What is Litecoin? Is it Better to Mine LTC rather than Bitcoin?
Litecoin (LTC) is often described as "Bitcoin's little brother". In many ways LTC is very similar to BTC, they are both peer-to-peer "crypto currencies".
Unlike fiat currencies (like the dollar or pound sterling), they 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 it is 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, and LTC was created by Ryan Ryhypnol based on the BTC model, but introduced a few modifications aiming to address several of Bitcoin's problems.
LTC vs. BTC Differences
- 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 6th) the price of LTC is 0.03x that of BTC
Similarities Between Litecoin and Bitcoin
There are certain fundamental aspects of the crypto currency 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 crypto currencies 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 it is 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 Jalepeno (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.
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 crypto currencies, 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 24h 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 crypto currencies. These are definitely not safe investments.
Useful Links When Starting with LTC
Litecoin Wallet. To start doing anything you need to get this.
BTC-e One of the exchange where you can buy LTC. Buying LTC is generally more of a hassle than buying BTC.
A LTC mining profitability calculator. Find out how much you are likely to make.
LTC mining hardware comparison. Find out how good your graphics card is.
A comparison of mining pools.
A thorough guide to LTC mining on litecointalk.org
download the Gui miner (with graphics interface) here.
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 litecoin.org. 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 for ever. 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 merchants 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 recipients wallet address. Jest 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 crypto currency 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. If you are curious about how good your graphics card is check out this list.
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 here.
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 its 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.
For an illustrated guide to setting up either program click here.
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 is, 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 below for a detailed walk through.