What is a mining pool?


In the early days of Bitcoin mining, all you had to do was start the CPU miner inside the Core wallet and you’d be on your way to making a profit. As you probably know, the mining scene is much more complex than it used to be. As difficulty rises and block rewards fall, solo-mining just isn’t going to cut it. If you want to make any profit whatsoever, you better start “pooling” your resources with other ambitious miners. You need to join a mining pool.

What is a mining pool?

A mining pool is a way for a large number of miners with the common interest of mining a specific cryptocurrency to gather, or “pool” their resources together in order to mine said cryptocurrency more efficiently. The amount of CPU and/or GPU processing power contributed to a pool’s network by a miner determines his or her overall reward. This reward is measured in shares, which are assigned to miners who successfully present a valid proof-of-work. Miners redeem their shares and are thus paid out consistently and periodically, versus having to wait a couple years to randomly receive an award when solo-mining.

Popular mining pools and their respective cryptocurrencies are:

Why join a mining pool?

The reasons for joining a mining pool are purely economical. As time has progressed, the difficulty of mining a block of any given cryptocurrency has increased astronomically, while rewards have halved time and time again. Solo-mining no longer turns a profit. Pool-mining, on the other hand, allows miners to turn a profit regardless of the size of their rigs. No matter whether you’ve got one GPU or one-hundred GPUs, you’ll make more mining than you’ll spend on electricity. Pool-mining is a win-win situation for everyone involved, as long as you join a pool that charges few (if any) fees.

Mining pools and centralization

Although you have a lot to gain from joining a mining pool, there can be one significant downside: centralization. Since pools require people to coordinate their processing resources, it can become very easy for a popular mining pool to dominate the overall hashrate of a given cryptocurrency’s network. ZCash, for example, has faced a similar dilemma. Leaders of these popular pools could use this position of dominance to attack the network. These attacks can include a 51% attack and a double-spend attack.

Solo-miners, on the other hand, don’t point their hashrate towards a specific central entity and thus don’t contribute to the risk of centralization.

If you wish to join a pool but don’t want to support the centralization of a cryptocurrency’s network, be sure to join a pool with a smaller hashrate. This helps build up competition against larger pools and helps balance out the network. Keep an eye on your pool’s hashrate as you mine; if it begins to become a dominant mining pool, switch pools once more.

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About Author

Got into cryptocurrencies through the fascinating gateway of mining. Favorite cryptos thus far are Monero, Ethereum, IOTA, and RaiBlocks. Sort of our in-house Monero expert, for all intents and purposes.