But what is mining, and how do you start mining Litecoin properly in a way that can actually turn a profit? Even the most basic elements of Litecoin mining can seem tricky to understand at first, but having the right Litecoin miner configuration can make all the difference.
What is Litecoin Mining?
Mining can mean multiple things depending on the exact cryptocurrency you are trying to mine. In the case of Litecoin, mining follows a very specific process, one that relies on proper mining hardware to handle effectively. By mining Litecoin, you can effectively earn Litecoin in exchange for computing power.
Litecoin mining revolves around validating transactions on the blockchain, as well as closing blocks and opening new ones. This is done through a proof-of-consensus mechanism, a very technical system that effectively keeps the blockchain secure and free from outside tampering.
In simple terms, you are donating computing power to help the blockchain process transactions safely and reliably. As a reward for offering that computer power, you earn small amounts of Litecoin on a regular basis, which are moved to your regular crypto wallet to be spent or traded later on.
How Does Litecoin Mining Work?
Litecoin mining can seem incredibly complex at first. The heart of the process relies on dedicated Litecoin mining software and hardware - without the right equipment, you can't even begin the mining process.
This means that the user does not actually have to do anything themselves. As long as you have good Litecoin mining hardware and software, you can get results just by donating your computer power to the cause and allowing your device to process transactions on the blockchain.
How to Start Mining Litecoin
There are multiple important steps involved in mining Litecoin. Even if you are not the most tech-savvy user, it is important to understand the basics of Litecoin, blockchain systems, and the way that your device can provide computational power.
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Get Your Hardware
Mining software means nothing if you do not have the mining hardware to back it up. Offering your processing efforts to the blockchain requires you to actually have processing power in the first place, and the more you have, the faster you can mine Litecoin.
Of course, the exact hardware that you need is not always obvious to newcomers. So, what do you actually need to start mining Litecoin on your own terms?
Getting a Rig
A "rig" is usually any computer setup that has been optimized to mine Litecoin (or any other digital currency). These provide a lot of computing power and are often built to run a specific mining program, meaning that you can begin mining Litecoin within minutes.
However, not everybody wants to use a Litecoin mining rig. Some people prefer installing mining software on their existing computers or attempting to build their own mining machines from scratch. Really, the only requirement for mining properly is having the right level of computing power to handle the mining software effectively.
More computer power means more mining rewards, but it also increases the amount of electrical power needed to run the device. For some people, choosing a weaker Bitcoin mining rig can help save on running costs, so there is not a one-size-fits-all solution.
Getting ASIC Miners
ASIC (application-specific integrated circuits) are small pieces of hardware dedicated to mining a specific kind of currency. For example, a Litecoin miner would only mine Litecoin but can provide a massive amount of mining effectiveness as long as they are kept cool and functioning.
"Professional" miners may have server racks filled with ASIC miner units, each set to mine Litecoin or some other currency on a constant basis. However, for many people, having a single application-specific integrated circuit can be enough to massively boost Litecoin production.
The only downside is the added power usage and the costs of buying an ASIC in the first place. An ASIC might increase the overall running cost for individual Litecoin units but will ramp up mining efficiency to produce even more Litecoin overall, making it a trade-off based on personal preference.
Knowing how to mine Litecoin means that you need to understand the software that makes mining possible. Whether you are solo mining or working alongside other miners in joint mining operations, having the right kind of necessary software is vital to getting any block rewards at all.
There are multiple pieces of software that can mine Litecoin. These connect you to the Litecoin blockchain and enable you to add new blocks to the network, enabling you to start mining as soon as your system is all connected up properly.
A lot of these pieces of software have a range of customizable features that allow users to tweak the way that they work, and some can even mine multiple kinds of cryptocurrency at once with the right settings. However, they tend to be very barebones in terms of their user interface - new users should take some time to learn how the software functions.
While there are a few key differences between the software options you have available, the end result is still the same. Litecoin mining works based on the hardware and software components, so choosing good options for both will give you the best results.
Once you are all set up, you just need to start mining the Litecoin yourself. However, it is important to understand how to mine Litecoin effectively. Not all methods are equally good, and some can be downright unreliable at best.
Most of the time, it is a bad idea to try solo mining. It takes a lot of power and run costs to even get started, and once your mining equipment is going, it is entirely possible to lose money without heavily-optimized mining rigs. Independent Litecoin miners can turn a profit, but it requires careful micromanagement of your computer power and energy usage.
This is still an option, though. If you prepare well enough, then you can always start looking into solo mining as a way of making more money just for yourself. However, the alternative is to work with other miners, something that can be just as profitable if you approach it correctly.
Litecoin Mining Pools
The easiest way to make mining Litecoin profitable is to use mining pools. These are agreements where individual miners combine their power to create a combined mining system, co-operating and sharing any payouts that they earn.
These are all individual collectives or groups, and some have distinctly different rules than others. For example, you might get a percentage of the reward based on how much power your system could provide, meaning that stronger mining rigs get a little more than weaker ones.
It is always great to find a good mining pool, especially if solo mining would not be enough to cover the electricity costs you are spending on it. Working with more miners also means that more successful block transactions are verified – you are getting less per token, but you are earning tokens a lot faster.
Once you join a mining pool, you can usually just start mining. The other members will often be accommodating to newcomers and will help explain exactly how it works.
Why Join a Mining Pool?
Mining pools might seem odd to a new miner, but they are actually the best way to mine coins like Litecoin. If you want a more consistent income, then a mining pool can be faster, cheaper, easier to access and pay out far more often.
But why, and what makes them so special?
The biggest difference between mining on your own vs mining in a pool is the probability of getting something. Mining for yourself means that each block reward is going to be higher, but you also run the risk of not getting anything for hours on end, especially with a slow computer.
Solo cryptocurrency mining basically cuts the frequency of your profits by a huge amount, meaning that you are getting very slow injections of new coins (and therefore fiat currency) in a way that might not be sustainable.
The energy costs alone can be a huge problem if your computer is using a lot of power and not verifying transactions fast enough.
The only downsides are that you are getting less per payout, but the sheer volume of them can make it all more profitable than just doing it alone. You also usually have to pay pool fees to join, but these are very low and will not impact most earnings unless you are very unlucky.
Even the best rigs need to rest and cool off sometimes, and that means that you do not want to overwork your mining computer. Pushing it too much can cause actual damage to the graphics processing unit (GPU), a core part of making the computer work and allowing it to mine correctly.
Straining your computer too much can break important and expensive components, especially a high-end computer bought specifically for mining. With a mining pool, you do not necessarily have to dedicate 100% of your processing strength towards the mining goals, especially not if you are just wanting to mine crypto as a side hobby.
Using a mining pool gives you easy access to a pre-established Litecoin mining community. Even if nobody is actively talking to one another, using a pool can get you set up and mining in mere minutes, all without having to worry about looking up the more in-depth details yourself.
Even if you are achieving the bare minimum payouts, you can get involved very easily and start out with mining. If you do not like the pool that you joined, then you can just move on to a different one or back out and try going it alone instead.
What about Cloud Mining?
If a mining pool is a group that shares its processing strength for mutual rewards, then cloud mining is the exact opposite. A cloud mining company runs its own mining system in a warehouse or other large building, leasing out the equipment to anybody who wants to rent it.
What is Cloud Mining?
This does not mean that you physically have to mine with those machines. Instead, you are paying for the machine and reaping any rewards that it gets: in return for paying for its power, you earn the crypto from the mining operations, giving you a steady supply of mined coins without needing to set up your own rig.
None of this happens in person. As long as you are paying the mining companies, they will keep the machines running and send over the rewards. If you are not in a position where you can set up your own specialized hardware, then it is a great option.
Why Use Cloud Mining?
Mining through cloud systems like this can have a range of core benefits, making it a great option for people who do not understand how Litecoin mining works and just want results as fast as possible.
No need for specialized hardware
Hardware requirements are a major roadblock to a lot of prospective miners, so outsourcing those hardware requirements to a company that already has its own equipment is much easier. Unlike joining a mining pool, you do not have to contribute any equipment at all.
Without any hardware issues, it becomes extremely easy to passively collect cryptocurrency without actually having to do anything except check up on what you have earned. As long as you keep paying the relevant fees, you can earn a constant stream of crypto.
You can join a cloud company without even having to own a computer. Many people set themselves up using nothing but their phones and only use their computers for personal reasons or to create safe hardware wallets for the crypto that they own.
Having such an easy method of joining up with these services basically means that you can keep collecting crypto for almost no effort and without having to bring anything of your own to the table. This makes it the most accessible option for people without good computers, stable internet connections, or affordable power options.
Are There Any Downsides?
Some people think that any crypto mining done under a company number pushes it closer to being a central authority, which goes against the spirit of crypto. However, it all depends on the company itself, and many are more about facilitating mining than controlling it.
The only other issue is demand. Like any other method of mining, your profits depend on the total value of the coin, so lower, value coins are not going to earn you quite as much.
This is not part of the cloud system, but it is another factor to consider when working out how much you would be willing to pay a cloud company.
What to Know About Mining Litecoin
Like any cryptocurrency, there can be a lot of specific details about the Litecoin network worth knowing. Even the smallest of factors can play into how much you end up mining and the total amount of crypto you are able to earn while still turning a profit.
How many Litecoin units are there?
Litecoin has an upper limit of 84 million Litecoins. Once this limit is reached, no more will be created, and mining will not provide any more rewards directly. This is a fixed limit, meaning that it will not increase even if the maximum cap has been hit for months.
Right now, there is around 67 million Litecoin in existence. If you want to get into mining your own Litecoin, then you need to do it before the cap is hit. Otherwise, you will not have your chance ever again. The current amount that exists is always slowly creeping up, so you want to get involved before it is too late.
How can I store Litecoin?
You can store Litecoin at any compatible-with-Litecoin wallet address or even directly trade it for another crypto on an exchange. You also have the option of selling it for fiat currency. Both of these options still require a Litecoin wallet to actually store your currency properly.
Remember that transaction fees still apply and that certain platforms may have sales and withdrawal fees too. Once you have mined your Litecoin, you get to decide how to use it, and many people will immediately sell it to claim the cash value.
The way that you store it matters since some wallets are safer than others. If your wallet is connected to the internet, then there is always a very slight chance of it being accessed remotely by a third party - so many people prefer to use "cold" wallets, offline storage devices that completely cut their crypto off from the internet as a whole.
Is mining LTC worth it?
As long as you know what you are doing, mining your own Litecoin can be a great option. The block reward values will increase if you can prove more computing or hash power, but the proof-of-work system means that any computer can get a block reward eventually.
It is more important to consider the relative value involved. If you are not going to earn enough through solo proof-of-work, especially after capital gains tax applies, then consider joining a cloud company or a shared pool.
It would be best if you were smart when mining. Choosing the right tools and options makes a huge difference, so be sure to have the right options lined up ahead of time and try something new if they do not work. Platforms like Coinpass.com are an excellent place to sell or trade the LTC you earn, for example.