In my ignorance of the subject, I thought that Bitcoin was the only virtual currency in existence. It turns out that’s not the case. While media attention has focused on Bitcoin, other forms of virtual currency have been created in recent years.
I became aware of these while I was researching Bitcoins and how to mine them.
Bitcoin Mining Not For Me
Having looked into Bicoin mining in an attempt to get on the bandwagon, it became clear very quickly that using your own mining rigs was just not economical. CPU mining died out in 2010 and GPU mining (using high-end video cards) became unsustainable earlier this year as the energy requirements and costs outstripped the profits.
As I mentioned in my previous The Problem With Bitcoin Mining post, ASIC (Application Specific Integrated Circuit) mining is now where it’s at with home-built mining rigs. The problem is that the Bitcoin Difficulty Factor is increasing exponentially and as a result, miners would be lucky to cover their costs with mined Bitcoins, let alone their energy bills.
Mining contracts, where you buy a share in an industrial-strength rig, suffer the same problems. The initial investment probably won’t be recouped, certainly not if a fraction of profits are not reinvested in upgrading the mining equipment.
So, crunching the numbers, it doesn’t look like there’s any profit to be made in mining Bitcoins now. The only thing that would change that is if Bitcoin itself significantly rises in value in the near future. It could still do that or it could drop in value just as easily. That’s the gamble you take mining Bitcoins.
Litecoin Mining Might Be For Me
Litecoin is Bitcoin’s little brother, it’s silver to Bitcoin’s gold. Litecoin hashing uses a different algorithm to that of Bitcoin. The “scrypt” algorithm requires a lot more memory to do its thing than Bitcoin’s SHA-256 algorithm. And that means that GPU mining (using those video cards again) is still a viable option and likely to remain so for the forseeable future. That escalating arms race of hardware vs Bitcoin difficulty isn’t there with Litecoin.
Litecoin does have its own Difficulty Factor but at the time of publication of this post, it’s about 2.2% every 2 weeks compared with Bitcoin’s 25%.
When a block is found, 50 Litecoins are issued compared with Bitcoin’s now 25 coins.
Again, at time of publication, Litecoins are worth about $30 (Bitcoins are worth about $900), so there’s a factor of about 30 in value between the two currencies. While operations to mine Bitcoins are now measured in GH/s (Giga-Hashes per second) – 20-100 GH/s being the norm on mining contracts – Litecoin’s is still measured in KH/s (Kilo-Hashes per second). High-end video cards will crunch Litecoin numbers in the 500-900 KH/s range, so Litecoin mining is still doable by the average Joe.
Doing GPU mining means you can mine between 3 and 10 Litecoins per month, depending on how powerful your video card is. Obviously, energy costs and equipment costs (assuming you bought a new video card for this), would have to be deducted from any money made. Increasing difficulty will also reduce profits as the months go by, so that has to be taken into consideration.
And, even if you’re not going to splash out on any new video cards or equipment upgrades, you can still mine Litecoins with your existing PC. It might not be much but it might be a fun experiment.
Litecoin is also about 14 months behind where Bitcoin is. Could it rise substantially in value like Bitcoin over the next 12-18 months?
So my idea is to mine Litecoins, sell one third of them for cash, trade one third of them for Bitcoin and hold one third of them (betting that the value of Litecoins will increase over time). Some profit would be reinvested into buying more mining kit, either replacing an existing video card with a better model or just buying more cards so more KH/s can be crunched and more Litecoins earned.
Filed under: Litecoin Mining