DEFINITION of Litecoin Mining
Litecoin mining is the processing of a block of transactions in the Litecoin blockchain. Litecoin mining requires solving algorithms, and being the first to find a solution is rewarded with tokens as payment.
BREAKDOWN OF Litecoin Mining
Litecoin is a well-known cryptocurrency which is bought and sold on a variety of exchanges, including major exchanges such as GDAX. It is similar in technical details to bitcoin, although the number of Litecoin that will eventually be released – 84 million – is significantly higher than the limit of 21 million coins set by bitcoin.
Processing Litecoin requires adding transaction information to the blocks, which are ultimately added to the blockchain. The blockchain serves as a record of all the owners of a particular litecoin. Blockchain adjustments are made by miners, who use computer hardware and software to solve math problems.
Since January 2020, Litecoin miners have received 25 new Litecoins for each block they process. The amount miners earn should be cut in half every four years. In the end, compensation for mining activities will go to transaction costs.
Cryptocurrencies compensate miners based on a proof of work hashing algorithm. The resolution of complex mathematics integrated into cryptocurrency means that a miner discovers a “solution”. Miners who discover the solution first are compensated by Litecoin, while those who could not find a solution must try again with another block of transactions.
Mining was originally relegated to the tech-savvy world, as hardware costs and installation time were more resource intensive than most people wanted to devote to the dark world of cryptocurrencies. As cryptocurrencies grew in popularity – and quickly appreciated in value – interest in mining skyrocketed.
The cost of the hardware used to extract cryptocurrencies, such as bitcoin, has decreased in supply and has become very expensive, pushing mining activities towards individuals and businesses living in areas with cheap access to it. electricity. Mining has gone from something that could be done on a home computer to a more industrial operation.
Setting up a Litecoin mining operation requires that interested parties make significant investments in equipment. At the start of Litecoin, miners could buy a graphics processing unit (GPU) to perform the calculations necessary to find a solution.
An arms race forced miners to increase the number of GPUs they bought, which could result in large electricity bills. As a result, mining operations tended to migrate to Asia, where miners had access to cheaper electricity. The cost of GPUs continued to increase due to the high demand for hardware, and ultimately led to more specialized and efficient hardware called Application Specific Integrated Circuits (ASICs).
Minors who have purchased the necessary equipment must then set up an electronic wallet where Litecoins can be deposited. At this point, miners can download software that will manage mining. The software runs a script that activates the Litecoin exploration program. Once executed, the program will attempt to process the blocks, but generally does not display the hash speed.
While mining a cryptocurrency such as Litecoin may seem profitable depending on the current popularity of cryptocurrencies, there are real costs associated with mining activities. Hardware costs can reach hundreds of dollars, and miners with a single GPU will compete with companies with a much larger hardware supply. Powering the hardware to the level required to run scripts successfully can also be expensive, as can a fast and reliable network connection.