Litecoin (LTC) is a digital currency and was created back in 2011 as an open-source project on Github by founder Charlie Lee, an ex-Google employee. LTC is a fork from the original Bitcoin and was created to improve on the initial deficiencies of the Bitcoin blockchain protocol. LTC has a lower block generation time of 2.5 minutes, an increased total supply of coins pegged at 81,000,000, and utilizes the more common scrypt hash algorithm.
Litecoin is one of the top 15 cryptocurrencies by market cap (~ $14 billion) and also one of the few cryptocurrencies that still uses a proof-of-Work consensus mechanism that can still be mined to generate block rewards. LTC cannot be profitability mined using consumer hardware like CPUs and GPUs, but rather requires specialized hardware called Application-Specific Integrated Circuits (ASICs) specifically programmed to mine LTC.
When it comes to mining, you want to first think about whether you are going to solo mine or pool mine. LTC is no longer profitable to solo mine, so if you are thinking of mining LTC, the best option would be to join a pool. Pool mining has associated costs like pool fees but you could see quicker rewards and reduced reward variance in comparison to solo mining. Let’s break down the elements of mining Litecoin so you get a complete understanding of the underlying technology and how the process works.
Litecoin Mining & Consensus Mechanism
Litecoin is based on the Scrypt hash algorithm, which is a Proof-of-Work (POW) consensus mechanism. This is the most common PoW algorithm which is still used by other mineable cryptocurrencies. Charlie Lee adopted this algorithm from Tenebrix, an early altcoin. The Scrypt algorithm incorporates elements of the SHA-256 algorithm but has more serialized calculations. Large amounts of high-speed RAM are favored when using Scrypt, as opposed to raw processing power alone.
Scrypt is a memory-hard sequential function that essentially requires more memory than a regular algorithm. This makes the mining process slightly more complicated than just mining Bitcoin or another cryptocurrency that uses SHA-256. LTC started with an initial block reward of 50 LTC which is halved every 840,000 blocks. The current block reward is 25 LTC and the blockchain size is currently 16.07 GB. Mining LTC to receive block rewards requires the use of ASIC miners. In the earlier days, you were able to mine LTC using GPUs, but it is no longer profitable to do so since Scrypt based ASIC miners were released.
Litecoin Mining Hardware
In the earlier days, you were able to mine LTC using consumer hardware like CPUs and GPUs, but it is no longer profitable to do so since Scrypt based ASIC miners were released. Even though mining with CPUs and GPUs may not be profitable, it may be a good way to learn how to mine. Consider using them to gain exposure to the process, familiarize yourself with the mining terminology, setup, and ultimately a low-cost way to find out if you are actually interested in mining before you spend thousands on an ASIC miner.
When it comes to the ASIC miners, you will need to make sure you are choosing the newest and latest models, as older ASIC miners may not be as competitive and you may find it hard to turn a profit with older models. The best ASIC miner on the market for LTC is the AntMiner L3+. It is built by BitMain, one of the largest and most trusted Bitcoin hardware manufacturers, and is the fastest LTC miner. You may want to purchase multiple ASIC miners to increase your profitability. You will need to buy a separate power supply cord as it’s not included with the miner. The APW5 power supply can provide up to 1300W /110V or 2600W over 205V+. You will also want to use extra fans to cool the ASIC miner and note that these miners can also get pretty loud.
The great thing here is that once you purchase a Scrypt-based ASIC miner, you can mine any Scrypt-based coin. For example, if you find that mining LTC is not as profitable as you had originally thought, you could start mining Dogecoin (DOGE).
|ASIC Miner||Antminer L3+||Antminer Power Supply APW5|
|Price (USD)||$850||$200 – $300|
|Power Usage (W)||800||N/A|
Litecoin Mining Software
ASIC miners typically come pre-installed with software. You will simply need to follow the instructions and it should be fairly simple to get started using BitMain and Antpool. Joining a mining pool increases your chances of profitability and reduces reward variance over time. It will be difficult as a solo miner to compete with the hash power of pools, so it’s best to join a reliable pool to increase your profit potential.
You will also want to make sure you have a wallet to receive your block reward allocation of LTC. Hardware wallets like the Ledger Nano S and Trezor are the most secure and reliable wallets for LTC, but you can also create a web wallet online here.
Litecoin Mining Difficulty & Profitability
The total global hash rate for Litecoin has been steadily increasing over the past few months which indicates that there is an increase in total mining power (more ASIC miners are being used) to mine LTC. The hash rate is related to the price of the coin, and difficulty closely tracks the hash rate.
The difficulty level indicates the computational difficulty of solving the next block to maintain the 2.5-minute block interval. The difficulty level has been increasing in a synchronized fashion with the total network hash rate.
As the difficulty increases it requires greater computational power and energy to mine the next block and receive the block reward. If the total hash rate and difficulty level is increasing, it could mean the coin is becoming more popular and will increase in price. Mining LTC based on potential long-term growth as digital cash could prove to be very profitable, given its transaction speed as a currency.
Below is a chart outlining potential profits using cryptocompare. This link will allow you to enter different inputs and see the associated profit potential so you can gauge your overall cost and profits. This is for illustrative purposes and results can vary depending on your inputs and the market price of Litecoin. It is also based on an LTC price of USD$ 146.25
|Litecoin Profits (USD)||Hash Power (MH/s)||Power Consumption (W)||Cost per KWh ($)||Pool Fee||Profit/Month||Profit/Year||Profit Ratio Per Day|
|LTC (1 ASIC Miner)||504||800||0.12||1%||$56.69||$689.74||82%|
|LTC (4 ASIC Miners)||2016||2400||0.12||1%||$297.88||$3,624.18||143%|
With the use of ASIC miners for the Scrypt algorithm, there is profit potential if you choose to mine Litecoin with multiple ASICs. The more ASIC miners you utilize, the quicker you will cover your initial cost, break-even, and become profitable. That being said, you want to pay attention to the ASIC miner market to see if new miners are coming soon that may make your hardware obsolete. Do your research and use the calculator to estimate your total costs and profit potential.
If you have any questions about Litecoin mining hardware or software, please feel free to comment below and let us know