Last week we dug into the history of Litecoin and explained the cryptocurrency’s rather interesting heritage. There are many unique elements that make Litecoin the successful cryptocurrency it is today. Today we are going to take a look at one of those – the mining process. Mining is at the core of every decentralized cryptocurrency and many believe that if a coin isn’t mineable, then it’s simply not up to par. Without miners, cryptocurrencies wouldn’t be able to have transaction confirmations, rendering them more or less useless as a result. Mining truly is the backbone of the blockchain world, so it’s well worth learning about.
Without any further delay, let’s begin our in-depth look at Litecoin mining…
Get Your Hands on a Wallet
Interestingly, you can still mine Litecoin with low-level computer equipment, meaning you can essentially get up and running with just a half-decent PC and a Litecoin wallet. There are a whole bunch of digital wallets out there, but for beginners it’s probably easiest to head over to the Litecoin website and download its default wallet for mining. You don’t need all the bells and whistles to receive your mining profits, and when they hit your wallet you can instantly transfer them somewhere safer. You can use whichever Litecoin wallet you wish though – the choice is all yours.
Consider Upgrading Your Equipment
While you can mine with your PC, it will take an awfully long time to see any real profits. You have a couple of choices beyond this, you can build a GPU rig with a selection of mid-range or higher graphics cards or you can invest in an ASIC miner. A GPU rig will set you back a little less than the ASIC miner, but the ASIC miner is purpose-built to mine cryptos, so it performs much better. Litecoin uses the Scrypt algorithm, this means that you can’t just use any good old Bitcoin ASIC miner to get the job done. You can get a pretty decent Scrypt ASIC miner from Amazon for about $460. Once you have a Scrypt ASIC, you can put it to work mining any crypto that makes use of that particular algorithm.
Mine Solo or Join a Pool
Litecoin is still relatively easy to mine, meaning you still have a decent chance of making some money mining alone. However – similarly to Bitcoin – you’re probably going to lose out a lot of the time to larger mining pools and corporations. It’s pretty easy to join a Litecoin mining pool, simply head over to a pool’s website and create an account. Once you have done that, you just point your hash rate at the pool and watch the rewards roll in.
Pools work by sending your mining rig a set of data that it will then turn into a unique hash and send back to the pool. If the pool is successful in creating the first unique hash, the block from your pool will be added to the chain and the pool will receive the block reward. The block reward is then distributed to the entire pool based on the percentage of hash rate each miner contributed. For example, if your mining equipment provides 1% of the total pool hash rate, you will receive 1% of the total block reward should your pool win – at the current rate of 25 LTC per block reward, your 1% would give you 0.25 Litecoin.
Choosing Your Protocol
To connect your mining rig up to either the pool or the Litecoin network, you’ll need to install a protocol first. Most miners use the Stratum protocol as it is one of the oldest and most widely used, meaning its well accepted. However, some miners have issues with it, feeling that it gives the mining pools too much power. This creates centralization in the mining process, which undermines the main point of cryptocurrency. A developer named Matt Corallo has created a new mining protocol called BetterHash. It gives more powers to miners and lets the miners decide exactly what they mine and in what way. Stratum is better for beginners, as all you have to do it point your mining rig to the pool or network and the rest is taken care of. However, if you have a bit of experience, BetterHash might be worth exploring.
Keep It Cool and Watch the Costs
That’s it really, once you have correctly directed your miner and set it running, all is taken care of and you can watch the Litecoin roll into your wallet. You will still need to perform maintenance on your mining rig though, such as ensuring it stays as cool as possible and that your electricity bills don’t run out of control.
Like all electrical equipment, when your mining rig is running it will get extremely warm. It is important that you keep it as cool as possible to maximize its lifetime, otherwise you could risk overheating it and burning it out. People often use AC units placed right above the mining rig, or if you’re feeling adventurous, you could set up a water-cooling system. Whatever you do, just keep your rig as cool as you can.
Once you have the cooling under control, you need to keep an eye on power usage. Counties in America have been shutting down unlawful crypto mining farms, as they draw huge amounts of power. If you are running quite a large operation, you will need to get in touch with your local counsel and power company so you can be given a special crypto mining rate, as you will draw far more power from the grid than an average citizen. Miners are often given higher costs per KW/h due to this drain on the grid, and is one of the reasons many mining farms are going out of business.
Mining Isn’t for Everyone
Mining is highly competitive, resource intensive, and often unprofitable. It is always best to make sure mining will be financially viable for you given all the factors involved, such as the price of Litecoin, cost of electricity, and cost of equipment. There is a lot more behind the Litecoin mining world and we are merely scratching the surface here. Mining is the process that keeps Litecoin – and all mineable cryptocurrencies – alive, and without miners the community would simply fade away.
Next week in our “Back to Basics” series, we will be taking a look at how to get your hands on Litecoin and some of the different ways you can go about it. Until then, stay tuned to BitStarz News for the latest cryptocurrency news, digital currency guides, and exclusive interviews.