Crypto mining can be lucrative if done right, and there are new miners entering the space every day.
However, mining some cryptocurrencies like Bitcoin can be demanding both financially and otherwise. This necessitates the use of mining pools.
With them, you can join other miners to contribute your power and mine together.
In this guide, we will discuss hat mining pools are, how they work, their pros and cons, and how you can join one to start mining and profiting also.
What is a Mining Pool?
Before now, anyone with a personal computer could mine Bitcoin.
However as time passed and the network become more complex with more miners are joining the network, it became almost impossible to mine with just a personal computer.
Only specialized equipment known as Application-specific Integrated Circuit (ASIC) are used to mine Bitcoin, and they require a lot of electric power to operate.
Setting up one is quite expensive, so most intending miners cannot afford to do that, which led to the concept of a mining pool.
A mining pool is a group of miners contributing their hashing power to mine a cryptocurrency.
Since it is expensive to set up and mining something like Bitcoin requires a lot of electricity, being in a mining pool reduces cost and increases the chances of every member’s success.
There are many mining pools for several cryptocurrencies, but they all operate in a similar fashion.
After the pool successfully mines a block, the block reward is shared among the members based on the amount of computational power they contributed towards the mining.
How Does a Crypto Mining Pool Work?
The mining pool is a platform that allows many miners to contribute their resources to mine a cryptocurrency.
This doesn’t only save cost, but also increases their chances of successfully mining a block compared to if the operated separately.
There’s usually a manager in charge of running the pool and providing services such as assigning tasks to members, managing their hashes, and assigning reward shares to them.
A pool fee is deducted from every member’s earnings and is used to run the pool. A pool may be proportional, pay-per-share, or completely decentralized peer-to-peer (P2P).
In the proportional pool, members are assigned shares which they hold until the pool successfully mines a block.
The shares are then converted into rewards and paid out depending on how many shares each member holds.
This also depends on the the computational power each member contributes.
For the Pay-per-share pool, members can receive daily rewards for the shares they hold even if the pool hasn’t successfully mined a block yet.
The peer-to-peer mining pool works quite differently by recording all the pool’s activities in one blockchain.
That way, no single member can cheat others by manipulating the information since everyone can access it.
To join a mining pool, all you have to do is look for a reliable one. You should consider details of the pool such as computing power needed, electricity costs, the mining pool fee and frequency of payout.
These will ultimately affect the profitability of the pool.
Pros of Mining Pools
Mining pools have many advantages that individuals can enjoy when they join them. Some of the advantages include:
- Increases the chances of succeeding since members put their computational power together.
- It doesn’t cost as much as setting up a mining outfit on your own
- There’s no cheating, since every member receives rewards based on how much power they contribute.
Cons of Mining Pools
Just like their are pros of mining pools, there are also cons, which include the following:
- You may not earn much if your contribution to the pool is small
- In a proportional pool, you never get rewarded until the pool successfully mines a block
Should You Join a Mining Pool?
Well, that depends. If you’re financially capable and hate sharing your rewards with others, no, you shouldn’t join a pool.
However if you don’t have what it takes to set upon your own, joining a pool could be a good call to boost your chances of winning.