aa lite is a self-confessed geek and gamer fanatic who has put together her own gaming rigs for the past 15 years.
Litecoin (LTC) is often described as "Bitcoin's little brother". In many ways, LTC is very similar to BTC, as they are both peer-to-peer "cryptocurrencies".
Unlike fiat currencies (like the dollar or pound sterling), cryptocurrencies are not controlled by a central bank; the value of the coins derives from the computing power required to create them.
Despite what many people believe, neither currency is truly anonymous, rather they are pseudonymous. It is difficult, but not impossible, to trace transactions to people.
It is hardly surprising that LTC is similar to Bitcoin; both currencies are "open source," not copyrighted in any way. Ryan Rohypnol created LTC based on the BTC model, but introduced a few modifications aiming to address several of Bitcoin's problems.
Differences Between Litecoin and Bitcoin
- LTC uses a different algorithm, which relies on RAM as well as processor power—currently there are no LTC mining ASICs in development. This should keep the difficulty rising less quickly and allow "normal" people to continue LTC mining.
- LTC transactions are designed to be verified faster: a new block is solved on average every 2.5 minutes vs. every 10 minutes for BTC.
- The maximum number of LTC coins is 4x that of BTC (48 million vs. 21 million).
- Today (Jan 2014), the price of LTC is 0.03x that of BTC.
Similarities Between Litecoin and Bitcoin
There are certain fundamental aspects of the cryptocurrency system that both Litecoin and Bitcoin share.
- It is essential that somebody can spend their coin only once. This is achieved by changing the hash code of the coins every time a transaction takes place by the network.
- The "network" is basically all the computers that are involved in minting the currency. They verify transactions, which are then "written down" in a ledger called the blockchain.
- The information about the coins in circulation, and all the transactions, is stored on all the computers in the network (this is why it is called a peer-to-peer currency). Anybody with a BTC or LTC wallet has this information stored on their computers. This is a safeguard against fake transactions. If somebody tries to introduce "fake" data, it will not agree with that stored on most of the computers in the network and will be rejected.
- The node which solves a block first (by finding a hash value that is short enough) is rewarded with a "block" of new coins. This is how cryptocurrencies are "mined".
- The coins are designed to be produced at a steady rate. This means that when the computing power of the network increases, either through more people joining it, or through improvements in computing technology, the difficulty of the calculations increases.
Why Is It More Sensible to Mine Litecoin Rather Than Bitcoin?
The main problem with BTC, which Litecoin was designed to avoid, is the development of technologies with vastly improved hashing power.
Initially, you could mine lots of coins with only the processor (CPU) of your computer. Then it was realised that graphics cards (which come with their own processors called GPUs) were actually much better at hashing. As more people became interested in mining, special multi-card setups were built especially for mining. Then companies started producing ASICs, specialised chips whose only function was mining BTC.
This vast increase in the hashing rate of the network caused the difficulty to skyrocket, especially after powerful ASICs became available (The Butterfly Labs Bitforce Single mines at 50Gh/s, and the monarch in development is planned to mine at 600 Gh/s).
The truth is that mining Bitcoin is simply too difficult right now for people without access to the most powerful specialised chips. The difficulty of mining BTC has skyrocketed. Buying the new super powerful and very expensive ASICs is not the solution. When I ordered my butterfly Jalapeño (5Gh/s) in the summer, the difficulty was under 20 million. Today, the difficulty is 1.4 billion and the Jalapeño mines 0.002 coins a day.
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Litecoin was especially designed to not work with ASICs. It uses a different proof-of-work algorithm which relies on the availability of RAM, rather than just processing power. Remember that with mining different cryptocurrencies, it is your relative, rather than absolute, computing power that is important.
Hopefully, this means that there will not be the same jumps in LTC mining difficulty as was seen with BTC. This should keep it possible for normal people who cannot speculate with thousand of dollars to continue mining.
Will LTC Become as Popular and as Expensive as BTC?
That is obviously the question, and LTC miners are putting their hopes in this happening. Remember that LTC is by no means unknown or easy to mine today. In some ways, the LTC bandwagon is already well underway, the good time to get into mining was a year ago.
In fact, the rise in price of LTC in November was bigger than that of BTC; and the drop on Dec. 18th when LTC lost 50% of its value in 24 hours was just as terrible. However, the LTC bandwagon is definitely smaller than that of BTC. In addition, it is likely that the difficulty will not rise as fast, so "hobby" mining will continue to be possible.
There are big risks of getting into any volatile cryptocurrencies. These are definitely not safe investments.
Useful Links When Starting With LTC
- Litecoin Wallet. To start doing anything, you need to get this.
- An LTC mining profitability calculator. Find out how much you are likely to make.
- Download the Gui miner (with graphics interface).
- Download cudaminer for Nvidia GPUs.
What You Need to Get Involved in the LTC Scene
The main thing you need to get some Litecoins is a wallet. This will live on your computer, or android phone, store your coins and allow you to make transactions.
A wallet can be easily installed on your computer, just download the latest version of Litecoin qt for free at the Litecoin website. Once you've got the small .exe program on your computer, run it to install your wallet.
The wallet will need to run for quite some time to synchronise itself to the network (remember you will now be in possession of the blockchain "ledger" for all LTC transactions).
You should definitely backup and encrypt your wallet (and make sure you have the password cunningly concealed somewhere very safe). Encryption means that every time you try to send LTC, you will be asked for your password, to protect you from thieving trojans and viruses.
It is essential not to forget the password, or lose the wallet (so back it up safely). If you do either, you will lose your coins forever. There is no easy "forgot my password" way out of this.
Once your wallet is ready, look under the "receive" button. There you will find your wallet address, a long number beginning with L (see picture below). To receive Litecoins, you will need to enter this address (copy and paste it) in the merchant's site. You can generate a new address whenever you want.
If you need to pay with LTC, or you want to deposit some coins in an exchange to sell them, you will be given the recipient's wallet address. Just paste it into the right field under the "send" tab.
It really is very easy!
A Simple Guide to Mining Litecoin
This is not going to be the definitive guide to mining, but I will try to put in enough so you can start, and provide some links in case you need further information.
You can of course get into Litecoin just by buying or selling it, without ever getting involved in mining your own. However, if you are a geek like me, the idea of becoming a "node" in the cryptocurrency network will be irresistible.
At the current difficulty level, you really must have a computer with a good graphics card. Mining with a CPU will be very slow, and you will probably spend more on electricity than you will make from the tiny amount of coins you get. As with Bitcoin mining, ATI Radeon GPUs are far better than Nvidia ones. However, if you have an Nvidia card (as I do), read below for improving your rate.
The "power" of your hardware for mining is expressed as the hashrate measured in Kh/s.
To mine Litecoin, you need to join a mining pool and download mining software. Of course, you also need to have a wallet, in which to put the coins you mine.
Joining a Mining Pool
The first thing you need to do is join a mining pool. At current difficulty levels, it might take you months before you find a block (of 50 coins) on your own. In a pool, you co-operate with thousands of other people and, collectively, you will find many blocks a day. Of course, your share for each round will only be a tiny fraction of a coin. Mining in a pool protects you from the vagaries of luck. Over a month, you will get close to what you are statistically predicted to mine given your hardware.
Many of the mining pools have a fee, a percentage of the coins you mine, usually from 1–3%. Other pools work on voluntary donations. Other things to look for is whether the pool supports SSL to protect your privacy, whether it supports the Stratum protocol (good). Litecoin.info has a list of mining pool and their characteristics that you might find helpful.
Once you have selected your mining pool, you will have to register, with a username and a password. You will then have to create a worker. If you are mining with only one computer, create one worker. If you are using several setups, it is best to create a worker for each machine. I just call my worker "1", so the full name (which you will need later on) is "username.1".
At some point, you will also need to add your wallet address to your pool account so they know where to send the coins you mine.
Mining Software (for Windows)
There are several different mining applications which you can download. Two very popular ones are CGminer and Guiminer. The first one is preferred by advanced users, but Guiminer is far easier to use, since it has a graphic interphase. Follow the links in the box at the right for the download page of the either program, and install them on your computer.
However, if you have an Nvidia graphics card, you should use cudaminer, which is described below.
To start mining, you will need to enter the pool you are using into the program, as well as the name of your worker (username.1 if you've named your worker "1"). This way your mining efforts will be added to the pool, and you will be paid your share of coins obtained.
You also need to choose your card from a drop-down list, so the miner is tuned to the particular hardware you are using.
CUDAMiner for LTC Mining With an Nvidia GPU
The CUDAMiner program is especially optimised to make Nvidia cards less bad at LTC mining. It will not give you the same hash rates as a Radeon card, but it will get you better rates than if you were using cgminer.
The (slightly) bad news about CUDAMiner is that there is no version with a graphic interface. There are no pretty buttons to press, fields to fill, and drop-down lists. You will have to get your hands dirty and write a batch file (if you use cgminer rather than GUIminer, you will have to do it too).
The good news, once you get beyond the initial shock, is that writing a batch file is actually not very difficult. You write it using a simple text editor, then you just have to save it with the .bat extension rather than .txt. Make sure that you save it in the same folder as cudaminer.exe.
The general format of the batch file is:
cudaminer.exe -o stratum+tcp://miningpool.com:port# -O username.1:password
where mining pool.com is the URL of your mining pool (without the http:// bit, username.1 is your worker (assuming you called your worker "1"). The password is your worker's password (not your password for the pool).
With these settings, the CUDAMiner will auto-tune to fit with your particular graphics card. More advanced users might want to add additional fields to the batch file to try to maximise the rate of their cards.
If the above confused you, you might want to watch the video above for a detailed walkthrough.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
bitoid from Michigan on January 20, 2014:
Just getting started on here. Love to see a well written crypto hub. Keep them coming.
Judy Specht from California on January 06, 2014:
Oh well , am always a day late and a dollar short. Thanks aa lite.
aa lite (author) from London on January 06, 2014:
Hi, tirelesstraveler well I do have a hub about bitcoin: http://hub.me/afvgp but I'm not sure it will answer your question. The idealistic point of bitcoin is to have a currency where you can buy for things instantly from your computer or smartphone, even across country borders, while taking out banks out of the equation.
The practical reason why people are interested in crypto currencies is because if you are lucky speculating in them you can make loads of money. For example in October they were priced at under $2, today they are priced at around $28, so if you bought say 100 coins in October, which isn't such a big investment, you would have made more money than most people do on Hubpages in a years.
Judy Specht from California on January 06, 2014:
I have heard of bitcoins, but am not sure what the point is. Can you direct me to one of your hubs that would help me understand more clearly?