How does Litecoin mining work?
In total, 84 million litecoins will be created through a process that’s called mining. A term you might recognise from bitcoin.
When you start mining yourself this could generate some nice profits, but perhaps even more important, you help maintaining and securing the litecoin network.
Would you like to know how this works and how you can start mining yourself? We’ll tell you all about it in this article.
How do I mine litecoins myself?
- What is mining?
- What do I need to take into account?
- Power consumption
- How much revenue does it create?
What is mining?
When you send litecoin throughout the network, the transaction will appear on the blockchain . Before the transaction is confirmed, it needs to be included in a transaction block. This is done by a computer on the network, known as a miner. A miner is a powerful computer performing calculations in order to add transactions to a transaction block.
The miner, or group of miners, that succeeds first will be rewarded with litecoins. This reward is called the block reward. The block reward contains newly issued coins that are created by adding a new transaction-filled block to the chain. Currently, the block reward consist of 25 litecoins. The reward is halved roughly every four years. The next halving is expected to take place in the first half of 2019. The miners will receive a block reward of 12,5 litecoins from that point on.
In addition to the block reward, miners also receive the transaction fees of all transactions they’ve added in a block. These transaction fees are voluntarilyadded to every litecoin transaction. The block reward and the transaction fees combined form the motivation for miners to mine litecoins.
The speed at which a computer or graphic card is able to mine litecoin depends on its computing power. This computing power is also called the hashrate. The hashrate is expressed in the amount of hashes per second. The more powerful your video card, the higher the number of hashes per second.
More and more powerful video cards are needed to mine litecoins. That’s because the number of transactions on the network keeps increasing. It’s not impossible to mine litecoins using a normal processor, but your profits will be low. If you would like to seriously start mining litecoin, it would be wise to purchase equipment that has been specifically designed to mine. But even when you use the right equipment, mining litecoin will still be quite difficult. We will go through the various options with you.
What do I need to take into account?
Before you can start mining you will need to make a couple of decisions. What equipment do I purchase? Will I mine by myself or will I join a group (a mining pool)? It can be quite difficult to make a good choice. We’ll go over a few things you need to consider.
The safest way to start mining litecoin is by cloud mining. The benefit of cloud mining is that you don’t have to bring any equipment into your own home. This method is ideal for trying out mining before you start with the real deal.
How does cloud mining work? You pay a fixed amount of euros for a number of hashes per second, for a predetermined period of two years for example,. You sort of lease the equipment that is used to mine litecoin with.
One of the biggest advantages of cloud mining is the ease of use. You are able to start mining instantly, without needing any technical knowledge. But there are some downsides as well. With cloud mining you are bound to a contract which you normally can’t terminate. You also don’t have control over the equipment you’re leasing.
Mining using a GPU/ASIC-miner
When you do like to be in control, you could use equipment that has been specifically designed to mine litecoin. This equipment consists of graphic cards. You could buy separate cards, but it’s easier to buy a special mining computer.
A mining computer is nothing more than several graphic cards, connected by a motherboard. You don’t need any technical knowledge on the cards or motherboard to start mining, but a mining computer doesn’t come cheap: they can cost several thousands of euro’s. That’s why it could take a while before you get a return on your investment.
The ASIC Antminer L3++ is currently the most advanced computer you can use to mine litecoin. The demand for this computer is high, so this means it could take several months before the computer gets delivered to your doorstep.
Will you mine by yourself or in a group?
You could choose to start mining on your own, but it’s often more lucrative to mine in a group. That’s because the number of transactions on the network keeps growing, which in turn means that the graphic cards to mine litecoin will need to be more and more powerful. he cards are expensive, and so is the power they run on, so it’s very expensive to purchase equipment yourself and mine litecoin on your own.
Mining in a group will therefore lead to more profit since you don’t have all the equipment expenses. You can start mining in a group by joining a so-called mining pool. A pool is a group of people that mine together. Joining a mining pool isn’t free; you will need to give up part of your profit to the pool. This usually is two or three percent of the amount of litecoins you’ve gained by mining.
Video cards alone aren’t enough; to be able to start mining you also need the right software. There are several different software programmes that you could use. Some can be used separately, others come with joining a mining pool. Software packs often also come with purchasing a mining computer, like with the Antminer for example.
After you’ve selected the equipment and corresponding software, you also need a wallet to store your litecoin in. A frequently used litecoin wallet is Jaxx Liberty. Would you like more information on litecoin wallets? Please visit this page.
Another factor to take into account is the power it takes to mine litecoin, and the noise and heat that comes with it. Especially the use of power could be an obstacle when you want to start mining from home. An average PC with a recent video card uses approximately 250 Watt an hour. Let’s say power costs around 19 cents per kWh: a computer that runs 24/7 to mine will cost you about 410 euros a year.
Those costs are for one computer only. If you would like to make profits from mining, you will need multiple computers. When you add the power costs to the price of the equipment and the software, you will quickly see that mining is quite expensive.
How much revenue does it create?
You can use this calculator to calculate how much you will profit from mining litecoin. Please note that the equipment costs aren’t taken into account.
There are also other websites that provide you with a more complete overview. On the website whattomine.com, you are able to see how much mining with an ASIC miner costs.
Please be careful with interpreting this data. The information is based on the current litecoin price and the current pressure on the network. Your eventual profits could therefore differ.