, and the acronyms run to six places. They include:
Pay-Per-Share (PPS): The pool operator pays miners a flat rate for each share of hash completed — which offers steady income but a little more risk for the operator.
Pay-Per-Last-N-Shares (PPLNS): Mining profits are shared out based on the number of shares the miner contributes. As solving blocks depends on luck as well as speed, miners profits will rise and fall.
Shared Maximum Pay Per Share (SMPPS): PPS but doesn’t pay out more than the pool earns.
Full-Pay-Per-Share (FPPS): The miner gets paid PPS plus a share of the block transaction fees.
Equalized-Shared-Maximum-Pay-Per-Share (ESMPPS): SMPPS but distributes funds equally among all miners.
Litecoin mining software
Then you need to look into Litecoin mining software and Litecoin wallets.
ASIC miners tend to come with software pre-installed, whereas GPU and CPU miners working blockchains with lower hashrates have a great deal of choice, although pools tend to have standard requirements.
Then you need a wallet, which is to say, an address where your share of the Litecoin mined is sent. This can be an exchange wallet, a software wallet, or a hardware wallet. Exchange wallets tend to be the easiest to use, but exchange hacks are legendary. Software wallets give you more control over your private keys, but are online and therefore hackable. Both are hot wallets. Hardware wallets, or cold wallets, are the safest as they are “airgapped” — which is a fancy way of saying they are not connected to the internet. The more crypto you have, the more security you need.
As for what to do with the Litecoin that you earn by mining? To hodl or not to hodl, that is the question. In other words do you pay your fixed costs — mainly power — out of your rewards or your pocket?