Litecoin should be bought from an exchange such as Coinbase if you’re only interested in owning it. However, if you are interested in mining bitcoin – either because you think you have the time and resources to make a profit, because you want to keep litecoin’s network decentralized, or because you are curious – this guide will provide you with an introduction to the terminology and suggestions for further research. Let’s start at the beginning.
There is no step-by-step guide to mining bitcoins since the nitty-gritty depends so much on your hardware, software, operating system, and pool litecoin mining When you’ve figured those variables out, there are good guides online and helpful forums for when search engines don’t work. Depending on your level of experience, you may want to skip certain sections of this guide. Please refer to the table below to navigate quickly.
Introduction of Mining
Cryptocurrencies based on proof-of-work, like bitcoin and litecoin, mine their blockchains to keep track of all transactions made on the network. Since the last block was found, the various participants in the network have broadcast a series of transactions. The miners assemble these transactions into structures called Merkle trees, and they work to find an acceptable hash.
The result of a one-way cryptographic algorithm is a hash: a given dataset will always return a single hash, but the hash cannot be recreated from the original data. However, it serves the purpose of ensuring that the data has not been tampered with efficiently. Even changing just one number in an arbitrarily long string of transactions will result in an unrecognizable hash. The hash of every block allows the network to recognize instantly if anyone is trying to insert a fake transaction anywhere into the ledger, without having to comb through the entire ledger every 2.5 minutes.
Is It Worth It to Mine Litecoin?
A Google software engineer named Charlie Lee announced the creation of litecoin in October of 2011 as a clone of bitcoin with modifications to help it scale better. Even now, the cryptocurrency has proven to have the kind of staying power other early bitcoin alternatives could not.
The price of Litecoin at the time of writing is just under $180, down precipitously from its May 2021 peak above $380. According to BitInfoCharts, the average transaction fee in dollars for Litecoin is $0.08, much lower than for Bitcoin (around $3.00). Litecoin transactions take much less time to confirm since a new block is mined every 2.5 minutes – four times faster than bitcoin. It is unlikely that Litecoin has scaled the way centralized payment systems have, but Lee’s claim that Litecoin is “the silver to Bitcoin’s gold” has some merit.
However, a claim Lee made in his initial blog post has not held up: the claim that litecoin could be mined by using the CPU on a computer. Instead of using bitcoin’s SHA-256 hash function, Lee adopted Tenebrix’s Scrypt hash function. “Litecoin can be mined simultaneously with Bitcoin and Scrypt,” meaning “Litecoin will not compete with Bitcoin for miners.” Since then, much has changed, and litecoin mining is no longer profitable without specialized equipment.
Even bitcoin was mined using a CPU in the early days. A GPU was the only way to mine bitcoin profitably by 2011, as the competition had ramped up. In choosing Scrypt, Lee enabled litecoin mining on CPUs as well, but that didn’t last very long either. Litecoin was soon mined with GPUs as well. After that, ASICs were developed to run SHA-256, and bitcoin miners began to move away from GPUs.
Lee has also spoken out about the environmental impact of cryptocurrency mining and its effect on global warming. Miners are attracted to the rewards that mining provides. These rewards come from transactions that have been processed and secured into blocks. The reward is typically halved every four years. As such, the total supply of bitcoins is fixed.