In this article, we are going to discuss what Litecoin Mining actually is and different kinds of methods for mining Litecoin. Every transaction that goes through the Litecoin blockchain needs to be verified by a third party before it can be successfully added to the blockchain. In exchange for successfully completing the verification process on a given block, 12.5 Litecoins are generated, as of May 2021, one Litecoin is worth about $300. This payment is used to offset the cost of the electricity required to mine the block in question and also as an incentive to get users to participate in the process.
This payment is generated from a transaction fee that every user pays whenever they send Litecoins and is split between the miners and the blockchain to cover maintenance costs. The more processing power that your mining machine has, the more likely you are going to be to receive a block to mine and finish it before it can be stolen out from under you. The way blocks are generated is essentially random and it is extremely difficult to determine who is going to receive access to the next block ahead of time.
In order to ensure that a new block will be considered valid, its hash value needs to be less than the value of any proceeding blocks which means that each block naturally shows the work that has been done to generate it. Each block then also contains the hash of the block that proceeds it in line which helps the auto-sorting process. As such, a block can only be changed without creating an issue if all the proceeding blocks relating to the changed transaction are changed as well.
Getting started
When it comes to the current best of the best for mining hardware, the first place you are going to want to check will be the Litecoin subreddit. Doing your research is important as you never know when the current top-of-the-line product might be replaced which means you will be able to pick it up for a reduced price. Mining machines typically run between $500 and $4,500 so knowing when to find a great deal can lead to significant savings if you time things properly. Once you know what you are looking for you can likely find a ready-made unit ready and waiting on Amazon.
Regardless of the system that you end up purchasing, despite the initial goal of the scrypt proof of work model, you are not going to make much mining with your existing computer or laptop no matter how good your video card or CPU is. Modern mining machines are built for speed and can only ever be used for mining which means that mining while not on an equal footing will often see you having blocks stolen out from under you by faster systems.
The ASIC company currently dominates the market with customized chips that are typically at least 100 times faster than non-specialized hardware. Trying to mine without the correct initial investment is likely just going to end up costing you more in electricity than you will probably ever make mining.
With a system in hand, the next thing you are going to need to do is to download the software that you will need for mining the litecoin. There are numerous different options to choose from in this regard, and new options are being created on a regular basis so it is best to check the Litecoin subreddit to determine what the mining software of the minute is. With that being said, AwesomeMiner.com is one of the most popular means of mining Litecoin, and even allows for the mining of bitcoins as well.
Join a mining pool
Once you have your mining rig up and running, the next thing you are going to need to do is to find a mining pool to join. A mining pool is just what it sounds like, a group of miners getting together to combine their hash power and improve the rate at which they mine blocks significantly. Like the work, the rewards that are generated from mining the block in question are then split among all the miners who participated in the block, though the specifics regarding exactly how payment is determined can vary significantly. While joining a mining pool is technically optional, it is strongly recommended if you want to put your new mining rig to work without sitting around waiting for your own block to materialize.
The power required to ensure that a proof of scrypt model is completed as quickly as possible is much more than the average mining machine can produce in a reasonable period of time. However, when the hashrate of several machines are combined, the process becomes much more manageable which is why the mining pool is a common occurrence when it comes to mining Litecoin these days.
If you are still planning on going it alone then you are going to need to download the Litecoin core client which will work to keep your machine in sync with the entire blockchain. This core can be downloaded from Litecoin.com. Assuming you decide to join a Litecoin mining pool instead, all you will need to do is know the rules of the mining pool and ensure that you follow them and generally do anything that the pool organizer requests of you.
Making sure you have chosen the proper mining pool is a serious process, because there are so many different ones out there to choose from. The most effective way to determine what options are available to you is by going back to the Litecoin subreddit and lurking around to see what you find. This will also allow you to read comments from real people who, presumably, have actually interacted with the company and have something useful to say. While making the decision to join one of the most popular mining pools will ensure that you are likely always going to have the option of working more blocks, but the amount that you are going to receive from doing so is much more likely to be largely negligible.
Furthermore, the total hash rate distribution is also going to remain higher for the blockchain as a whole when it is split into an overall larger number of smaller groups than a few larger groups is. It is typically considered to be better for the health of the blockchain as a whole if you choose a mining pool that is somewhere in the middle though large enough to ensures you have a steady rate of work to choose from.
Once you have signed up for a mining pool, determining what you can expect to make from it is complicated enough to be a full-time job almost by itself. There are numerous different ways that compensation is calculated, some of which are described below. It is important to be familiar with all of them when searching for your pool of choice to ensure that you really know what it is you are getting yourself into.
PPS: The pay per share (PPS) model of mining pool compensation allows miners to be paid for their work as soon as the block in question is finished being mined, even before the blockchain has released payment for it. This is because the miners are paid out from the balance that the pool holds in reserve which means that the full onus of any risk that the blockchain doesn’t payout is going to rest solely on the mining pool operator.
As there are always going to be these types of risks, this means the mining pool operator will be required to have a large reserve of cryptocurrency on hand at all times in order to ensure that their pool remains solvent during periods of time where the pool has bad luck or isn’t pulling as many blocks as may be preferable. As such, it is not seen these days very much and is considered the gold standard of mining compensation.
PM: The proportional model of mining pays out in a proportional fashion which means that each miner is paid out in relation to how much of the proof their machine actually solved. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
PPLN: The pay per last N share (PPLN) method of payment is broadly similar to the proportional method with the exception that it pays out based on N shares rather than standard shares. The main difference between this method and the PPS method is that the PPLN model pays out based on the amount that is generated per block, which means that the amount that the miners are paid for doing the same work is going to vary as well.
DGM: The double geometric payment method (DGM) is a type of hybrid payment model that helps to ensure that any risk that comes up from mining is split evenly between the pool manager and the miners. The pool takes a portion of the profits when the pool is mining lots and lots of blocks and then uses those portions of the funds to ensure that payment continues normally even if things are slow or the work being done is extremely complex. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
SMPPS: The shared maximum pay per share model is a take on the standard PPS model that is seen more and more frequently these days. It offers miners a fixed amount per share that is determined based on the total amount of rewards the pool has bought in over a set amount of time. Payments are made each time the time period in question expires and all associated blocks have been accepted by the chain.
RSMPPS: The recently shared maximum pay per share model is similar to SMPPS with the biggest difference being that it prioritizes new members in the pool so that they are more likely to get shares than those that have been in the pool for an extended period of time. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
CPPSRB: The capped pay per share with the recent back pay model pays out based on a variation of the MPPS model that strives to pay out miners as much as possible while also ensuring that the pool remains financially stable in the process. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
PPM: The pooled mining model, also called the slush pool, is a payment method that prioritizes later shares of the proof as they typically require a larger cost of resources to finish effectively. This method is also useful to pool managers as it keeps miners from jumping out of the pool once the easy early work is done. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
POT: The pay on target model is a variation of the standard PPS model that compensates miners based on the number of resources that they used in order to mine the block successfully. The more resources expended mining the block, the larger the share of the rewards received. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
SCORE: The SCORE payment model is based around a reward system that is weighted proportionally with payments being distributed based on the length of time it took for the block to be mined completely. It also pays out more for later shares of the proof that are generated to compensate for the additional difficulty. Payments are then determined based on the score each miner receives based on all of the above criteria. Payments are then transferred once the block has been accepted into the blockchain and payment has been released.
Eligius: The Eligius model of payment was designed to take the best parts of the PPS model and the BPM model and roll them together. It generates shares that can be paid out as soon as the work is completed, even before the blockchain has paid out the rewards. Rewards are divided evenly between all the shares that went into the block with shares from uncompleted blocks rolling over into the next successfully completed block. Payments can be collected any time a miner acquires more than 0.67108864 of the shares of a block, with lesser amounts still being paid out after a week where the miner didn’t mine anything.
Tripple: The triple method of mining pulls together numerous smaller pools and gives each miner one percent of each available block to mine. This tends to result in miners receiving larger shares overall when compared to the previous mining methods. The pool managers then also take a percentage of the profits of each successfully mined block and put it into a pot that everyone who earned a block directly is eligible to win. This also ensures that each miner is proportionally more likely to see a larger profit, regardless of the strength of their mining rig.
Cloud Mining
If you like the idea of earning Litecoins without paying for them directly but don’t want to deal with the hassles that come with mining on your own, then cloud mining might be a better choice than purchasing your own mining machine. With this type of mining, you pay a fee to use the processing power from someone else’s mining machine and keep whatever Litecoins are mined as a result. In order to get started with this type of mining, you don’t need anything more than your computer and a Litecoin wallet.
This doesn’t mean cloud mining is risk-free, however, and it is crucial that you understand what they are to ensure you can protect yourself against them. The biggest downside to this type of mining is that obviously, you are going to make less money than you would if you were mining for yourself. The other major thing to consider is that the rate of fraud among cloud mining companies is quite high as it can be difficult to prove that any wrongdoing has occurred while you are still receiving payments.
These types of scams typically involve paying out those who buy into the program using funds from those who bought in later on in the process.
Things will likely run smoothly for a while and then, slowly but surely, the rate at which payments are received will start to drop off as the scam becomes more widely known and starts to have difficulty attracting new marks. Eventually, new money will run out and the scam will fold. This is why it is important to research any cloud mining pool you are considering joining before putting your money down.
In addition to looking on the Litecoin subreddit, you are also going to want to contact someone at the Litecoin mining pool company and determine the specifics on the type of servers that they are running. They should be able to provide you with detailed specifications in addition to pictures of their server space. Regardless of what they tell you, if they can’t provide this information then they are likely a scam. Likewise, if their website doesn’t have a seal of approval from ASIC then you will have to think long and hard where their hardware is coming from as ASIC is the name in the space and an estimated 85 to 90 percent of all large-scale operations use their products.
