Litecoin (LTC) is a digital currency and was created back in 2011 as an open source project on Github by founder Charlie Lee, an ex-Google employee. LTC is a fork from the original Bitcoin and was created to improve on the initial deficiencies of the Bitcoin blockchain protocol. LTC has a lower block generation time of 2.5 minutes, an increased total supply of coins pegged at 81,000,000 and utilizes the more common scrypt hash algorithm.
Litecoin is one of the top 5 cryptocurrencies by market cap (~ $8 billion) and also one of the few cryptocurrencies that still uses a proof-of-Work consensus mechanism that can still be mined to generate block rewards. LTC cannot be profitability mined using consumer hardware like CPUs and GPUs, but rather requires specialized hardware called Application Specific Integrated Circuits (ASICs) specifically programmed to mine LTC.
When it comes to mining, you want to first think about whether you are going to solo mine or pool mine. LTC is no longer profitable to solo mine, so the best option would be to join a pool. Pool mining has associated costs like pool fees but you could see quicker rewards and reduced reward variance in comparison to solo mining. Let’s break down the elements of mining Litecoin so you get a complete understanding of the underlying technology and how the process works.
Litecoin is based on the Scrypt hash algorithm, which is a Proof-of-Work (POW) consensus mechanism. This is the most common PoW algorithm which is still used by other mineable cryptocurrencies. Charlie Lee adopted this algorithm from Tenebrix, an early altcoin. The Scrypt algo incorporates elements of the SHA-256 algorithm but has more serialised calculations. Large amounts of high-speed RAM are favoured when using Scrypt, as opposed to raw processing power alone.
Scrypt is a memory-hard sequential function that essentially requires more memory than a regular algorithm. This makes the mining process slightly more complicated than just mining Bitcoin or another cryptocurrency that uses SHA-256. LTC started with an initial block reward of 50 LTC which is halved every 840,000 blocks. The current block reward is 25 LTC and the blockchain size is currently 16.07 GB. Mining LTC to receive block rewards requires the use of ASIC miners. In the earlier days, you were able to mine LTC using GPUs, but it is no longer profitable to do so since Scrypt based ASIC miners were released.