At the core of a cryptocurrency, is a mathematical problem, an algorithm. Different currencies such as Bitcoin and Litecoin, have different algorithms with SHA-256 being used by Bitcoin whereas Litecoin utilizes Scrypt. Miners solve these algorithms through specialised hardware.
How Mining Works
Taking Litecoin as an example, a crypto-transaction occurs by sending 1 Litecoin to the recipient. This transaction is stored on a database known as blockchain on the Litecoin network, forming a digital ledger. The sender and recipient wallet address, and the amount of Litecoins transferred is visible; however, name, location and other details are kept confidential.
The Litecoin network is legitimized by miners, who use GPUs (Graphics Processing Unit) or ASICs (Application-specific Integrated Circuit) to estimate and solve solutions to the algorithm. The miner with the fastest GPU or ASIC, will successfully solve the solution, gaining a block, and depositing Litecoins directly to their mining wallet. For Litecoin, miners take 2.5 minutes to verify one block to be added to the blockchain, thus preventing the same person sending the same Litecoin twice.
Is it worth it?
What makes mining profitable however, is having a GPU or ASIC that does not consume a lot of electricity. It is useless mining cryptocurrencies if you’re losing money paying high electricity bills. A high hashrate is also important to determine profit ratio for mining and this also depends on the GPU. The higher the hashrate the faster the results - defined as MHash/s. It is also important to measure the joules: the more power efficient, the more profit - this is represented by MHash/j. Mining for cryptocurrency requires multiple GPU’s, so finding a card that balances price to performance ratio is essential.
ASIC is recommended as it consumes less electricity to run a high hashrate to determine the profit ratio. For Litecoin, Scrypts rely on high speed RAM, where Antminer L3+ is suggested to be the most profitable ASIC on the market with a power of 800W and a speed of 504MH/s. Needless to say that with the cost of electricity on the island, Malta is not the first option for cryptocurrency miners.
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